Can a board resolution be used to state the maximum deferral percentage that can be deferred by the HCE group  and also state that any amount over the average by any HCE who has or will attain at least age 50 by the end of the 2018 calendar year will be considered a catch-up contribution?

A sponsor adopting an open MEP decided to start its own plan.   So they gave notice to the MEP and the balances for the active participants were rolled into the sponsors new plan.   Balances for terminated people were left in the MEP though.   Should the balances for the terminated people have moved as well?

Have another recent situation when the plan sponsor was acquired by another company and the acquired sponsor is transferring into the acquiring entity's plan.   Again, do the balances for participants terminated prior to the acquisition move into the acquiring entity's plan?

Both Relius and FTW will rollforward a plan and enter the end of year participant counts as beginning of year counts.

Are people increasing that figure by the 1/1 entry dates?  NOTE:  I would OF COURSE take them into account for purposes of determining an audit requirement.

Based on the fact that FT/Relius pre-fill those figures, I have to make the assumption that they do not think this is a big deal.  Just curious if others think maybe it's not worth the time it takes to count them up each year.

So let's assume there is a successor plan rule violation - 401(k) or 403(b) plan, doesn't matter for purposes of this question. All participants in the terminated plan rolled their assets over to the new plan, which was established prior to the 12-month period.

How would one even present this for correction under VCP? Anyone tried this, asking the IRS to allow it? Etc., etc.? - I don't recall ever seeing this - successor plan questions usually come up prior to the termination of the first plan. Any "fixes" that the IRS approved? I wouldn't think that this is very common, but maybe it is.

Individual currently owns a non-qualified VA, he is the owner and annuitant, contract had a ratchet and guaranteed minimum withdrawal benefit.  The ratchet has expired so he is looking at exchanging into a new 
VA contract.  

The current contract has the owner as the annuitant and his spouse as designated beneficiary.  He is looking at exchanging into a VA where he will be the owner and he and his spouse will be joint annuitants.  Does this qualify for a 1035 exchange?   Best I've found in trying to research is that the Service has not directly addressed this.  The wording in the code and regs is vague at best, saying: 

The exchange, without recognition of gain or loss, of an annuity contract for another annuity contract under section 1035(a)(3) is limited to cases where the same person or persons are the obligee or obligees under the contract received in exchange as under the original contract.

Clearly the current owner/annuitant would be the same obligee.  But is the spouse, who is currently the designated beneficiary in the existing contract an "obligee", as she would be under the new joint contract?

Thanks.

I'm talking to a plan I'm looking to take over, and they are getting close to the audit threshold.  Luckily, they have two separate businesses in their controlled group, so I'm thinking about splitting the plan into two identical plans to avoid the audit (yes, we'll charge them a little more, but nothing near what the audit costs).

The assets are on a product platform.  One of the issues of the plan is that very few of the participants have balances, so I can deal with manually separating the download, but is there a problem with all the participants staying in the same 'contract'?  Is this a master trust?

Thanks.

Small DB plan Trustee pays for investment courses from Trust assets (about $1,500 from $750,000 of assets).   Could this be construed as a plan expense?  I think probably not, however, in the context of a DB plan for which the Trustee is main participant and ultimately having to meet minimum funding it may not make a difference.

The ultimate question is whether this type of expense is proper to begin with or legitimately a settlor or personal (to the Trustee) expense.  In the context of a DC plan it could make a difference.

OK, I know this has been asked, but some threads are from 2003 & 2004, so I wanted to ask again.  A client received a DOL letter (out of Philly) last month about the late deferrals reported on their 2018 5500.  This client had already contributed lost earnings to participants and filed Form 5330 with the excise tax payment.  The letter says "It is important to note that some plan sponsors who make late remittances of participant contributions decide merely to calculate lost earnings using the VFC calculator, and deposit that amount into the plan, but do not file a VFCP application. This informal process is not the same as filing a VFCP application, and does not protect a plan sponsor from potential audit by EBSA."

In the last month, I went ahead and filed the VFCP application on behalf of the plan sponsor because I don't know if they would otherwise be targeted for an audit.

Questions:

1) If it will be time consuming and costly (to the plan sponsor) to determine actual earnings for each affected participant and payroll, are you using the DOL calculator even when not filing a VFCP application?  I believe the answer is yes for the majority.

2) What potential penalties could the DOL impose if they audit a plan that has corrected the prohibited transaction by filing the 5330 and paying the excise tax, albeit with earnings determined using the DOL calculator.  I would think none, but maybe they would require the full application?  Either way, no one wants the DOL to audit a Plan and I would like to reduce the probability.

