Non-ERISA DB plan - a public school.

A participant who is retiring wants to receive her retirement benefit in an option that used her spouse's DOB as the basis to calculate the various optional forms of benefit. But, she wants to reflect their REVOCABLE trust as beneficiary.

I know this wouldn't qualify under the RMD rules, but is it allowable under the "regular" rules? Is it allowable for the plan to calculate the retirement options using the spouse as measuring life, yet have the death benefits paid to a revocable trust (even assuming the spouse is sole beneficiary under the trust)?

A restaurant client had a safe harbor 401k.  They terminated the plan in 2017.  However, they were supposed to fund the 2017 safe harbor contributions prior to distributing all of the plan assets.  They only funded about $5000 of the $15,000 that was due participants.  However, during 2018 they paid out all current account balances and the platform show zero for the plan balance.  What is the procedure for making the participants whole at this point.  They are anxious to file the final return, but there are still contributions due participants.   I don't think they have the funds to put into the plan.  

If a 401(k) plan fails ADP, distributes the excess contributions as required to correct the failure, and in the process HCEs forfeit matches attributable to the distributed excess contributions, as they must, can the employer turn around and provide taxable (W-2 compensation) bonuses to the HCEs with the match forfeitures, for example exactly in the amounts of the individual match forfeitures, without violating the anticonditioning rule of Treas. reg. sec. 1.401(k)-1(e)(6)? Arguably this is OK, because the bonuses are not conditioned on the employee's making or not making the elective deferrals, but rather are conditioned only on some of the elective deferrals failing ADP, since in order for the bonuses to be paid, in the amounts they are paid, both (a) the HCE must have made the elective deferral, and (b) a portion of deferral must be distributed to correct an ADP failure. On the other hand, the employee would not receive the bonus if he or she had not made the deferral to begin with, albeit that the employee did not know at the time he or she made the deferral whether a portion would be returned to him or her as excess and result in a cash bonus rather than a 401(k) match. The reg says that the conditioning can't be "direct or indirect" (emphasis supplied), so maybe what I'm describing is "indirect" conditioning. On the other hand, what is being proposed here is very similar to what you can do with matching in a nonqualified spillover plan matched to your 401(k) plan, although the PLRs blessing those seem to be based on part on the language in 1.401(k)-1(e)(6)(iii) specifically dealing with nonqualified plans, so maybe they are distinguishable on that basis, and of course they are only PLRs anyway.

Our client has a 401k plan.  We (the TPA) just discovered an error in the way the client has been calculating deferrals.  Prior to the EGTRRA restatement, bonuses were excluded for deferral purposes.   When restating for EGTRRA, we (the TPA) did not code the adoption agreement correctly to exclude the bonus.  So both the EGTRRA and PPA restatements were written to have deferrals deducted from bonus.  The client has never deducted deferrals from bonus, and that has been their intent for over 15 years.  Do we have an operational failure or a document failure?  Or is this a scrivener's error?  What is the best way to correct?  Do we have to go to VCP?

Hypothetical scenario: Sole owner of a S corp is very young (under 30), unmarried and has low lifestyle requirements (~60k/yr) but has excessive amounts of income (600k+/yr).  He only expects this income to continue for another 3-6 years at best but could slow down sooner. He is considering forming a C corp for tax reasons because he does not qualify for 199A (specified service business) and the corporation has no value without him and will never be sold. 

In a perfect world, he would like to defer taxes on current income in exchange for future income payments (say between ages of 35-60 and use qualified fund contributions/accumulations for income over 60). This all assumes his effective income tax rates would stay at or below dividend tax rates due to his low lifestyle requirements (forget legislative tax risk). Is it possible to use a deferred comp and/or supplemental plan to defer current income taxes and create future income cash flow as he would like?

My first concern with this arrangement would be that as the sole owner, is it even possible to have a substantial risk of forfeiture with either deferred comp or a vesting schedule on a supplemental plan? If this is not normally possible, is it possible to create a corporate resolution to introduce a substantial risk of forfeiture, for example in irrevocably requiring certain excess profits to be used for corporate philanthropy? 

Is there an issue with the "informal" 10% guidelines if the corporation only has 2 employees (the owner and a manager)? I know this rule normally becomes an issue with larger corps trying to include too many employees on a plan, but is this also an issue with a small company only trying to provide owner benefits?

Are there other considerations that could pose problems in addition to these concerns, like accumulated earnings tax on informally funded liabilities? (assume COLI is an unusually expensive alternative due to ht/wt).

Thanks!

414(c)-5 expressly provides for situations where two non-profits can be considered one employer for the purposes of sponsoring a plan together. But it does not expressly provide for a for-profit entity who most likely has control to determine 80% or more of the board at the non-profit to be in a controlled group with one another. Is this situation implied? Can allow the non-profit to adopt the for-profit's qualified retirement plan?

