Dealing with a cash balance/DC combo.  The Plan defines Comp period as the 12 month fiscal period ending within the plan year.

Example: 3/31 Fiscal Year End.  The 12 month comp period would be 4/1/2017 – 03/31/2018.

This plan has 4 entities (control group) participating. 2 w/ 3/31 fiscal years and 2 w/ 12/31 fiscal years.

The employer switched fiscal years after the completion of the 3/31 fiscal year to a calendar year.  I technically have two fiscal year ends (21 months of comp) within the 12 month plan year. 

4/1/17 – 03/31/18 and now 4/1/2018 – 12/31/18.  The plan year has not been changed and continues to be a 12 month calendar year.

We want to be able to include all 21 months of compensation for funding purposes during 2018 and then going forward 2019’s compensation will follow the 12 month plan year.  How do we include compensation from 4/1-17 – 12/31/18 for funding purposes for those 3/31 fiscal EE’s that had their fiscal year switched to 12/31?  

Can this be accomplished in the 2018 plan year?

For sake of simplicity I will just use an example

1000 shares in suspense in 2017

Original amortization schedule is 20 payments of 160 (total payments of 3,200)

160/3,200 x 1000 = 50 shares released with $3,040 in remaining loan payments

Year 2018 the amortization schedule was updated by the valuation company and is 20 payments of 155 (total payments of 3,100)

should the 2017 share release be recalculated to reflect this updated amortization schedule? 

Insurance providers report claims paid on their Schedule A letters, but not a separate item for Claims charged. I'm wondering if this amount should be entered on Sched., AIIIb under both (1) Claims paid and (4) Claims charged. Reason I wonder is that the SAR pulls the 'claims paid' number from the Claims charged entry.

Hello,

I am sorry if this is a basic question. I'd like to ask what do we mean when we say that the employer has to guarantee a return of 3.75% on employee contributions? For example, assume that someone, aged 65, has just started in a company and this year's employee contribution is 10,000. Then what's the amount of the lump sum that he will receive when he retires (assume at 67)?

Thank you in advance for your help.

I need some guidance as to what someone would do in this situation, or if anyone knows of a cite that they can refer me to.

I have a client who was sued (settled 2018) by an employee for vacation pay from 2016.  For simplicity, let's say they were awarded $3,500.  The client was also ordered to pay a penalty on that amount of say $1,500. 

The plan is a safe harbor non-elective plan.  The client then submitted the 3% SHNE contribution on the $3,500 plus lost earnings on the $3,500.  The participant is now asking for the 3% ($45 plus lost earnings) on the $1,500 penalty.  

Here is what the SPD reads (for the readers digest version)...

Does plan compensation include monies paid to me during an absence or after my employment ends?

Usually, only the amounts paid to you while you are an employee are considered plan compensation (described above). However, the plan may consider certain types of pay as plan compensation, though paid during an absence or after you leave employment.

 If you are totally and permanently disabled, compensation under your plan will not include disability related salary continuation payments.

 Payments you receive after terminating employment might be considered plan compensation, if they meet the definition of "post-severance compensation. "To be considered post-severance compensation, the payment must be one that you would have received had employment continued, such as your salary or wages. Post-severance compensation does not include severance pay, or other amounts you receive only because your employment ended.

To be included in plan compensation, post-severance compensation must be paid to you by the later of the end of the limitation year in which your employment ends, or within 2-1/2 months after the date your employment ends.

Payments for unused accrued sick, vacation, or other leave that you would have been able to use if your employment had continued are not included in your plan's post-severance compensation.

Thoughts?

The debates here, are several...1) She should not have gotten the SHNE on the vacation pay to begin with.  2) Vacation pay could be considered post-severance compensation (as she would have received it, had she not terminated), but the last paragraph kind of negates that.  3) None of it was paid within 2-1/2 months after employment ended.

Thanks in advance!

We are advising a client (along with bringing in outside experts) regarding an overfunding of a sole proprietor DB plan. Long story short, the actuarial was unable to accurately anticipate the aggressive nature of our client's investing and currently has a nearly $1mm overfunding situation. The actuarial has suggested that the sole proprietor take "catch up" distributions to eat up the overfunding, however the client has reached out to us to brainstorm some additional options due to income tax impacts. To complicate matters, the business is wrapping up operations within the next year or so and may exist in a "slowed down" state for a number of years beyond. 

I realize the option of a Qualified Replacement Plan (QRP) exists, but I believe that the overfunding amount will remain suspended until used for contributions (which may be impacted because of the lower amount of income). The issue with the suspension is that in the case of untimely death of the sole proprietor, my understanding is that it automatically reverts. 

Beyond that, I have read that using the money for health benefits is possible, but the topic is less popular and murkier based on my limited research. 

Any thoughts or suggestions on avenues to explore? My intent is to have a thorough discussion with the client and "spit ball" ideas in coordination with the actuarial. 

Thanks to all. 

Good afternoon to all,

Have any of you ever calculated the earnings on a series of slightly late deposits (between a few days and 6 weeks each) for a client and found that some participants are only going to get a very little bit of money? I just had to do this for a school with about 45 participants.  While 19 of their 26 deposits during the year were late, they weren't THAT late, and the total interest on the late deposits per person just isn't much. Some will get a few bucks but many will get less than a dollar.

Why did I bother with it?  Because some of the employees found out that deposits were being made tardy and demanded to know what our client was going to do about it.  He's in the unhappy position of having to prove that the rules have been followed to the letter.  So he will have to pay us more than the interest and penalties involved to find out what he owes.

