A client is interested in having their existing VEBA reorganized as a 501(c)(3) organization? Has anyone ever heard of this being done? Even assuming that the IRS would agree to grant this type of request, what are the pros and cons of going down this route?

This employer is correcting failed nondiscrimination testing for a prior plan year using the one-to-one method under Revenue Procedure 2013-12, Appendix B, section 2. When allocating the QNEC to eligible NHCEs should the employer use the plan's definition of compensation for the year of the failure or total compensation for the year of the failure? IRS guidance does not appear to address this specific question (the revenue procedure merely states it must be a uniform allocation as a percentage of compensation).

HI everyone, 

I am currently working on a 401(k) audit at my firm. The client changed their TPA and Custodian in Feb 2019, and I am needing to disclose it as a subsequent event. Do you know where I can find a sample disclosure? 

Thank you!

Anyone have experience with an IRS audit or a citation on what are facts and circumstances around providing the 'effective opportunity' for a participant to defer?

Hypothetically: we have a client who will sign a new plan document with SH basic match on 9/30/19.  The recordkeeper chosen by the client has previewed that it will likely take 60 days to set up the new plan and to provide enrollment materials to the participants.

So the participants will likely only have 1 month of match.  Of course the owner will max out.  So the plan will be in existence for 3 months, but...

Again, i'd really appreciate anyone who's been challenged by the IRS on this point (if anyone!), or if you have a citation that says more than  "Whether an employee has an effective opportunity is determined based on all the relevant facts and circumstances" 1.401k-1(e)(2)(ii)

And i don't think this is an EPCRS issue, as the reason for the  Employee Elective Deferral failure is NOT due to the plan improperly excluding anyone. EPCRS App A .05(10)

Anybody??

I have a client whose plan defines compensation to not include taxable fringe benefits.  I learned today that one of the employees is paid a "taxable living expense allowance", which I believe qualifies as a fringe benefit.  He was permitted to defer from (and be matched on) the allowance throughout 2018, and I imagine most of 2019.  I can deal with the excess match contributed but my question is if there is a "fix" for the failure as it pertains to the deferrals.  I'll need to confirm with the client if the allowance is paid with his salary in the same paycheck (which would mean his 15% deferral election was actually a higher rate of deferral based on the lower eligible wage) or if it's done in a separate monthly check (in which case there shouldn't have been deferred from at all).  Do I just document as an operational failure, implement new procedures, lecture the client and move on?  The participant was clearly content with the deferrals as they were being withheld so I don't think a corrective distribution is the appropriate path as it would be a detriment to the participant.  Thanks in advance for your thoughts.

Plan will be a 401(k) with 90 day eligibility and quarterly entry dates.

They currently use a staffing company to fill new positions and then either hire them or not.    They are usually hired within 4-6 months.  No one makes the year required for leased employees.

The company wants to exclude credit for any service they had with the staffing company and count service once they are hired.

Is this allowable? 

How can it be worded in the document.

I had someone suggest excluding service with any other company not sponsoring the plan.

Thanks for any suggestions, just want to make sure I am not forgetting something.

Good Morning -

Company A sponsors a 401(k) plan with a safe harbor match with a 12/31 plan year end.  Company B is a participating employer.  It is a calendar year plan.  Company A and B were part of a controlled group until Company B was sold in a stock sale to unrelated parties in January 2019.  New owners of Company B mistakenly thought they could continue to participate and remitted January deferrals into the plan.  Those deferrals were returned by Company A essentially freezing them from participating in the plan and Company B returned to the employees providing notice that deferrals were not being accepted into the plan.  Company B is now looking to establish its own safe harbor plan.  There is the question of whether this should be started as a new 401(k) plan with a safe harbor match or a spin-off of an existing plan.  If a new plan, I think there would be an issue of violation of the successor plan rules.  If a spin-off, then you have the operational failure of the missed opportunity for deferrals and missed safe harbor contribution issue.  I guess if spin-off, it is possible to use the safe harbor correction under EPCRS of 25% of missed deferrals and 100% of missed match, plus earnings if provide notice within 45 days of correct deferrals.  I would appreciate hearing everyone's thoughts on this.