Husband in his mid 50s no longer working for his former employer.  He has a defined benefit plan with them but has not yet elected to commence his benefits although he is eligible to do so.  In the Judgment of Divorce, the trial court ordered that the wife will receive a fixed monthly payment from the Plan starting when the husband reaches age 65.  This is incorporated into a QDRO - shared interest allocation, and sent to the Plan Administrator for approval.  The is no option in the Plan to pay an Alternate Payee prior to the Participant being in pay status.    

Note that the husband may decide not to elect to commence his benefits at age 65.  There is nothing in the Judgment of Divorce or the QDRO requiring him to do so, and he refuses to say that he will do so, and may not.

Note that neither the Judge or the two attorneys (NOT ME) had a clue what they were doing.     

Note that survivor annuity benefits are not involved.   

Note that the parties are not amicable.  

The Plan Administrator, acting through its Third Party Administrator, Fidelity, says that the commencement of an Alternate Payee's benefits must coincide with the commencement of the Participants benefits and cannot be qualified if the conditioned is based on his age, or her age, or at a fixed date, because that makes the commencement date uncertain if he has not actually commenced his benefits.   

I have prepared QDRO where, for example, the husband is 65 and retired and the wife is 55 and still working, and both have DB retirement plans.  They agree on reciprocal if, as and when payments to the other, but such payments shall not commence until the wife reaches age 65.  QDROs accepted.    

Any thoughts, workarounds.  Don't suggest alimony since husband will say no, and because that TCJA of 2017 has made the payment of alimony non-deductible by the payor and non-taxable to the payee, so there would have to be a reduction in alimony to account for his lost tax benefit. 

Thanks, 

David 

Okay, so let's say I am a one member LLC, and I have one employee. I want to create an FSA DCAP and the FSA healthcare account for the one employee. The employee gets health insurance elsewhere, so all we need is the FSA DCAP and the healthcare fsa. The dcap and health fsa will be the only benefits available. What's the best way to do this? I am a newbie at this. Both of those accounts will be 100% employer funded (by me), is that legal? As in, the employee will receive the same pay as they're currently receiving, and plus I will 100% fund both FSA accounts. 

So here are my newbie questions: 

1. Does there need to be some kind of "plan document", even if there's just one employee? 

2. How do you open these accounts? Do you go to some bank and ask them to open an FSA account? I called a few banks, and they didn't even know what "FSA" was. 

I have a pension plan with a $300,000 minimum funding requirement for 2018. Plan and fiscal year are the calendar year. The client funded $125,000 in Jan 2019 and filed his corporate return without extension. The balance of $175,000 was funded in May. The issue is whether the $175,000 is deductible for 2019 fiscal year.

Rev Ruling 77-82 says... " the rules of this section relating to the time a contribution is made for sec 412 are independent from the rules contained in sec 404(a)(6)".

2011 Gray Book Q&A 7 raised the issue of which combinations are acceptable for a contribution made during the 2010 404 grace period ( 1/1/11 to 9/15/11) as follows:

a) Deduct in 2010 reflect on 2010 Sch SB

b) Deduct in 2010 reflect on 2011 sch SB

c) Deduct in 2011 reflect on 2010 sch SB

d) Deduct in 2011 reflect on 2011 sch SB.

The acceptable answers were a, c and d.

Based on this, I've concluded that I will report on $175,000 on the 2018 such SB and take the deduction in 2019. Any comments? Many thanks...

A large profit sharing plan with pooled account overpaid a distribution in 2018. The participant reimbursed the plan for the appropriate amount (in March 2019), the year-end reports/ participant statements correctly reflect that, and the  5500 shows a receivable  for that amount that was reimbursed subsequent to year end. Lost earnings were paid by plan sponsor to the plan in April 2019, but those lost earnings were not accounted for by the TPA for 2018.

The TPA for the plan agrees that those lost earnings will need to be accrued on the 5500, but asked whether or not they have to re-do the year-end work – participant statements, nondiscrimination testing, etc – for the accrued lost earnings that should have been allocated to participant accounts.

Is it an acceptable practice to allocate the lost earnings in a subsequent year? 

Thanks!

I'm trying to fix a coverage problem and will have to go through EPCRS because of the multiple years involved. Two employers, two separate 401(k) plans. For the deferrals component using the ratio percentage test, Plan A passes coverage (safe harbor plan), and Plan B fails (not a safe harbor plan). I cannot permissively aggregate because Plan A is a safe harbor plan. Average benefits test is less than 50%. No language in plan documents about how to fix this coverage issue.

Question: To pass the average benefits test, the Plan B employer needs to make QNECs but to which NHCEs? Employees who are eligible to participate in Plan B but made no deferrals?

In the controlled group, I have 192 NHCE (172 in Plan A plus 20 in Plan B) and 11 HCE (8 in Plan A plus 3 in Plan B).

Thank you.

Payroll-based SHM is not deposited by the end of the quarter after the deferrals were taken.  

What are the consequences?

