Owner has 4 hourly employees and the plan was set up with safe harbor match. None of the NHCE hourly ee's has enrolled in the plan although they are all eligible. So only the owner has a balance and he continues to put in the maximum 401k and s/h match for himself.  Plan has no profit sharing component, so no top heavy minimum required. Just not used to seeing a plan with owner only having a balance and thinking about the implications.

Plan has decreasing tiered profit sharing formula based on compensation:

• 2% of the first 30k in comp
• 1% of the next 10k in comp
• 0.5% of the next 25k in comp
• 0.25% of the next 35k in comp
• 0.1% of the next 65k in comp

Would this require General (Rate Group Test)?

Thanks!

Small plan - 8 participants including 1 HCE (owner), total assets around $175K.

Plan sponsor made a deposit of EE deferrals, and check bounced.  Sponsor replaced bad check and funds are in the plan.  However, asset custodian charged small fee ($25) for returned check.  Must plan sponsor reimburse plan for the returned check fee or can it be netted against earnings?  What do the regs say?

Thanks!

There were late deferrals in 2017.  The late deferrals were deposited into the plan during 2017 as well.   The earnings on the late 2017 deferrals were deposited in 2018.   The late deferrals were reported on the 2017 5500-SF.  Should they also be reported on the 2018 5500-SF even though the late deferrals were deposited in the prior year (2017)?  Is the deposit of late deferrals only considered corrected when the late earnings are deposited?

Moderator - My multi-part story/question got deleted from the forum, I guess because I posted it in 3 different forums as it has multiple topics to it....I will keep this question limited to the QDRO issue, so hopefully you can keep this post active in this forum

Situation -  Pending Divorce, and QDRO has not been filed yet.  Husband owns 100 percent of company with 4 employees in pension plan.  Husband (age 70) owns about 90 percent of pension plan's total vested benefits.  Employee #2 has about 10% of vested benefits.  Employee 3&4's shares are nominal.  A dollar amount about equal to Husband vested benefits is owned by the pension plan that is not applied towards anyone's share, which is the "overfunding" (this number is substantial, in the 7 figures).  

Question - Does anyone know if any portion of this "overfunding", whether in cash or pension plan assets can be transferred to the wife via her QDRO?  Can it be done either voluntarily by the Pension Plan trustee or by court order?  

Any help or thoughts are much appreciated

-Rich

Client is a single member LLC (disregarded for tax purposes) and we're exploring a retroactive S-election to be taxed as an s-corp.  The LLC name, EIN, and address will all be the same.  We're getting advice that the plan documents need to be retro-amended, but I'm finding conflicting information.  Questions are:

1.  With the LLC name, EIN, and address staying the same, will any plan documents need to be amended?

2.  If the s-election is for the entire year and no wages are paid (nor distributions taken), how should the prior year contributions be treated?  Withdrawn as excess?

I have a plan that has quarterly entry for participation.  (no age requirement)  The plan excludes Part -time, Temporary, and Seasonal employees.

In the Corbel document, 1,000 hours of service was used to describe the PT, temp, and seasonal employee.

Here is my dilemma, because the plan has only the Qtrly entry requirement, the Subsequent eligibility Computation Period was not completed.  Plan year and Anniversary year are the common choices. 

If an excluded employee would happen to not work the 1000 hours for the next year, that's fine, they would not become eligible.  But what subsequent eligibility comp period do I track next?  I cannot find anything in the master plan to default to plan year or anniversary year.

The plan needs to choose plan year or anniversary. 

Am I missing another provision in the document that might clear this up?

Are premiums paid to medicare an acceptable safe harbor medical expense for a hardship distribution?

Payout provisions of 457(f) plan state that deferred amounts will vest on July 30, 2019, provided Exec is employed on that date, and the vested amount will be paid by March 15, 2020.  Plan goes on to state that this payment is intended to be a short-term deferral under 457(f) and 409(A). 

The payment is taxable to the recipient in 2019, even if paid out in 2020, right?  The law seems very straightforward on this to me, but I am confused about what relevance the short-term deferral language has (if any)?

Any input would be appreciated!

Hi, I'm hoping to get feedback for this non-paying business topic, although it is definitely benefits-related.

I'm the treasurer for a small non-profit.  We had one employee for many years, and she was paid under the payroll system of another non-profit - you could say there is a casual/friendly relationship between our organizations but no way is there any common control or commonality of any kind.  We reimburse the other employer for all wages, taxes, etc.  (I'll come back to "etc." later...)  This all set up way before my time, BTW.

