Our new client is an S corp. with put option.  We discussed the NUA treatment with the client whether or not this has been applied to past distributions and received very vague and incomplete information.  This has made us skeptical if this was correctly applied.  Seems to me that this treatment would have been applied across the board to all particpants to which it was applicable since plan inception (or post Rev proc 2003-23) to avoid nondiscrimination.  Any thoughts? 

My apologies if this fact set is covered elsewhere, and appreciate any thoughts.

One owner corporation sponsors calendar year 401(k) non-safe harbor plan.  No employees until 2018, one employee becomes eligible for plan in 2019, owner neglects to provide the opportunity to participate.

Owner has not contributed to the plan yet in 2019.  Obviously the plan is top heavy.

Assume first that the owner will not participate in 2019.  How do I determine the missed deferral opportunity if there were no NHCE deferrals in the past?

Can I use 3% (similar to the rate used in the first year of a plan using prior year testing)?  If so, is the QNEC 50% of the 3%? 

Let's assume next that the owner does want to participate, and let's assume the owner wants to defer 10% of their compensation.  Is the QNEC now 4% (that is, 50% of the 8% needed to pass ADP)?

If any of that is actually correct, does all of the missed deferral correction amount count towards top heavy, or must the top heavy minimum be contributed in addition to the correction amount?

Thanks very much.

Plan eligibility for 401k and match is at hire.

Plan will match 100% of the first 6% of 401k.

Plan wants to set up traditional auto enrollment at 3%.

No safe harbors in this plan.

Does that sound funny?

Can someone comment on the attached shortfall summary. It seems that my outstanding balance in 2018 is less than the sum of the annual charges. Don't see where my calc went wrong!

2018-SHORTFALLBASE Sheet1.pdf

If you have late deposits in a MEP from several participating employers, who is responsible for the excise tax?  The plan sponsor or the individual employers?  Anyone know where to find any guidance on this?

Can a non-electing church plan require that only full-time employees are eligible for all contributions, even if that means that some employees working more than 1,000 hours are EXCLUDED?  It seems permissible, but I just want to be sure...Also, I am seeing some old coverage rules that may indicate that they need to cover 70% of their total # of employees?  Is that applicable?

Thanks!

We sold our ESOP company in early 2018. The Plan has been terminated with the IRS. We have an independent Trustee who chose to distribute 80% of the sales proceeds to all participants in 2018, but withheld 20% for unanticipated expenses (like a mini escrow). The question is, does the Trust have to process RMDs for 2019 on a terminated plan? Any experience or advice on this topic would be greatly appreciated.

Had question posed to me by broker on plan.  Three person plan - Dad Mom & Daughter only.  Daughter working in UK and apparently in a plan for the UK company where she makes deferrals.  

If she also worked from Mom and Dad co. in U.S. this year is there any impact on her U.S. plan deferrals based on her deferrals in a U.K. plan?  

No other detail from agent.  Told her I have no idea but would check here or tell them to contact ERISA attorney.  

I work at a small company (less than 10 employees) that's a s-corp. We provide group health insurance for our employees and pay $450 towards their premium. However, one employee would like to purchase their own insurance just for 2020 and get reimbursed the $450 pre-tax. I don't think it would be discriminatory because this employee is not highly compensated, not an officer, and is in a department of their own (could classify this benefit based on that?). I've done a lot of research and it sounds like reimbursing one employee is allowable based on IRS notice 2015-17:

"Code § 9831(a)(2) provides that the market reforms do not apply to a group health plan that has fewer than two participants who are current employees on the first day of the plan year. Accordingly, an arrangement covering only a single employee (whether or not that employee is a 2-percent shareholder-employee) generally is not subject to the market reforms whether or not such a reimbursement arrangement otherwise constitutes a group health plan. If an S corporation maintains more than one such arrangement for different employees (whether or not 2-percent shareholder employees), however, all such arrangements are treated as a single arrangement covering more than one employee so that the exception in Code § 9831(a)(2) does not apply. For this purpose, if both a non-2-percent shareholder employee of the S corporation and a 2-percent shareholder employee of the S corporation are receiving reimbursements for individual premiums, the arrangement would be considered a group health plan for more than one current employee."

No other employee would be reimbursed for their health insurance premiums, they're all being covered through the group plan. Based on my research, it doesn't sound like this will get us in any trouble, but I'm concerned I could be missing something. I could really use some input on this.

I am opening an individual 401(k) retirement account in relation to my self-employment income (where I am an independent contractor). The Individual 401(k) plan is intended for businesses that do not employ any common-law employees.

I employ a household employee (my nanny) to take care of my children. She allows me to go to work but she does not work for my business. Is my nanny considered a common-law employee? Or do I qualify for opening the retirement account?

Thank you!

Each year we seem to have a handful of RMDs for deceased participants. The client tell us they don't have a bene listed on file, neither does the fund family. The client also tells us they do not have a way to track down the family and can't assist. These are typically small plans. 

We haven't found a way to force the balance out of the plan and the fund families don't seem to have a process. 

Anyone else run into this situation? Thoughts? 

I have a doctor who is a PC and they closed down their business in September 2019.  The last paychecks went out to employees in September.  The doctor wants to do a SEP contribution for himself in 2019 -- the PC has not been dissolved yet, but employees have rolled or taken distributions from their respective SEP accounts.  Would the client still be obligated to pay the former employees a SEP contribution for 2019 if he takes one for himself?

A Plan Sponsor has a Profit Sharing Plan (3 participants) with pooled investments held at a brokerage firm, which charges quarterly investment advisory fees. Plan Sponsor wishes to reimburse the Plan each quarter for the fees paid. I haven't seen this in years, but I believe there are two options:

Treat the reimbursement as an employer contribution (Deductible on the corporate tax return); or

Treat the reimbursement as an expense of the Employer, deductible on the corporate tax return.

