A plan was established in 2016. The TPA provided an adoption agreement effective January 1, 2016. One trustee signed it December 19, 2016 and the rest signed it 1/1/17.  Contributions were not taken until 2017. What can the Plan do to remedy this? They are moving to another recordkeeper, and the shortcomings like this with their current provider are why.

With a SHNEC provision, I know that discretionary matches above 4% are subject to ACP testing. If they also want to fund PS, how much of a margin could they have and still pass?

An employer has a group of employees that are will become union members, the collective bargaining agreement begins mid-year. The calendar year 401(k) plan provides a safe harbor match. The union has negotiated to be eligible for deferrals in the plan and for some nonelective contributions, but no match.

Can the plan be amended mid-year to exit safe harbor just for the union employee group only, to reflect the bargaining that occurred, but still keep safe harbor status for 2019 for the rest of the plan, the non-union portion?

Participant originally requested a lump sum distribution.  Asked his Employer if he can change his mind.  The original paperwork had not been processed so TPA told the Employer to have  the participant to complete new distribution paperwork.  The original request was never cancelled by TPA and in Nov 2018 a distribution check is issued to a participant as a lump sum distribution.  Taxes withheld and participant cashes check.

The "new" distribution paperwork is received and in Dec 2018 another (duplicate) check is issued to the participant as a rollover and sent to rollover institution.  No taxes withheld and check is cashed.

Lots of issues on this one, but if we want to correct it as if the lump sum distribution did not occur, how can we fix it?  A corrected 1099-r has to be issued, but how do we get the taxes back from the Government?

Hi to All,

BACKGROUND:

I have a very difficult client who is already perturbed with me because we can't process her RMD for free, we can't give it to her in quarterly installments, and we can't endorse a rollover of all her assets into her IRA and THEN taking her RMD.  All of my research indicates that she must take the RMD first and then roll the remainder from the 401(k) to the IRA.

She is terminating her plan effective 05/31/2019; her date of birth is 08/26/1948; she turned 70.5 on 02/26/2019.

QUESTION:  Her RMD is a bit over $31,000.  She has called several times insisting that when it is processed, her broker will send $10,000  straight to the United Way, tax free, and the remainder which is of course taxable, will go to her.  Now that I go to actually research and try to accommodate her wishes, I am finding that this is not permissible.  According to my research, she could have done this out of an IRA, but not out of a 401(k).  Do any of you know any way that she can somehow avoid taxation on the portion she wants to donate to charity?  Can she recoup it somehow when her 2019 personal taxes get prepared next spring?

Thank you for any observations or advice.

We have a client who just started their 401(k) at the beginning of the year.  They have essentially been shut down for days due to ransomware.  They still do not have access to most of their computer functions including payroll.  All election forms are electronic.  And emails are down.

Payroll was manually completed last week (approx 500 employees) and the bare minimum was done to get paychecks out.  FICA, Federal and State withholding.  As their software handled the employees 401(k) in the past they did not have deferrals taken out of the last payroll.  And it appears that they will still be manually required to do payroll for a while (they are not paying the ransom but there are backup issues).  

FYI, safe harbor plan with standard match, determined on a payroll v payroll basis.  No true up.

I have not encountered anything like this in the past.  Generally you can make up missed deferrals if the participant has enough time to make up what was not deferred.  Trying to formulate options.

Any thoughts would be appreciated. 

I have a control group of 10 companies, 1 plan that is excluding 9 companies and all Highly Compensated Employees.  Am I correct that at least 70% of NHCE's need to be eligible to pass 410b?

If company the total of all of companies NHCE's is 100 and only 7 are allowed to participate doesn't this fail?

Unrelated person 1 owns 70 percent of company 1.  Dad owns 9 percent, and has three minor children.  It is my understanding that for controlled group purposes, you first test unrelated person 1 and dad with their ownership in a second company, then unrelated person with child 1, separately with child 2 and separately with child 3.  In other words, all individuals are not tested at the same time and you never have at the same time ownership of more than 100 percent when you do a test.  Derrin Watson does say this in an old 2001 Q and A, but I can't seem to find any authority. Can anyone find a cite to formal or informal IRS guidance that so states?

Is this also true with a grantor trust, where the grantor is always attributed the trust shares, and for example two beneficiaries have an actuarial interest in the trust shares?

For a 12/31/2019 valuation, can an election by the plan sponsor be made before the end of the plan year (12/31/2019) that states the plan sponsor will burn enough of the prefunding balance so that the 12/31/2019 AFTAP and FTAP will both be at a minimum of 100%?  Or does the election have to state a certain dollar amount that will be burned?

In the case of an end of year valuation, you won't know the end of year liabilities until the following year and then it will be too late to burn a portion of the prefunding balance for the prior year.  If the election must state a certain dollar amount that will be burned, how does everyone handle a situation like this where you want to maintain the AFTAP and FTAP at 100%?

Thanks in advance for the insight.

We have a Phantom Stock plan.  It is essentially deferred compensation, however it doesn't specifically limit participation to a Top Hat group.  Do we need to do a top hat filing?  If not, do we need to comply with ERISA rules?

To make things a bit more complicated, how do we handle omnibus equity plans?  They offer some types of awards that are exempt from 409A, such as stock options, but they also allow for phantom stock, which is deferred compensation.  Do we need to do a Top Hat filing for an omnibus plan?  And, again, how does it factor in that participation is not limited to a top hat group?  If not a Top Hat filing, is there something else?

Hi to All,

John Hancock sends out an email every day with a list of alerts regarding plans we as the TPA have in common with them.  They seem to think that it is "Urgent" when a plan has contributions that come in for participants who are not enrolled in the contract or have missing investment instructions.

