We need some insight...my husband had a major medical emergency earlier this year. He was fully covered at the time. I have found out that his company's health plan is self funded and BCBS is the administrator. Fast forward to several months later, his company abruptly closed, now filling Ch 11. His claims are high-dollar, about 900k and it took BCBS a while to finalized the claims due to the complexity of the claim. BCBS send payment over to the hospital, which they confirmed to me that the payment has posted. However, now, we are being told by his HR that they never funded the account for BCBS to issue payment and the HR is confused on how a payment was made. The BCBS reps told me that they would never send over payment if there were insufficient funds in the account and when they issued the payment, there was sufficient funds in the employer's account. So, my question is, can BCBS ask for that payment back from the hospital and then we will be liable that bill even though he was insured during the time of hospitalization? BTW...the EOB (which I saved) says we owe $0.  Or what how do you think this will play out?  We are worried sick.  Thank you.

I had a feeling this one could get bad and stocked up on water and supplies last weekend, which was good because the line was snaking around Sam's Club at 7am this morning...

I hope you all stay safe and dry!

Grrr.... I thought I understood this, but some discussion recently now has me questioning myself.

Calendar year plan. Participant terminates employment 12/31/18. Receives final paycheck - just normal wages only - on 1/4/19. Plan uses W-2 compensation, and the determination period is also calendar year.

Plan uses the "defaults" for 415 post-severance compensation purposes - that is, normal qualifying post-severance compensation categories are included for 415 purposes, and the plan does NOT utilize the "administrative delay" rule - also commonly referred to as the "first few weeks rule."

For PLAN compensation, the plan includes,  for all contribution categories,  the allowable post-severance compensation categories - regular pay, leave cash-outs, etc..

So, the payment of wages received on 1/4/19 should have deferrals withheld, and the participant should receive a 2019 safe harbor nonelective, and therefore, for a cross-tested plan, also receive gateway. But since 1000 hour/last day, receives no other PS allocation.

Participant Included in all other 2019 testing.

Am I off my rocker on this?

I know Tom is in Florida, and many others as well. We'll be thinking about you - best wishes for all of you and your family, friends, and neighbors, and hopefully you will be relatively unscathed by the hurricane. Good luck!!!

this is a really long story - but to just cut to the chase, I had a loan deem on my 401K account about 6 years ago due to my employers' error to make the necessary payments from my paycheck.   I had tried every which way to have them fix this and was told there was no way to fix it - I paid the penalty and taxes on it back then - not realizing, of course, that this would stay on  my account FOREVER (until I retired, etc.) and would limit any other loans I could take.  I am now wanting to do a early partial distribution in the amount of $50,000 (I know about the penalty and taxes since I am not 59 1/2 yet)  - my question is - will the deemed loan have to be paid out of that early distribution that I take or since there will still be plenty in the account to cover the loan - can that be done when I turn 59 1/2 and get a full distribution?  Hope all of that makes sense.  thanks in advance!

We know that a safe harbor 401(k) that "consists of solely a cash or deferred arrangement and matching contributions that satisfy the safe harbors of 401(k)(12)/(13) and 401(m)(11)/(12)" gets a pass on the top heavy requirement.

I'm sure I'm overthinking but if I have a Plan with employee deferrals and SH match basic formula, then an additional 100% vested ER match of 25% up to 4%, I still get the TH free ride, right?

A new health and welfare plan was established in 2016 and had less than 100 participants in 2016 and 2017 so no Form 5500 was filed. For the 2018 plan year, we were incorrectly told by the client that the number of participants at the beginning of the year was 145 so we filed an extension before July 31 indicating this is the first extension for the plan. Upon additional review, the client confirmed there were only 20 participants at the beginning of 2018 , therefore a 5500 report is not required.

Do we need to do anything to notify the IRS to disregard the extension?  Will we get any inquiry from the DOL about a potential filing? Now that we filed an extension, do they expect to receive a 5500?

Thanks.

Here is an interesting question.  Participant has $10,000 of Fund A in his 401(k) account and $5,000 of a participant loan in his 401(k) account.  He also has $7,000 of Fund A in his Match account. 

Can I have the participant sign an investment election to rebalance his portfolio and shift $5,000 of Fund A from his Match Account to his 401(k) account, and then transfer $5,000 of his loan from his 401(k) account to his match account.

His 401k account would be reduced by the $5,000 loan leaving, but increased by $5,000 of Fund A being transferred in. As a result, the account has the same balance in the end.  The same thing happens in reverse order on the match side.

Is there anything in a reg or whatever that indicates the source of a loan can never be altered?  There is much in the rules that is quite clear that loans are INVESTMENTS like any other.  A consequence of that definition is that this should be doable.

One of my clients is going through an IRS audit and is getting frustrated. We have been supplying her with everything but she now wants us to take over speaking with the auditor. Years ago, I would complete the Form 2848 as an unenrolled return preparer and using my CAF number. Looking at the 2848 now, it appears that I can no longer do this? Do I need to apply for a PTIN?

Am I no longer allowed to speak with the auditor at the client's request?

Any advice would be appreciated.

Taking over a 401(k) set up by one of the payroll companies in 2017.  It is a law firm organized as a partnership of professional corporations.   The three partners did make 401(k) deferrals both years, however the processing payroll company did not include the individual PCs as adopting sponsors of the plan.