The toughest part to figure out is what to do when the participant has already terminated employment and been paid out.  How does our client manage to pay someone as little as 13 cents after they are gone?  Do these tiny payments have to funnel through the platform provider or can the school just write a check to the terminated employees and mail it to them?

Your thoughts, ideas and experiences are greatly appreciated, as always.

Some participants in ERISA plans have hired registered investment advisors (RIAs) to manage their retirement plan accounts -- selecting investments from the plan's menu, rebalancing the investments, considering in-plan and out-of-plan assets collectively, etc.  The plan sponsor/fiduciaries do not endorse any RIAs to plan participants.   Assume that the plan sponsor has permitted RIAs to access participants' accounts, and further, to deduct the RIA's asset management fees directly from the accounts. 

The Deseret Letter  (DOL advisory opinion 2005-23A) does not directly address the fee deductions.  The question is whether the plan fiduciaries will have co-fiduciary responsibility and liability for ensuring that the RIA's fees were reasonable, and if failure to monitor the fees is a breach of fiduciary duty. 

Is there any DOL, IRS, or other guidance on this topic?  Thank you.

Nonprofit (501(c )(3)) plan sponsor provides a lump sum numberto each employee representing an amount which can be contributed to the HSA or, if not, to the 403(b ) plan.  It has always been my opinion that such a choice makes this money, when contributed to the 403(b ) plan, an employee contribution because of the old cash or deferred rules.  The employer would like it to be deemed an employer contribution.  We could insert a Non-Elective provision with individual groups and test it, but I am just not certain that the fundamental question and answer are correct.

Please share your thoughts!  Thank you.

Patricia Neal Jensen

I have a plan that was created in 2018 and is short, spanning only November and December 2018.  While they do not have any ER money that is attached to a vesting schedule at this time, my question is this:

Are hours that count towards a year of service also prorated for a short plan year?

Group:

Client has extended a number of SOL time limits in current audit.

A former advisor was involved over last few years of TEGE audit.

TEGE auditor now wants to extend 3 years of audit (2014, 2015 and 2016)

to June 2021.

I have been trying to obtain copies of which extension form was used:

either 872-A or 872-H (to extend time for Trusts).

Q:  Does a termination form 872-T apply to both of these extension forms?

Q:  Where do I find form 872T?  I have tried searching IRS websites

and other sites but to no avail.

Q: Is 872T a notice placed on your own letterhead?

Thoughts and comments appreciated.

Warmest,

Joe Dadich, Esq.

Plan year starts with 2 participants. During plan year, Participant #2, who is not a spouse and is already terminated, takes a full distribution. So plan year ends with 1 participant.

So, is this the year that the plan switches to 5500EZ? Or wait until the year it starts with 1 Participant?

(technically speaking, plan will file SF as one-person plan)

A client called because they were pressured by their platform to approve a distribution and agreed to it.  Unfortunately, their document is written so that there is a one-year wait on distributions (because there are usually errors in deposits that we have to reconcile after the end of the plan year).  But let's say that we are confident that this particular person has no deposit errors, so the distribution was 'correct' in the amount (vested amount, deposits, etc.), just about ten months too early.

I know that they have violated the terms of their document.  But what is the downside/correction?  It's not really an "overpayment", is it?  I'm not seeing anything remotely applicable in EPCRS 2018-52.  Thanks.

I've got a plan that transferred to us from another recordkeeper last year.  The prior recordkeeper just came to us stating that they had a stale check attributable to this plan and asking us to confirm wire instructions to move the funds to us.  This is the first time I've seen a recordkeeper attempt to transfer stale check assets to a successor provider, but maybe it's more common than I think.  Are other providers accepting stale checks in situations like this and how are you handling this?  Are there any issues rejecting the stale check being transferred? 

Hi.  We have received a check for around $500 from an investment fund where we are unable to determine what participant it applies to.  The check is made payable to the plan.  Apparently the SEC ordered a settlement under an administrative proceeding.  Certain investors received settlement proceeds if they were affected by market timing activity in 2001-2003.  We have not been able to figure out what participant account to apply the check to.  

What should we do?

I would be interested in reading comments from our QDRO legal beagles:

http://hr.dickinson-wright.com/2019/05/24/surprise-a-qdro-can-apply-to-a-welfare-benefit-plan/

Took over a plan that the document excludes highly compensated employees from receiving the safe harbor match.  The plan now wants to change and give the safe harbor match to everyone.  Can I amend mid year or do I need to wait until January 1, 2020.  Thanks.

A non-governmental 457(b) plan is terminating.  However, the plan document was never updated for PPA, HEART, and WRERA.  I understand that any plan correction cannot be through VCP, but the plan sponsor has option for the IRS to review their 457(b) plan document or consider any other document form issue by requesting a private letter ruling?

In a related issue, in distributing assets upon plan termination, what procedures can the plan sponsor implement when distributees cannot be located?

Our document software creates an SPD for delivery to participants.  I know it's not required but of course it is a good and thorough explanation of the plan so I would typically have clients distribute (whether exempt or not).  I have a new client where the provisions are quite complex and vary depending on which group of employees you are "disclosing" to, which makes production and distribution of the SPD's a bit more challenging.

So I know they are not required to use an SPD (they have informal informational sheets).  But are there benefits to distributing a complete SPD to all Participants which clients may wish to avail themselves of?  One thing that comes to mind is reducing the risk of an employee saying "Geeze if you had told me that.."