This is not the norm for most of the participants in most of our plans - if someone is employed and deliberately signs up to make deferrals, they usually choose investments too.  However, sometimes a Safe Harbor 3% non-elective contribution or a profit sharing contribution gets deposited for participants who didn't choose to defer, are indeed not enrolled in the contract, and do not have any investment directions on file.

How important is this?  Is it a violation of something or another to have participants on default enrollment?  What is John Hancock looking to us to do about it?

Your observations and advice are appreciated, as always.

Is it safe to say that if a "solo" 401k plan's assets fall below the $250,000 threshold as of 12/31/2018 & they have filed the 5500-EZ in the past years, they can just stop filing without worrying about receiving correspondence from the IRS?  And then they start back up if their assets exceed $250,000 at the end of a future plan year?  

Deleted original question. Trying to condense something into a question that perhaps makes more sense.

Suppose I own Company A and Company B. Controlled group. Company A is the sponsoring employer, and Company B is signed on as a participating employer. Effective December 15th, 2018, I sell Company A - a stock sale. The new owner of Company A wants nothing to do with the plan, so does a resolution and amendment to terminate the plan effective 1/1/2019. Does not establish a new plan, nor are there plans to do so.

I still own company B. And, I've just purchased two more businesses.

If I attempt to establish a plan, other than a SEP or a SIMPLE-IRA, it would be considered a successor plan, right?

Now, the other question is whether, IF I establish a successor plan, if this "taints" distributions already made, or pending, to employees of Company A? It does not seem reasonable that it would.

Appreciate any thoughts. (And by the way, I have no idea WHY any of this took place - only know what DID take place, for whatever reasons.)

A retirement plan's sponsor would like to amend its ERISA-governed plan to restrict distributions to preclude a check and allow only a direct deposit to a distributee's bank or other financial institution account?

Would such a provision be contrary to any required provision of ERISA's title I?

Would such a provision tax-disqualify the plan under Internal Revenue Code section 401(a)?

Why?

I've understood that the IRS, when it comes to coverage testing interprets 1.410(b)-4(b) such that a plan that has everyone in their own group/classification will be considered to have "substantially the same effect as an enumeration by name" and as such, it is not a "reasonable" classification and the plan must pass the ratio percentage test instead.

That's fine - but is there any written guidance stating this? For some reason I'm unable to locate it if there is. Any unofficial IRS pronouncements to this effect at recent ASPPA conferences, etc? I've seen reference to an indirect interpretation of the issue from back in 2001, but I'd sure like to find something more direct and more recent.

Thanks.

P.S. I know they withdrew the portion of the proposed regulations that would have applied this same interpretation to NONDISCRIMINATION testing, But I'm still trying to track down some documentation/confirmation that this is how the operate n the coverage issue. 

Facts:

Divorce was final 20 years ago.  ALL marital assets including all retirement funds were properly divided at the time of divorce, and wife waived all rights to all post-divorce properties in Divorce Decree. Husband remarried 17 years ago, and established a new 401K account (and ERISA fund) with a new employer 5 years  ago. The new wife is the designated and statutory beneficiary to the 401K. ERISA does not allow husband to change beneficiary without the new wife's written consent.

Ex-wife now is suing husband for alimony owed to her and the court awarded her the entire balance of the new 401K. Ex-wife claims that she is the "former spouse" under the QDRO exception and is entitled to the entire balance of the new 401K, although the new 401K is a post-divorce asset and the new wife is the beneficiary. The new wife objects on the basis that this 401K is her marital asset and the Ex-wife has no right to take it. 

Is Ex-wife a "former spouse" to this 401K or simply a "creditor". What the "former spouse" mean in ERISA?

I have a client who is In the process of establishing an LLC as an investment vehicle for self-directed IRAs.  I'm aware of the 25% rule that would cause funds transferred to the LLC to be considered as "plan assets" & subject to the prohibited transaction regulations if the aggregate equity in the LLC held by all IRAs exceeds 25%. Assuming the LLC does not satisfy the 25% rule exemptions.

My question is does a prohibited transaction occur at the time an IRA accountholder purchases equity in the LLC (IRA equity exceeds 25%) or does a potential prohibited transaction occur based on the use of the funds once invested?

Our interpretation of ASOP 51 is that it is not applicable to ASC 715 reporting, but we wanted to see if others had the same interpretation.  Thanks in advance for all responses.  

We're taking over a PS Plan that is employer directed and not taking over the 401k Plan, employee directed.

In reviewing both documents, we found that both Plans provide the TH minimum. The 401k also includes some Union people but otherwise the covered employees are the same. Under the 401k, the PS eligibility is 6 months (never contributed to) while the PS is 21/12/1000. We found that no one had been doing the combined TH Test and luckily, they are not top heavy but we are thinking that only plan should provide the TH and since we are restating the PS, we'd suggest removing it from this Plan.  Are we missing anything?

If the Plans were TH, would 3% have to be given to both Plans? We have differing opinions in the office.

Thanks for any feedback    

Hi.  The employer is a school division.  They have a retiree health plan.  The employer subsidizes a very small portion of the premium.  Most is the retired employee's share.  The superintendent has recently retired.  The school board would like to pay the employer and the retired employee's share of the premium until the retired superintendent reaches Medicare eligibility.  Is this permissible?

I thought that these types of arrangements (employer pays or reimburses an employee for premium cost) was banned by the ACA.  Are there other ways to accomplish this?  I know that the school board won't want to change the structure and raise the employer subsidy for all retirees.  I also thought about the option of having the school division hire the former superintendent as some sort of consultant so that they could pay him a wage equal to his share of the premium cost (but I don't think the school board is interested in that).

Other ideas?  Am I missing a simple solution?

Thanks.