Any thoughts would be appreciated, thanks.

I've been told by a vendor that the address for an ERISA plan administrator must be in the same state as the plan situs. Is this accurate?  Thanks in advance.

My divorce was final 5/2017.  I was married 24 years.  My former spouse has worked as a police officer for 30 years. The QDRO to divide my former spouse's defined benefit retirement plan was completed about a year later.  QDRO was then approved by the Plan Administrator, sent to the court and the actuarial firm that manages the Plan approved the QDRO and sent me the paperwork this past August to begin distribution of my portion.  After reviewing the paperwork, I called the attorney who prepared the QDRO to inquire about the valuation date as I had understood it was to be the date of our divorce but instead the valuation date on the official paperwork was written as 7/2019.  The attorney then called me back and proceeded to say that she had conferred with the Plan Administrator who then told her that the QDRO was drafted incorrectly as a Separate Interest (with Survivorship) rather than a Shared Interest.  Furthermore, I was told that I would not be able to commence benefits until my former spouse retires (he has reached retirement age) and that the Shared Interest will not allow for Survivorship.  This is a real turnabout and greatly affects the equitable division of our monetary assets in the Divorce Agreement.  I have since retained an attorney and we are 4 months into a very slow process.  My question is simply when does a QDRO become "set in stone?"  At what point can one be assured that it is approved and settled without the worry that at some point in time there may be redress of it?  Also, does anyone here have experience with a situation like this where the Plan Administrator approved a Separate Interest QDRO "by mistake?"  I appreciate any feedback and advice.  Many thanks.

A two company control group is ending as of 12/31/2019. Both participate in a 401(k) plan together. The main sponsor would like to kick out the participating ER at the end of the year. The Participating ER will likely voluntarily end it's participation in the plan anyhow. They aren't ready to have a new plan of their own. 

The plan document (yes I read it) is silent on this exact scenario. The participating ER MAY  choose to set up a successor /spin off plan. But nothing in the document says they have to. 

I think the old rule was, the discontinuance of an ER doesn't necessarily create a partial plan termination or distributeable event because the employee's haven't terminated employment. But I thought there was a narrow circumstance where it could be considered a partial plan term and distributable?  

Am I imagining this possibility? Anyone know the rules? Point me in the right direction? 

I find I am having trouble with the benefit accrual rules in 430(d). A client started a pension year in year X. Unit benefit formula is High 3 x5% per year of service ( including prior service). High 3 is computed based over all years of service. In year X there are 7 years of prior service and high 3 is $8000/month. Accrued benefit follows method under 430(d)-1(C)(1))ii)(C);

 at beginning of year X accrued benefit  is 5% x 7 x $8000=$2800 for the FT, and $400 for TNC. We are now in year x+2 and due to a huge bonus of $500000, High 3 is now $22,000. Accrued benefit for FT is then determined as 5% x 8* $22,000=$8800 and benefit for TNC is only $1100. Thus the big change in average comp is being spread over all years of service rather than applied in year X+1. Is this correct? And if the benefit accrual method were changed to where the increase in pay is fully applied in year X+1, is that a change in funding method?  My old brain is having trouble understanding if this is correct. Also, is there a way to change the benefit accrual method that doesn't require a change in the funding method. Appreciate any help understanding this rule.

I have a brand new start-up plan that started 1/1/19. The owner is just now calling me 12/11/2019 wanting to amend the plan to a SH plan because the company did well and he has extra funds to put to work (and not get taxed on). Obviously it is too late for that. And it is too late to change to SH for 2020. BUT... the owner is saying that his accountant, other attorneys and colleagues of his are saying we should be able to back date this and be able change the plan to SH for 1/1/2020 plan year. I can tell you that my Trust Co. and our TPA partner would never go for ever doing something like that. But since the feedback he is getting is that should be okay he thinks there should be no problem doing that, especially if each employee signs off that they received their SH notice. Thoughts/opinions on how to handle?

His other question is something I do not know the answer to. He asked if he terminated his plan and went to another company and started a new Safe Harbor plan elsewhere - that would be effective for 2020 - would be allowed to do that??? OR if decided to terminate services with us and convert the plan to a new provider and changing it to a SH Plan - what are the dates and deadlines for that? Could he in fact do that and have it be effective some time in 2020??

Any feedback will helpful!

TIA!

Either my math or my senses is failing me (maybe both!) here.  Participant is partially vested in a source.  She takes a partial distribution.  The BPD gives this formula to determine what her vested account balance will be after the distribution.

Quote

X = P(AB + (R x D)) - (R x D)

For purposes of applying the formula: P is the nonforfeitable percentage at the relevant time; AB is the Account balance at the relevant time; D is the amount of the distribution; and R is the ratio of the Account balance at the relevant time to the Account balance after distribution ( AB(1)/AB(2) ).

So I have:

P = 50%

AB(1) = 10,000

D = 1,000

AB(2) = 9,000

R = 1.111 (10/9)

So, the math according to the formula is:  .5 (10,000 + (1.111 * 1000)) - (1.111*1000) = 4,444.44

Shouldn't the vested balance be merely $4,000?  She had $5,000 vested, took 1,000 of it and so should only have 4,000 vested.

Where did I go wrong?

We have a participant who is terminated, wants to take a full distribution and she also has a loan outstanding. However, she does not want the loan to be offset at the time of the distribution. Rather, she wants to send a check to pay off the loan after the distribution is done. Is this allowed? My understanding is that it's not and the loan offset must be done when taking a full distribution. Is that correct?

Thanks.