We are a not-for-profit that is  the plan sponsor of a 401k plan that has a 6 month elapsed time eligibility period .  

A temp employee has had the following service :

worked 3/11/19-5/31/19 or 2.67 months, break in service was 2.56 months, and then worked 8/19/19-9/6/19 or .59 months. (no 1 year break in service)

The next break in service will be around 1-1.5 months if she is rehired in the next week or so. 

If service is 6 months from original hire since her breaks were so small, she is pretty much immediately eligible.  If not, she would need to earn 2.75 more months of time to be eligible.  It makes a difference for costs for funding/grants/etc.  I hate counting pennies, but we must! And honestly I'd like to get it right going in rather than a correction at year end!

Our plan document has a section that states "Rehired Eligible Employee who had not satisfied eligibility : If any Eligible Employee who had not satisfied the Plan's eligibility requirements is rehired after severance from employment, then such Eligible Employee shall become a Participant in the Plan in accordance with the eligibility requirements set forth in the AA and the Plan.  However, in applying any shift in an eligibility computation period, the Eligible Employee is not treated as a new hire unless prior service is disregarded in accordance with" (rule of parity, 5  one year breaks or one year old out rule)."

My TPA contact is out of the office through Monday.  And their backup told me they couldn't give me an answer and were unwilling to look it up or research it for me (yes, another reason to find a new TPA!)

Anyone want to offer their advice/opinion?

As usual, just want to make sure I'm not missing something. I've just seen a couple of plans that did perform the Key employee concentration test and the DCAP testing. However, they did none of the eligibility or benefits testing.

It so happens that even on a cursory glance, they obviously pass eligibility testing, so maybe they just looked at it informally and, reasonably enough, said "it passes." Ditto for the "Availability Standard" test. However, for the Utilization Standard test, the HCP ratio is app. 10%,and the non-HCP ratio is about 5%. And it looks like this has been going on for about a million years, give or take a year or three...

So, - am I missing something with regards to the Utilization test? Is there some special way around this that I don't know about?

And for the past failures, I'm not aware of any "correction" procedure - if audited, they are screwed, right? All they can do is correct this going forward?

Any thoughts appreciated!

Two things in life are ubiquitous.  First, yellow taxis in Manhattan.  Second, the use of the time rule formula for allocating an ERISA qualified defined benefit plan for an employee who is still working, using a "shared" formula, a/k/a "Bangs/Pleasant" formula in Maryland, a/k/a "Brown Formula" in California, a/k/a pro-rata formula re: FERS and CSRS - 5 CFR § 838.621. 

Thus, your standard shared interest allocation for a defined benefit plan:

"The Alternate Payee is hereby awarded 50% of the "marital share" of the Participant's retirement annuity benefit if, as and when paid to the Participant.  The "marital share" is determined by a fraction, the numerator of which is the number of  months during the marriage that the Participant accrued creditable service in the plan, and the denominator is the number of months that the Participant accrued creditable service in the plan at the time of his commencement of benefits."

Now we have Fidelity on it's website, setting forth 10 Northrop Grumman defined benefit plans with respect to which they offer only two allocation options: See page 40, line 3 of the attached. 

" ______% (insert percentage) of each of the Participant’s monthly benefit payments from the Plan.
$_____ (insert dollar amount) of each of the Participant’s monthly benefit payments from the Plan."

Note the absence of a time rule option for defining the amount to be paid to the Alternate Payee.  

I now have another attorney telling me that I cannot change the model QDRO to insert a time rule option AND must wait until the Participant actually retires to prepare and submit the QDRO - likely about 20 years in the future. Say what? 

26 IRC Section 414(p)(2) sets forth everything needed for a valid DRO:

"(2)Order must clearly specify certain facts:  A domestic relations order meets the requirements of this paragraph only if such order clearly specifies—

 BUT, hold on, if the Participant remarries and  then retires,  his new wife becomes irrevocably vested in the survivor annuity and the intended Alternate Payee can never get it....PERIOD.    

See the 1997 decision of the US Court of Appeals, 4th Circuit,  in  Hopkins v. AT&T Global Information Solutions at
http://scholar.google.com/scholar_case?case=9954117838131396049&q=hopkins+at%26T+global&hl=en&as_sdt=2,9

followed by the 5th Circuit in 1999  Rivers v. Central and South West Corporation at   http://scholar.google.com/scholar_case?case=2296953953561556363&q=rivers+central+and+south+west&hl=en&as_sdt=2,9:

“This Circuit agrees with the Fourth Circuit's decision in Hopkins and adopts its rationale. Rivers failed to protect her rights in Franklin's pension plan by neglecting to obtain a QDRO prior to Franklin's retirement date. Consequently, Franklin's pension benefits irrevocably vested in Mrs. Franklin on the date of his retirement and Rivers is forever barred from acquiring an interest in Franklin's pension plan.”

