It's July and I would like to file a final 5500-EZ for 2019.    Do we still just cross out the 18 on the form and put 2019 or is there a preferred method these days?

Have a situation where a missed deferral opportunity was corrected in such a way that very closely resembles the EPCRS pre-approved correction.  They calculated the "missed match" in such a way that some participants will end up wth slightly more than a 4% safe harbor match.  

The specifics are not relevant to my question so I'll forego a detailed explanation. The question is EPCRS Section 6.02 (Correction Principals) says "(a) The correction method should, to the extent possible, resemble one already provided for in the Code, regulations, or other guidance of general applicability."

The correction method they used is resemble, and does resemble very closely what EPCRS says (including notice requireements, making up for missed match etc).  It is just that the method of calculating the missed match provides them with a little bit extra than the EPCRS methodologies would have.

Is this still a suitable correction under EPCRS SCP?  Or is their essentially a "Do it this way or it's or you don't get any reliance"?

We are capping anyone over $275K (in 2018) at the maximum match based on the normal formula.  So this new approach will not allow anyone to get more than the match based on max comp. For whatever that is worth.

For the 2018 Form 5500-EZ:

QUESTION RE LINE 6a2
11/30/18 - Solo 401k participant loan taken; $50k; no loan repayments made in 2018.
12/31/18 - Solo 401k total plan assets in brokerage account $340k (390 - 50 = 340).
Which amount should be reported on line 6a2… $340k or $390k… which one?

QUESTION RE LINE 7a
2/1/19 - Employer contribution for 2018; $3k.
Even though the contribution occurred in 2019 (and was for the 2018 year), $3k is reported on line 7a, correct?  Yes?  No?

QUESTION RE LINE 9
The plan had a participant loan during 2018.
What amount goes on line 9… outstanding loan principal as of year end… outstanding loan principal plus interest as of year end… some other amount?

Thanks for any help you can provide… much appreciated!

I have a plan that deposits their 3% SHNE per payroll.  Due to prior year calculation errors and numerous turnover at the plan sponsor they have asked me to check their deposits quarterly for accuracy. 

While reviewing the 2nd quarter deposits there was a participant that entered the plan on 4/1/2019.  I did the SHNE calc based on the comp provided from 4/1 - 6/30.  When I advised the client that  there was a true-up due I was told that the calc was incorrect because the comp that was provided to me included pay that was earned from 3/17 - 3/30, but paid on 4/5/2019 and should not be included because it was earned before they were eligible on 4/1 even though it was paid on the 4/5 paycheck after the participant was eligible.  I've never ran into this before because we have always asked plan sponsor to provide us comp from date of participations since we are a balance forward TPA and not daily val.  The client contact wants something in writing from the document that tells her specifically what compensation to use.  If I read the document under Adjustments to compensation is says that "compensation paid while not a participant in the component of the plan for which compensation is being used will be excluded".  This reads to me that it should be calculated on compensation "paid" after the participants entry date and not "earned".   Coming from a daily val TPA firm previously we did everything based on paycheck date so now I'm questioning what the right answer is.  Has anyone else ran into this and can provide any advice or site from the Regs to help me appease the client?

Any thoughts would be appreciated.  Thank you!

I know I can add a discretionary match to a safe harbor plan mid year.  But can I add a stated match?  We have a client that wants to make a big match on top of the 3% SH.  More than the discretionary match constraints would allow.

For a plan that chooses to pay in the Safe Harbor 3% Non-Elective contribution on a payroll basis, are they required to "calculate" the contribution based on annual compensation and thus need to do a "true-up" each year?  I seem to be finding evidence that for the Safe Harbor Matching contribution you can choose to calculate and deposit it based on a payroll basis (as long as it's chosen/defined in the plan document).   I've read the Treas. Reg. 1.401(k)-3(c)(5)(ii).  I would like to confirm that for the Safe Harbor 3% Non-Elective Contribution the IRS currently does not allow an employer to calculate it on a per payroll basis?

Thanks for your help!

I have a publicly traded U.K. company with 5,000 employees in 17 countries with a U.S. subsidiary that is trying to join an open MEP. From what I have read from another post that "Legally a foreign employer can maintain a qualified plan for a U.S. employee if the plan complies with U.S. laws". I assume that because this is a publicly traded company on the London stock market that if there is another U.S. subsidiary that we don't have to worry about control group issues and can just have the U.S. subsidiary become an adopting employer of the open MEP. Because this is a MEP,  we will have already met the requirement that the trust is sited in the U.S.

Any advice will be appreciated.

Seems like every few years, there's a thread about whether a plan sponsor can enforce the loan policy to have loan repayments only be deducted from payroll.  Here's one good one from about two years ago:
https://benefitslink.com/boards/index.php?/topic/61537-stopping-loan-payments-while-still-employed/

Let's go with the premise that if someone wants to cease their loan deductions while still employed, you cannot stop them.  If the loan policy says that loan repayments are through payroll deductions only, do you then have to allow the participant to repay the loan through some other method?  Or are they voluntarily dooming themselves to default?

Thanks.

Have a plan that is wanting to change their fiscal year end from 6/30 to 9/30 and I have a question about entry dates.  1 year, 1000 hours service and semi entry (7/1 and 1/1) are eligibility requirements.  (Entry dates will change to  4/1 and 10/1)

I understand that eligibility computation periods are created from 7/1/2019 to 6/30/2020  and 10/1/2019 to 9/30/2020 because of the short plan year. 

I understand that the plan may not use the short plan year as the computation period and prorate the hours of service requirement, unless the overlapping period alternative is provided to employee who cannot satisfy the proration requirement.  This alternative is not the subject of my question at this point, but I know it's available if employer would like to go that route.