Is this arrangement legit at all?  I was thinking it was ok for the other organization to be a common paymaster and process payroll as a convenience, but as I'm looking at more closely it seems there needs to be some common control or close relationship between employers, which does not exist here.

Back to the "etc." part - she's been participating in certain benefits of the other employer - LTD, life, and a 403(b).  Health was even offered but declined way back when.  I feel very strongly that she was NOT an employee of the other organization - they did nothing but cut her checks - and she should not have been covered under any of these benefit plans (weirdly enough, we are participants in a pension plan through yet another organization, legitimately, so she's been in a pension through one org. and a 403(b) through another).  

Unfortunately she died recently, and we are in the process of hiring a new person.  I want to make sure we do it right, and am advocating strongly to NOT have anything to do with having the new person paid through the second organization (although they remain perfectly happy to do it).  It's...downright fraudulent, IMO, and yet, I guess because "we've always done it," no one seems to grasp the severity of the situation.  

So - I'm looking for confirmation that I'm right, or if I'm not, say that so I can adjust my thinking.

I am just trying to gauge how other companies handle 5500's.  Does anyone work for a company that automates 5500's or has them somehow pre-filled with information provided during the annual compliance review? If so, what software is used? 

Hi Everyone - so I'm in the process of updating agreements and such for my clients.  Was wondering if anyone would be willing to share privately what they provide a new client as far as agreements, required fee disclosure.  Trying not to recreate the wheel but want to make certain I'm sending something reasonable.  I would not copy your template just want an idea of what other TPAs send.

Thank you.

I had a question on RMDs that I am getting confused with. If a participant over Age 70.5 (Age 76) terminates employment in April of 2018, would their first RMD be due April 2019 or December 2018?

I want to get this straight; something seems wrong.

If a sponsor does not start somebody's deferrals in an auto-enroll plan, there is no QNEC needed if they start the deferrals no later than 9-1/2 months after the plan year in which the first deferral was missed?

So, if someone was eligible 1/1/18, there would be no QNEC if they start the deferrals by October 15 2019?  That's 21-1/2 months late!

(I understand that they have to start as soon as it's brought to their attention, and that match has to be calculated from 1/1/18.  But that seems like an awfully long time!)

From EPCRS:

Quote

If the failure to implement an automatic contribution feature for an affected eligible employee or the failure to implement an affirmative election of an eligible employee who is otherwise subject to an automatic contribution feature

does not extend beyond the end of the 9½-month period AFTER the end of the plan year of the failure (which is generally the filing deadline of the Form 5500 series return, including automatic extensions), no QNEC for the missed elective deferrals is required, provided that the following conditions are satisfied...

1.415(b)-1(c)(5)  states that an automatic benefit increase can essentially be disregarded when applying the 415 dollar limit to a benefit if 1) the benefit is paid in a form to which section 417(e)(3) does not apply, 2) the plan satisfies other requirements.

I have a plan that provides for an accelerated form of payment (a Social Security Level Income Option), but otherwise satisfies all of the requirements of the above section. The catch is that this is a governmental plan that is exempt from the requirements of 417(e). Does a form of payment that would otherwise be subject to 417(e)(3) no longer fail the above exception by virtue of being paid from a governmental plan?

Here’s the situation, and I apologize for the length and if I am not getting all the terminology correct as I am not a professional.

Mother and Father (from now referred to as M & F) are nearing end of divorce that started years ago.  For reasons I’d rather not get into on this forum, I’m helping M.    F, age 70,  is 100 percent owner of company (4 plan participants including himself) with a defined benefit pension plan that is significantly overfunded.  He has the vast majority of pension vested benefits.  His vested benefits are 10 times that of employee #2 (longtime 30 year employee), employee #3 (family member), employee #4 (new employee).  Despite M working for free for years for the company, she was never an official employee that had any interest in the pension plan.

The pension overfunding is so large that it almost equals the amount of F’s current vested benefits.  To soak up overfunding, F shifted a couple hundred thousand dollars into employee #3’s plan , which didn’t make much of a dent in overfunding, and since he is only 30 years old, maxed him out on his future expected benefits.  F is trying to soak up the rest of the overfunding by having the plan buy term life insurance for employees, and pay the yearly premium.  The plan has more than enough overfunding to pay the upfront premiums and pay the yearly premiums for the 30 year duration of the policies.  As per law, the death benefit on the policy can be 100 times the monthly salary of the plan participant…so figure that as long as F doesn’t live till 100, his designated beneficiaries get a hefty life insurance payout.  If he lives till 100, all the premiums went down the toilet, but hey he won anyways, he lived till 100!