To the same effect see Dahl v. Aerospace Employees’ Retirement Plan, a 2015 case from the U.S. District Court for the Eastern District of Virginia (and cases cited therein) -
https://scholar.google.com/scholar_case?case=3487596170773082469&q=dahl+v.+aerospace&hl=en&lr=lang_en&as_sdt=20000003&as_vis=1

Other cases following Hopkins are collected at:
https://scholar.google.com/scholar?start=0&q="Hopkins+v.+AT%26T"&hl=en&as_sdt=20000006
 
I have changed Fidelity forms like this many times and inserted a time rule formula and it was accepted by the Plan.  

Can anybody cite an IRC/ERISA code provision, or a case decision, or any treatise, that would be contrary to my universal experience that time-rule formulas are acceptable as a method if defining the amount of the Alternate Payee's defined benefit annuity, and that a Plan Administrator/TPA cannot limit the options available?   

Thanks for your insight.   

David 

N-G Shared QDRO Package 42 pages 2019.pdf

Last week I recently became a 2% owner of an S Corp of which I am an employee.

I am participating in Dependent Day Care and FSA to the max amounts.  Also, I participate in an AFLAC type policy.

I understand there will be tax implications but I'm trying to figure out what exactly they are.  Do all of these pre-tax items get treated the same way for this tax year?

When calculating an RIA's fees, can/should the value of accrued interest on bonds be included in the portfolio value?  Is there guidance written anywhere on how to value an account for charging fees?

I have been asked to assist in a situation where a solo 401k plan had loans taken from the plan without promissory notes, pledges of account balances, etc.  The loans at one time years ago exceeded $50,000.  Repayments have not been made.  The sole participant now wants to withdraw what benefits there are and close the plan.  It has been a couple of years since I prepared any corrections under EPCRS for any plan failing, much less one like this.  Any insights and suggestions will be greatly appreciated to get me started off in the right direction.

Hello,

I'm new here and was hoping to get some clarification on a question regarding 401K and deferring the Audit. 

From 2016-2017 we had 3 401K plans with common ownership... starting September 2018 we merged all the assets from those 3 prior plans into a new plan with new plan number. 
For the three prior plans the group has always filed a 5500SF... Now that we have merged those assets into an entirely new plan with new plan number on September 2018 our eligibility has climbed we think to more than 100 eligible....My question is since the plan is a new plan starting on 09/2018 -12/2018 can we defer the audit to the next year? 
I keep getting mixed answers on this with some CPA's saying that it isn't a new plan it is an offspring of the 3 prior plans so it wouldn't qualify to defer the audit the following year. 
Any input is appreciated as I keep getting answers saying we can and some saying we can't defer the audit...

Thank you all! 

In filling out the 5500 where one company has moved all of the plan assets to another company with that same Multiemployer plan, do you mark that the plan has terminated as the ending assets for company A are at zero and then fill out the information for the termination and say that it is a final 5500 and indicate the name of company B as the recipient of those funds?

Good day to all:

A doctor (of course) signed the documents to set up a new 401(k) plan in December of 2018 that was effective 01/01/2018.  It was to cover only her, at least to begin, because she had no employees.  She signed everything, we did the document, she paid the bill, and it died right there.  No investment accounts were ever opened; no deposits were ever made.  All requests for information have been completely ignored.

Does this plan really exist?  There is nothing to file because there would only be an EZ if she had over $250,000 in the plan.  It makes me nervous, though - I can't quite wrap my head around a client for whom there is nothing to do, if she really is a client at all.

Have any of you had this happen?  If she ever answers us and says she changed her mind and doesn't want the plan after all, do we need to terminate it as we normally would (resolution, amendment) and file the first, final, and only EZ for it?  Can an employer sign all the papers and pay for a plan and then just walk away from it without further ado?

Thanks as always for your advice.

When you think you've heard it all...

Non-profit ERISA 403(b) plan. The business decided to install a 457 plan so that they could contribute for the lone HC executive. Fine.

Due to a new and inexperienced Human Resources person, they not only didn't timely adopt the 457 plan, but the employer contributions were just sent to and deposited into the 403(b) plan! This happened for several months until it was finally noticed.

Now, I know about PLR 9144041, etc., and although this situation doesn't clearly fall under the stated "mathematical errors", etc., it does seem like there should be some latitude to consider a contribution to the wrong plan (even though other plan not yet established) as a mistake of fact. For example, if a client has a DB plan and a DC plan, and the DB contribution sent to the DC plan, I'd feel comfortable having that refunded under a mistake of fact.