1.  Employee A has been excluded from the plan for several years because he could not satisfy the 1000 hours requirement.  He is on the 1000 hours watch from plan year to plan year.  However, the employee went full time May 2019 and is expected to satisfy the 1000 hours requirement during 7/1/2019 to 6/30/2020.    If there was no plan year end change, the employee would be eligible 7/1/2020.  It doesn't seem right to me that the employee have an entry date of 10/1/2020.  Is there an implied entry date of 7/1/2020 still because of the eligibility computation period of 7/1/2019 to 6/30/2020? 

I'm missing something.....

2.  What pitfalls should I be conscious of?

What do you do when terminated participant doesn't return election forms in 401K plan?

Hi,

I just need to confirmation on this event: we have an employee who is married and was covered by his parent's employer. His coverage ended on 6/30/19. He wanted to use his special enrollment period to enroll not only himself, but also his spouse (who has no qualifying loss of coverage). I told the employee he could not enroll his spouse, at this time, but am getting some push back and just wanted to make sure I am not mistaken.

Thanks!

Partnership Plan, one Partner essentially has retired but his final K-1 for 2018 is a negative number.  

Should he still be in the 401a4 testing for the year?

Would the relevant question be, "Did he perform any service in 2018?"

Thank you

I received a phone call from a relatively small plan saying they sold their business and one of the requirements was the 401-k plan needed to be terminated before change of ownership.  What notice and in what time frame must be given to participants?  Is it possible to terminate even a small plan in a relatively quick period of time?  Any help is appreciated and any sample documents would be appreciated as well.

Hello everyone - is anyone aware of having to no longer complete Schedule D for a large plan with assets invested in a Transamerica group annuity? According to Transamerica, no Schedule D is required because Transamerica is not a Direct Filing Enitity (DFE) and, therefore, the plan's assets should be reported as being held by a registered investment company (Schedule H, Line 1c(13)) rather than being invested in pooled separate accounts. Thank you for your assistance.

I looked around the boards and found some older posts related to Tribes and 401(k) Plans. Not sure how current those discussions are however.  Curious if there have been changes to the application of ERISA, control groups, 5500's etc.

An individual-account § 401(k) retirement plan provides participant-directed investment.

Following participants’ directions, the plan’s trustee engages in transactions with a party-in-interest.  No exemption applies, and there is no doubt these are prohibited transactions under ERISA § 406 and Internal Revenue Code § 4975.

Yet these transactions are not necessarily an IRC § 401(a)(2) exclusive-benefit violation.  Among other facts, each investment has an above-market return, and the plan’s counterparty has strong creditworthiness and liquidity.

The plan’s governing document includes this:  “The Trustee shall not engage in any prohibited transaction within the meaning of the Code and ERISA.”

Does something that might not have tax-disqualified a plan have that effect because the plan’s fiduciaries failed to administer the plan according to its governing document?

Section 657 of EGTRRA amended § 401(a)(31)(B) of the Code to require that mandatory distributions of more than $1,000 from a plan qualified under § 401(a) be paid in a direct rollover to an individual retirement plan (i.e., an individual retirement account as described in § 408(a) or an individual retirement annuity described in § 408(b)) of a designated trustee or issuer if the distributee does not make an affirmative election to have the amount paid in a direct rollover to an eligible retirement plan or to receive the distribution directly. Section 657(a) of EGTRRA also added a notice provision to § 401(a)(31)(B)(i) of the Code which requires that the plan administrator notify the distributee in writing (either separately or as part of the § 402(f) notice) that the distribution may be paid in a direct rollover to an individual retirement plan.

A TPA manages many plans with the $5,000 cash-out feature, notifies affected terminated participants regarding the mandatory distribution, but only rolls over the account balance to the IRA upon direction from the plan sponsor.  Absent plan sponsor direction, the participant’s account balance remains in the plan.

Is there a time factor in which the direct rollover be made to the IRA or can the monies remain in the plan as currently administered?

Client executed a non qualified stock option agreement with an employee, but claims it actually meant to give the employee incentive stock options.  Is there a quick way to fix this? I have not yet seen the actual equity incentive plan (asked for a copy).  Thanks. 

Hi,

2017-56 states that one of the three asset valuation method changes  automatedly approved is:

(2) A change in asset valuation method to a method that determines the value of plan assets as the average of the fair market value on the valuation date and the adjusted fair market value of assets determined for one or more earlier determination dates, as described in § 430(g)(3)(B) and the regulations and other published guidance thereunder.  (See § 1.430(g)1(c)(2) and Notice 2009-22, 2009-14 I.R.B. 741.)  The asset value determined under the method must be restricted so that it is not greater than 110% and not less than 90% of the fair market value, as described in § 1.430(g)-1(c)(2)(iii). 

Based on the above, a change to using a 3 year average as the value of the assets for the val (ie a 3 year average calculated  based on the fair market value of the assets as of the current val date plus the prior two years fair value of the assets)  would be automatically approved?  Thank you.

We have the ability to pre-fill Fund Company distribution forms with names and addresses before sending to terminated participants using an in-house software program.  We would NOT enter DOB's or SS#'s.  Just names and addresses.

What are others doing?  We had been including Names/addresses at one point in time but decided to stop because we felt like once that information was on the form, it was that much closer to being susceptible to theft.  Do others have any insight regarding security audits, etc., that have done studies/analysis on this stuff?  I'm sure others are putting a lot of thought into this.

Part of the discussion of course is that we are mailing them the form, so the envelope and cover-letter does already have their name and address.