Thanks!

Hi, 

John owned company A and had DB Plan for six years. He sold company A in an asset sale (not stock sale). John after the sale immediately opened Company B that does different services than what A offered (new type of company). He wants to contribute this year and get a deduction. 1.Can his company B just become an additional sponsor and adopt the DB Plan that his original company A had? As if he starts a new DB for his new company then he will not have any prior service for the first year of this plan and his maximum.Contribution will be low.  (Company B is most likely in a controled group with A as both owned by John 100%...but would rather have company B join the plan of A by becoming an additional sponsor of A's plan, rather than joining Plan A bec of the Controlled Group, bec John wants to close down company A). 2. If he can adopt and becomes a new sponsor of the Plan that A had , can he close down compny A or should he keep.it open? Thank you very much for any insights regarding this.

Suppose a Standing Election was signed by plan sponsor in 2016 that includes language that the plan will use the COB/PFB to apply towards the minimum required contribution in order to avoid an unpaid required contribution.  The 2018 minimum required contribution is 100k and the plan has a 150k prefunding balance.  The prior year use balance percentage is over 80%.

Can the prefunding balance be used to satisfy the 2018 minimum contribution relying on the standing election that's in place?  Or does a new election need to be signed that specifically states the amount of the prefunding balance that will be used to satisfy the minimum for the year?

For purposes of determining whether a participant has a permissible distribution event under Code section 457(d)(1)(A)(ii) due to severance from employment with the employer, do the controlled group rules apply?  In other words, must a participant terminate employment with all members of the controlled group in order to be eligible for a distribution?  I would think so, since Treas. Reg. section 1.457-6(b)(1) references the regulations under Code section 401(k) (which obviously require a termination with all employers in the controlled group).  Is anyone aware of more specific guidance on this point?

Is there ever a disadvantage in having a safe harbor match pan based on compensation from the date of entry? 

Thanks.

A participant in a large 401(k) plan passed away earlier this year.  There is a legal case pending regarding his beneficiary designation.  (The girlfriend appears to have gone online and changed it to herself the day before participant passed away; family is contesting it.)

The lawyer for the girlfriend has sent a letter to the plan sponsor telling them that they should invest the account balance in a QDIA.  So a couple of questions have come up.  1.  What fiduciary duty would there be for the account when the participant has died and beneficiary is unknown?  (This plan has full participant-directed accounts.)  2.  Should access to the deceased participant account be closed to others?  (It appears the girlfriend still has view-only access to the deceased participant's login information.)

Additional information on the investments - the overall earnings on the account year-to-date are over 20%.  Market fluctuations recently have decreased the value.

The company has been part of a PEO 401(k) plan since 2016.  The plan has been operating as a safe harbor 401(k) plan.  The company is leaving the PEO effective October 1, 2019 and will spin-off from the PEO 401(k) plan to a single employer plan.  The new plan recordkeeper says it can't accept employee deferrals until November 1 (the company does payroll semi-monthly on the 15th and last day of the month).

Is it preferable to draft the new plan document as a restatement of the existing plan with an initial effective date of 2016 and a restatement date of October 1, 2019?  The new document will have the same provisions as the PEO plan, with certain changes in eligibility and vesting being effective January 1, 2020.  Plan number will be 001. 

Alternatively, is the new document drafted as a successor plan, with an initial effective date of October 1, 2019?  Again, the provisions will be the same as the PEO plan with certain changes effective January 1, 2020.  Since the intent is to continue this as a safe harbor plan, is this option viable? 

The company will be instructed to continue to take deferral contribution deductions from the October 15th payroll even though the remittance to the new recordkeeper will be a little late.

Thinking down the road...If the plan is treated as a restatement, how is Form 5500 completed for 2019?  If we report opening assets of 12/31/18 account balances is this inconsistent with identifying this as a first return?  But, if we report opening assets of zero with a transfer from the PEO plan is this inconsistent with reporting an effective date of 2016?