Thoughts on this situation? I know this interpretation may be pushing the envelope, but it doesn't seem that far-fetched to me.

Companies B & C are domestic subsidiaries of foreign parent A and in a control group. B is not profitable and sponsors an under funded frozen defined benefit plan for its employees. 

Can sponsorship of this plan be transferred from B to profitable company C such that C can make (tax deductible) contributions toward funding benefits for B's employees? If they were unrelated, I think clearly the answer is no (exclusive benefit rule), but OK for a control group, yes? First thought is why would C be allowed to make contributions for another company's benefit but as part of the control group, if B goes under then C is also on the hook with PBGC for under funding, so why shouldn't C be allowed to fund. If B did fail, or was sold (asset sale) with plan staying behind, C could pick up sponsorship, right, so why not now?

Should B remain as a participating affiliated employer, since it still exists and its employees are the participants? I would think so. I also think language should be clear that all contributions from affiliated employers are available to fund benefits for participants employed by any and all participating affiliated employers.

We had a transaction occur and as part of the transaction, our employees with Options and RSUs were required to be paid out.  However, as part of the transaction, we had to put money in an escrow account for a year to cover if we violated any representations.  So, instead of receiving the full $100/share the employees were entitled to under there Options and RSUs, they only received $80, and the additional $20 was put in the escrow account.  It's been a year, and we didn't violate any representations, so we are now releasing the additional $20, and we're wondering whether it should be included for 401(k) purposes?

Our Plan's definition of compensation specifically excludes payments from Options and RSUs, but we're wondering if this compensation should be treated as something different because it was held in an escrow account -- does that change the nature of the compensation somehow?

We offer AFLAC as part of our benefit plan. The reps insist that all eligible employees must be seen and see all the products offered, sign an acknowledgement form or a waiver even if they do not want to make any changes or cancel coverage during open enrollment. True or False

Question about the interaction between the 401(a)(17) limit and a 401(k) Plan that has one or more exclusions from its definition of compensation -- e.g., bonuses are excluded.  In figuring out Plan compensation, which applies first – the Plan’s definition or the 401(a)(17) limit? Example (for 2019, in which the 401(a)(17) limit is 280,000). Total compensation is 300,000, which includes a bonus of 10,000. If I first apply the Plan’s definition and then apply the limit: compensation is 290,000 and compensation for the Plan is the lesser of 290,000 and 280,000, so: 280,000. If I first apply the limit and then apply the Plan’s definition: compensation is the lesser of 300,000 and 280,000, so 280,000, then back out the bonus, so comp would be 270,000. I have looked for guidance/authority and the only thing I have found so far is one ASPPA Power Point that says apply the Plan’s definition first, then apply the limit, but no citation for that. Anyone?

I know this is a basic question, but I've got differing answers for some recent.  Can a Cash Balance Plan have a 6-year vesting schedule or is it just a 3-year cliff?

Thanks in advance

Dropped working may10 2017;  had $18000 401k loan;  defaulted this year; no earned income at all this year just WC;  how much taxes will I pay on defaulted loan?

Hello,

Our group plan carrier messed up and failed to enroll an employee back in April when we submitted her application. However, because we didn't know that until September, she has been enrolled on our group HRA since April. So, we were/are out of compliance for the five months she was not covered by our group health plan.

The carrier has since enrolled her onto our health plan as of 9/1, but our broker doesn't think they will consent to back-enrolling to April. If they don't, what do you think we should do? Fortunately, she didn't have any medical claims until September, but she did use her HRA for some dental/vision charges prior to September. We would like to make the employee whole, since it wasn't her fault, and ideally get back into compliance. Should we:

1. Report her HRA employer contributions as taxable for those five months she was not covered and give her a bonus to cover the taxes;
2. Reset her HRA active status date to 9/1 and give her a (taxable) bonus to cover the HRA contributions for those five months;
3. Not even bother asking the carrier to back-enroll her to April and just ignore the fact she was not covered by our group plan for five months (what are the risks here?);
4. Or something else?

Of course, if the carrier won't back-enroll her to April, we will also reimburse her premium payroll deductions. 

Thanks for any advice!

Does anyone know if the ASP system is down today?  This is awful.

Client is terminating his profit sharing plan, and is retiring at current age of 75.  We have calculated the RMD for his employer account.  I assume (?) since the voluntary account has already been taxed, the only amounts he would be taxed on and would be subject to the RMD would be the earnings?

He also wants to rollover the voluntary contribution account.  We're talking somewhere in the area of $250-$300K, which I do not believe he can rollover?  If that is the case, what is to happen to the account?

My question concerns the 5500s.

My client owns two companies, obviously a controlled group.  He is the only employee in each company.

Since they are two employers, do we need aggregate the assets for purposes of the $250K threshold for filing.