3) Are any of you opting for the VFCP filing for all late deferrals from the get go (before the client receives a DOL letter)?  We give our employers the option, but we charge an hourly rate for this that would always FAR exceed both the lost earnings and the excise tax, so it is cost prohibitive.  Unfortunately, with these DOL letters being sent to plan sponsors, they are getting freaked and we end up doing the filing anyway.

An employer recently decided to terminate their calendar year 401k asap and would prefer to have 2019 be the last year that admin is needed.  The SH contribution is the 3% nonelective.  I wanted to make sure I have the right procedure in mind after trying to read the regs but finding conflicting information on some of the threads here.     

If I understand, the soonest that the plan can be terminated is no earlier than 30 days after the issuance of a participant notice which says that the plan is terminating and how the employer's obligation to make SH contributions will end on the plan termination date.  At this point it looks like 9/15/19 would be a likely plan termination date.  A 'maybe' SH notice was not issued for 2019.

The employer will need to not only contribute the 3% SHNEC based on compensation through the date of the plan termination, but also pass the ADP test if any deferrals are made by the HCEs.  The plan also allows for cross-tested PS contributions, and if any are made the ACP test would need to also pass.  The 415c, 402g and 401a17 limits would all be pro-rated for an 8.5 month short plan year.   

All contributions must be made during 2019 and all assets must be distributed by December 31, 2019.  A 5310 will not be submitted.  Is there anything that is being overlooked?  Thanks in advance for all help.

Terminated employee continued to be paid after termination due to payroll error. Employee deferrals were withheld from the erroneous "post-termination pay" and contributed to the 401(k) and employer matching contributions were made on those deferrals. The error was caught and employee repaid the post-termination pay to the employer. But in the meantime, he took a distribution of his entire 401(k), including the deferrals and matching contributions attributable to the post-termination pay (that he since repaid).

I am clear that the employee deferrals are considered Excess Amounts under ECPRS, the overpayment is considered a corrective distribution not eligible for favorable tax treatment, and certain notice and reporting obligations apply.

But I cannot find a clear answer on the employer matching contributions? Are they considered Excess Allocations under ECPRS requiring repayment to the plan by either the participant or the employer?  But since they were contributed to the plan in error to begin with (and we're still within the same plan year), it doesn't seem rationale to me that they would be required to be repaid to the plan. The amount in question is apx. $300.  Or can they be considered Excess Amounts and treated the same as the employee deferrals? Essentially just considered taxable income to the employee? 

Thanks in advance for any thoughts.

We have a client that is bringing on board a new physician assistant.  Their 401(k) Plan has a one year of service with semi annual entry dates.  They want to amend the Plan to allow this employee to participate immediately.  Any thoughts on amending the Plan and under eligibility naming this individual specifically as being a participant in the Plan?  I am told this employee will be compensated well below the HCE limit (around $90,000 a year maximum compensation).

Thanks in advance.

I have a plan that wants to do a fixed match in excess of 6% of pay (dollar for dollar up to 10%) --generous, I know.

There's a 3% SH Nonelective.

Oddly enough, I've never had to perform an ACP test on match in a SH plan.

I know I can test ALL the match together.  But if I just want to test the non-safe harbor piece, what percentages am I using?

I'm guessing if someone has a 10% match, do I give them a 4% in the ACP test?  Someone deferring only 6% gets a 0?

We have a money purchase plan with two allocation groups.  It satisfies the minimum allocation gateway.  There is a non-standard definition of compensation which leads to my question which is, can a money purchase plan include a minimum allocation?  For example, if the two allocations for the two groups are 7.5% of eligible comp and 5% of eligible comp, can the plan also provide that regardless of above no participant shall receive less than 2.5% of total comp?  Thanks.

Company had SIMPLE IRAs for their EEs in 2017 & '18.  There were deferrals (one in '17 and one in '18) that were withheld but not sent to the IRAs.  The IRAs are closed (they still exists, but no new money is being contributed)

Company has 401(k) Plan for 2019.

Most of the people still have the IRAs as they are waiting to roll the money into the K plan.  One person cashed theirs out.

They are small amounts, less than $50.

I'm guessing they need to deposit the amounts to the existing IRAs.  What about the one who closed theirs?

I haven't seen a plan document (if there is one) but here is the election form.    Each employee that is given this form is allotted (x dollars).  This is money the employer gives them.  The employer does not deduct anything from their paychecks.  The bookkeeper writes checks to employees directly after they submit supporting documents stating that they used the money for things such as medical bills and/or dependent care costs. I haven't seen such an arrangement before, as I don't deal with welfare benefit plans. Is this common? Given that they have a choice between the other benefits and cash to be deposited to an IRA, are the health/welfare benefits still non-taxable?