All input is appreciated.

Thanks.

I apologize in advance if I am asking a question that has been answered before.  Several hours of searching have failed to help me.

I work at a small startup and no one here knows anything about how any of this works, including myself.  I started us on a 401k plan a couple of years ago and I'm being told that we are failing the ADP test, probably because we only have 6 people and 3 of them are HCEs.

My problem is that the percentages used by the plan to determine this don't make sense to me.  I tried asking them about it, and got a very confusing answer from their support team, having something to do with who is considered eligible to be a NHCE.  After a lot of searching, I finally figured out that they are using the "prior year plan" (I think--nothing else makes sense).  But I still can't figure out who they are counting as an NHCE--does someone who worked for the company last year (2018) who left the company in 2019 count?

What if they joined mid-2018?  Does it matter when?

What if they joined mid-2018 and left in mid-2019?

What if they joined in 2019--do they not count at all because of the prior year thing?  Does it matter when in 2019 they joined?

What if they joined prior to 2018 and then left in 2018?

What if they joined prior to 2018 and then left in 2019?

Any way for me to understand this would be much appreciated.  Does this vary by plan, so I have to ask their unhelpful support team again and can't get an answer here?

84-year-old retired participant is taking RMDs from qualified plan.  He dies in 2018, and his 85-year-old spouse receives his 2018 RMD based on his life expectancy.  In 2019, his now-86-year-old spouse must begin taking RMDs based on her life expectancy, which is only 7.1 years.  Does the RMD have to be calculated using the Single Life Table?  Does she get any break as a spousal beneficiary in the year after her husband's death or is the plan required to treat her as an individual beneficiary?  If she rolls the amount out of the plan and into an IRA, does that help reduce the RMDs for future years?

Thanks!

Let's say there are 2 companies in a Control Group. One of them is Safe Harbor, the other one is not. What happens if they fail coverage on their own and must aggregate?

I understand that you generally cannot aggregate Safe Harbor and non-Safe Harbor plans, but what would be the way to run testing if this scenario were to happen?

Hi, 

1.Are all employees included for the 25 count or can we exclude union.employees. ?

2. Are employees that work less than 1000 hours included for the 25 count? 

Thank you.

Hi.  We have a 457(f) plan.  An executive with a lot of PTO banked has asked whether the unused PTO can be transferred into his 457(f) plan account.  Is this permissible?  Currently the plan is silent to this, but I imagine it could be amended (if it is legally permissible).

Thanks for any guidance.

Client has a safe harbor 401(k) profit sharing plan with a cash balance plan.  Plan and tax year are calendar year; 2018 return on extension.

The 2018 required contributions are the 3% safe harbor, the minimum cash balance, and the minimum profit sharing to pass nondiscrim.

Client does not have the cash to fund everything.

What are the ramifications if the client uses all available cash to fund the cash balance to reduce the penalty, but misses the deadlines for depositing the safe harbor and PS.

I know the deadline for safe harbor is 12/31/2019, but not so sure about the PS.  I know that the PS can be deposited up to 10/15 and still be allocated as 2018 for 415, but what are the ramifications if say both safe harbor and PS are not deposited until after 2019, especially with respect to the 2018 nondiscrimination testing.

Compounding the issue is that most of the SH and PS goes to the non-highly.  The majority of the CB goes to the owner.  So by not funding the SH and PS and using any available cash to fund the CB does that create nondiscrim issues in itself?

Thanks very much.

Assume that a plan participant is a minor with legitimate plan compensation.  The minor’s parent makes the decision for the minor to make an elective deferral contribution to the plan without the minor’s consent (or even their awareness).  Would this create an operational failure where the plan document requires the election be made by the participant and doesn’t provide for proxy?  Or, would parental rights control here and allow for the parent to make this decision for their child?  If the parent has the ability to cause the contribution, would the child have the ability to override the election their parent made?