Hi everyone,

I'm curious what everyone else is doing for an e-mail retention policy.  We're looking to put an auto-deletion policy in place, but are having a hard time nailing down an appropriate set of parameters.  Seven years is where my mind instantly goes, but in light of cumbersome investigations and producing copious amounts of email, I'd love to trim that back if possible.  What is everyone else using and what are your thoughts on whatever you implemented/considered?

Thanks!

 (we only allow hardship withdrawals from employee deferral and rollover sources of money - yes, we know we can change that but don't really want to and that's not a question in this post )

I am the HR manager in the scenario (and worked in 401k recordkeeping back in the stone age of mainframes and quarterly processing as the recordkeeper and the TPA in one of the top 3 large global HR consulting firms)

Is it now common practice to require the employee to fill out all of the hardship distribution paperwork that must be notarized with proof of need prior to the employee (or HR) being able to find out the amount available? I was told our TPA won't tell us the amount upfront before the form is completed by the employee because "We have found that if the maximum amount available is provided, the hardship requested is exactly the amount available.  Since the IRS states that the hardship distribution cannot exceed the amount of the hardship, the participant should provide the amount of the financial hardship amount and reason."

Does it not stand to reason that an employee is not going to ask for MORE than the amount available if they know that is the maximum they can take and if their need meets or exceeds that amount?    And in the end it's the documentation that is going to rule the day on whether it is an approved reason or not and what amount out of the available is going to be given?  (In both cases this last week, both employees had LESS available than their need)

Just curious if this is SOP... or if this is just that the TPA  doesn't want to calculate the amount only for an employee to decide they do not want to take it. In 15 months with this TPA and employer, I haven't had an employee refuse whatever is available even if it was lower than the need. So it is not like I am calling to get "quotes" and then not following through.

Participant submitted a request for a hardship to purchase primary residence.  The Buy/Sell Agreement lists the buyer as his wife. The mortgage will be in the wife's name.  They are "legally married and will live together in this house.

Question - although the house is in the wife's name, can the participant take a hardship for the expenses incurred regarding this purchase??

(Sorry, I posted this in "other kinds of welfare benefit plans" as well, but I'm not sure that's the right place for it.  So I'm posting it here as well.)

Stumbled on this forum, what a great wealth of wisdom!

I'm a union rep and we are considering starting a healthcare plan for our members.  Instead of the various employers having their own healthcare plans for our members, the employers are going to give us the money and we will provide the healthcare plan for our own members.

I believe we will need to start a VEBA and a MEWA, but I am uncertain as to how much we will need to allocate for start-up costs (e.g. legal advice, documents, etc.).  We have 10-15k local union members.  I'm assuming it will cost $500-$1mm to start up and at least 1.5 years before we can go live.  Am I even in the ballpark?  

Anyone know how much it will cost us to get this started?  Any help is much appreciated!

Stumbled on this forum, what a great wealth of wisdom!

I'm a union rep and we are considering starting a healthcare plan for our members.  Instead of the various employers having their own healthcare plans for our members, the employers are going to give us the money and we will provide the healthcare plan for our own members.

I believe we will need to start a VEBA and a MEWA, but I am uncertain as to how much we will need to allocate for start-up costs (e.g. legal advice, documents, etc.).  We have 10-15k local union members.  I'm assuming it will cost $500-$1mm to start up and at least 1.5 years before we can go live.  Am I even in the ballpark?  

Anyone know how much it will cost us to get this started?  Any help is much appreciated!

I have a (small) client with a couple of retirees that are interested in the new lump sum window that the IRS has recently started allowing for participants who are already in receipt.  One of these retirees was a High 25 and was not allowed to select a lump sum when he retired originally.

The client is also making steps towards terminating the plan.  

If they were not terminating, the plan would need to fund up so that they were 110% funded for this High 25 retiree to receive his lump sum.  Since they are terminating, does that 110% still apply or does it go away?  Logically it doesn't seem to make sense and it seems like they should only fund to pay out the benefits for the plan termination, but logic and the regs don't always agree.  

Does timing matter?  We can't terminate the plan and then create a  window to pay out the lump sums.  If we create a window for the lump sums, then does the 110% apply since we haven't yet terminated.  If we can't do it before or after, how can we do it "at the same time" - feels slightly impossible?

thank you for any insight!

Anyone have any experience using EPCRS to correct defaulted loans?

(d) Defaulted loans. A failure to repay a loan in accordance with loan terms that satisfy § 72(p)(2) may be corrected by (i) a single-sum corrective payment equal to the amount that the affected participant would have paid to the plan if there had been no failure to repay the plan, plus interest accrued on the missed payments,

This is pretty cool, but I am getting stuck on details…

I have a 2018 deemed loan with a 1099R, the participant and employer do all they should to self correct -- done.  How does the participant handle the 2018 1099R? Don’t report income and wait for the IRS to ask?  Must the custodian issue a corrected 1099?  Or??

What if QDRO done & approved, but participant never collects their retirement funds? Does that affect the alternate payees ability to collect?