If this is actually under a cafeteria plan, is there a problem with the IRA arrangement - since the money isn't actually put into the "plan" then this seems ok? I'm very confused by this arrangement...

Flex Benefits Enrollment Options

(Year)

If you would like to participate in the Flex Benefits Program, please read the following and fill in the information on the included form.

For the contract year 2018-2019, (employer) is offering the following Flex Benefits to each staff member who is currently working 30 hours or more:

For the (x) contract year, the (employer) Flex Benefits amount is (x).  This is to be prorated from date of hire.  These funds may be used in the following ways:

1. All or some of the funds can be allocated to purchase health insurance provided by the (employer).

2. All or some of the funds can be allocated towards medical expenses not covered by other health insurance plans.

   Please note: Medical benefits may be paid to a designated beneficiary (other than the employee’s spouse or dependents) but this will then be considered taxable income and must be reported.

3. All or some of the funds can be allocated for Dependent Care.

4. All or some of the funds can be allocated for an IRA set up through the (employer).

   Please note: You may allocate funds not used for the above to be put into an IRA at the end of the year. However, this will be considered taxable income and must be reported.

    

   In addition, you may contribute your own PRE-TAX dollars into option number 5.

    

   By signing this, you acknowledge that you understand that you are committed to the enrollment choices on this form for the entire contract year of (X).

     

Flex Benefits for Year (X)

Name:___________________________ Social Security #:___________________

                                                Flex Benefit Portion       Employee Portion

1. Health Insurance          $_________________

    

2. Medical Expenses                    $_________________ 

    

3. Dependent Care                       $_________________

    

4. IRA                                         $_________________  $_____________

1. IRA: I wish to allocate any unused portion of #1, 2 or 3 to an IRA, understanding that this will become taxable income and must be reported.

_________Yes              __________No

AUTHORIZATION: I certify the above information to be true to the best of my knowledge and that the children for whom I will be claiming dependent or child care expenses either reside with me in a parent-child relationship or are legally dependent on me for their support. I further understand that the Flex Benefit amount will be in effect for the entire plan year and cannot be revoked except as permitted by federal law.

Signature:___________________________                Date:________________

There are discussions of this subject, but didn't find one QUITE on point for this specific circumstance.

401(k) plan, key person has deferred more than 3%. Not a safe harbor, but there is a discretionary matching contribution. Business is ceasing operations, probably in September. Plan will be terminated. The employer does NOT want to provide a top heavy minimum. No employer match or profit sharing contribution will be made for 2019.

Seems like if they make the plan termination date as 12/31/2019 rather than in September as they originally proposed, but all employees are gone as of, say, September 15, then they fail the last day requirement and no top heavy is due. Is it that simple, or am I missing the boat? (It would be different if they made the plan termination date, say, September 15th and that is the day all employees terminated employment.)

If Merchant Marine get a Merchant Marine Attorney!

A participant was on military leave from October 2018 until March 2019.  She received a safe harbor contribution for 2018 based upon actual 2018 pay through October, but now needs to receive the 3% safe harbor on the compensation that she would have earned during her period of military service.  Likewise, she will need a 3% safe harbor on missed pay for 2019, but this will not be calculated until the end of the year when we calculate the contribution for all employees.

USERRA indicates that the make-up 2018 contribution should have been deposited within 90 days after her return to employment or by the time that the other safe harbor contributions were deposited.  This make-up contribution is now LATE.  Is there a know correction to this error?  I did not see anything in EPCRS, but maybe was searching for the wrong terms.  Do I need to calculate earnings from the 90 mark after re-employment until now? 

Thanks!

Looking at ECPRS 6.07:  

Quote

"However, these correction methods are not available if the maximum period for repayment of the loan pursuant to § 72(p)(2)(B) has expired."

Question 1

72p2B on its own references exclusively the 5 year term.  But regs for 72p2C is what provides the grace period. I have a loan for which the 5 year term expired in June 2019. Are we entitled to use a grace period as well, giving us until 9/30/2019?  Admittedly I’m having trouble getting there…

Question 2

And then as a follow up, if that is not available, 6.07(2) seems to suggest that even if the loan was deemed in 2017, we can “cancel” the 2017 1099-R that was issued by the recordkeeper, have the employer fund any applicable withholding, and issue a new taxable 1099-R for 2019. Am I reading that correctly?  Everything at issue here was clearly not the fault of the participant (there is general agreement that the recordkeeper let us down).
 

Does anyone know of a reason that we cannot mail several 5558 forms in one envelope? we mail them certified.    WE have about 10 clients who need an extension of their 5500-SF and 5500.