As part of divorce settlement, F has agreed to give M half of his vested benefits of pension plan in a QDRO.  However there is significant value in the overfunding that F is extracting via life insurance purchases for his choice of beneficiary, and possibly other ways to monetize overfunding in future (such as selling the company or a part of it, and the overfunding)… at bare minimum, overfunding reverts to company at 10 cents on the dollar after excise/income tax.  F refuses to make M or her choice of heirs a ½ beneficiary of this life insurance he is purchasing, and refuses to compensate M not even 1 dollar for the value of the overfunding.  M is upset because it was through F’s own foolishness that he built up overfunding with their money and effort over the years and now he is getting value out of it and he is refusing to give her anything.  

Questions are as follows

1)     Is there a way to transfer any portion of this Overfunding into M’s QDRO, whether through cash or pension assets?  If so what are the legal ways to do it? 

2)     Can a judge order the pension plan trustee to transfer Overfunding cash or assets into a Wife’s QDRO?

3)     Does anyone know of any instances in which Overfunding has been valued in a courtroom setting, and more specifically in marital law?  For instance, at the very minimum that overfunding is worth 10 cents on the dollar if all the money reverts to the company and excise/income tax is paid…but F is purchasing life insurance with the overfunding to avoid the excise tax., and there is an expected value to that death benefit his choice of beneficiary is receiving.   There also other creative options for monetizing overfunding.  .Does anyone have any experience with convincing a judge or negotiating a settlement based on pegging a value to an employee’s interest in his pension plan’s overfunding?

4)     Any other suggestions that would help M get value from pension overfunding that F is getting benefits from and may monetize in the future, but refuses to share with M?

I have talked to a lawyer in pension funding, who has helped me get this far, but as you can see this is a very niche issue and any fresh perspectives or experience would be much appreciated.  Thank you!

-Rich

Code Section 409A governs NQDC when granted to a service provider from a service recipient.  We want to grant NQDC -- specifically, phantom stock -- to a non-service provider.  Basically, the company owes money to a creditor and wants to grant the creditor phantom stock to cover the debt.  

First, can this be done?  I don't see why not.

But, second, what rules apply?  I assume if it is vested, constructive receipt somehow plays a role.  But say it's vested this year but is to be settled in year 3 -- what are the tax consequences there?  I assume we wouldn't be limited to 409A's payment triggers (fixed time, death, disability, etc.) since 409A wouldn't apply?  Any other issues?

Company A was acquired by Company B in an asset sale.  The Purchase Agreement provided that service with Company A would be counted as vesting service under Company B's 401(k) plan.  Company B was later acquired by Company C in a stock sale.  Company B's 401(k) plan was then merged into Company C's 401(k) plan.

X was originally employed by Company A.  He became employed by Company B as a result of the asset sale.  He terminated employment with Company B before Company B was acquired by Company C.  X was hired by Company C sometime after Company C's acquisition of Company B.  X's total vesting service under Company B's 401(k) plan (counting his service with both Company A and Company B) was longer than his break in service from the time he left Company B until he was hired by Company C.

If X received a total distribution of his account under Company B's 401(k) plan when he terminated employment with Company B, does his service with Company A count for purposes of vesting under Company C's 401(k) plan?

This is a constant headache. If we were smart, I swear we wouldn't allow it, but there is great demand for it.

Anyway, suppose you are utilizing this exclusion. Someone who is HIRED at 8 hours per week, and is therefore "reasonably expected" to work less than 1,000 hours, is subsequently put on full time. Let's further suppose it is a calendar year plan, DOH is February 15, 2019 and full time status starts in July of 2019.

Does the person (A) enter immediately in July, since no longer "reasonably expected" to work less than 1,000 hours in the initial computation period, or (B) does the person actually have to work the 1,000 hours, and therefore subsequently enters on February 15 of the following year, (2020) when the initial computation period is complete?

Even if (b) is the more technically correct answer (which it is IMHO) do you think it is reasonable to interpret it, as long as done consistently, such that you use (A) instead?