Think IRS would approve a correction for them to adopt the plan now retroactive to 2017?   There are about 50 non-partner employees of the partnership who are in the plan (about 2/3 of them are NHCEs).  

Thanks. 

Is there an additional requirement that if an Owner who is LESS than a 5% owner, over age 70 1/2 and is still employed MUST take RMDs because they are in a "position of control" with the Plan Sponsor/Employer?  The TPA is stating this to our client, but I haven't been able to easily find anything requirement this by the IRS.  Perhaps it's a Plan Document requirement?  Trying to find an answer for the Owner/Employee.  They actually serve as the "Chairman of the Board".  Not really sure how much "control" they really have.  

Your help is greatly appreciated!

We have a client that has an existing safe harbor 401(k) plan that does the enhanced match.  There may be a new participating employer joining due to control group issue that does not have a current plan but cannot afford the enhanced match.  May new employer do the basic match instead and have special language to that affect on their participating employer agreement?  Both companies have HCEs.  

Self insured plan wants to cap payments made for air ambulances to some arbitrary number, $20,000 for example. Does it matter that this is for emergency care, and is this a essential health benefit under the ACA? Any source you can point do would be appreciated. Thank you!

So, suppose you have CG, consisting of Corps A, B, C, and D. A & B sponsor plan #1, and they run on a calendar plan and fiscal year. C & D sponsor Plan #2, and they run on a 10/1 to 9/30 plan and fiscal year.

The numbers are such that either plan, no matter how you look at it, passes 410(b) and 401(a)(4) EASILY, as very few HCE's participate.

However, as an academic exercise for future reference, suppose you are testing Plan #1 (calendar year) and you wish to determine the HCE's for 2019. When doing the 5% owner test, are you looking at 5% owners only in 2018 and 2019, or, would an owner who was a HCE in plan #2 in the 2017-18 plan year by virtue of ownership in December of 2016 be included? Seems like it should be the former and not the latter. Same type question for compensation test - for Plan # 1, are you looking solely at compensation during calendar year 2018, and HCE status under plan #2 for the plan year ending 9/30/19 is technically irrelevant?

Maybe to try to condense the question, for plan #1, is the HCE determination made solely under the normal plan #1 timeframes (but taking into account all employees of all members of the controlled group)? I believe this is how it works...

Anyone with experience with use of level funded health plan and Davis-Bacon?  Client has MEWA with a level funded health plan and would like to offer to employers subject to Davis-Bacon.  Would contribution of employer premium to MEWA sponsor be considered an "irrevocable contribution to an unrelated third party" under Reg. Sec. 5.26?  Since a level funded plan is a partially unfunded plan, we are trying to verify whether the contribution of the premium to the sponsor makes the plan a bona fide fringe plan, despite the fact that the plan is technically partially unfunded.  

I don't know what to make of this.  Client set up an LLC for himself.

He's also a partner in a larger company.  That LLC issued him a K-1 for his income, and then also issued his own separate (single member) LLC a K-1 as well for a separate source of income from the larger partnership.  It's that "smaller" LLC that sponsors his plans.

The first year, he had a Schedule C to reflect the payments from the smaller LLC to the individual.

Since then (the past 2-3 years), the income is not being shown as flowing through the smaller LLC - he just received it on a second K-1 issued by the larger company.  So I think that's wrong to use for purposes of funding his plans.

But - is it enough for the big LLC to pay the little LLC on that K-1, or does the little LLC then need to turn around and issue a Schedule C every year?  Or, is it enough that as the single member, the earnings on the K-1 (from big LLC paid to little LLC) enough to count as income for the individual himself?

We're trying to figure out if the CPA needs to re-address past years' tax statements, in terms of how the payments were reported, before we get into tracking what sort of benefit he's actually due under the DB plan.

thanks in advance....

--bri

We are planning on amending our plans in 2020 for the new hardship rules.  That includes the no more suspension of deferrals.

What happens is some takes a h'ship now?  Their suspension period would go until February.  Does the suspension just go away Jan 1?

Hi to All,

We have a 401(k) plan for a non-profit entity with a new comparability formula for the profit sharing.  The intention in the design was to have each participant in his own group and to vary the contribution level at will.  There are no HCEs and of course no "owners".  

Can the employer give 10% of pay to the 3 oldest employees and nothing to the 3 youngest employees?  Can the contribution be literally whatever they feel like giving to each person?

We are so accustomed to the world of small closely held companies that it's hard to think outside the parameters of normal non-discrimination testing. Our first instincts are to say "Oh no, you can't do that!" but perhaps you can!  Any thoughts?

Thank you as always.

I have a plan with a discretionary match that is calculated and deposited each payroll.     At the beginning of the year the board of directors elected to cap the match at 15% of compensation.      The payroll department didn't apply the 15% cap and 3 participants received excess match - 2 of them $4000 and $6000.         Is the cure for this error to forfeit the excess?    

Company A owns 20 other companies at 100% ownership. All 21 (20 plus company A) entities have their own separate plans with different record keepers, TPA's and financial advisers. No one has performed combined coverage testing for the past 15 years.  The plans vary from safe harbor to traditional 401k with profit sharing. All plans are small plans so on their own have not had an audit requirement. All plan year ends are calendar year.

Question: Is this an obvious VCP submission requiring them to go back and run coverage testing for X years? Or can this be self corrected? 

Thank you