A 5% owner of a law firm is approaching age 70 and would like to be bought out of his ownership share to avoid having to take RMD's from his account balance?  Would this work?  For example, is there a "lookback" period the IRS has on a situation like this?

Also, is there a separate IRS table for calculating RMD's from a 401-k as opposed to an IRA?  Any help appreciated!

Corbel just sent us an email that they are adding a "collapsible" Adoption Agreement where the unselected options will be suppressed.  Does anyone have more information on what that will look like?  I assume for example a non-safe harbor plan, the whole safe harbor section will be suppressed.  But their email was a little sparse on detail, perhaps because they haven't figured it out yet.

Just curious what others know about it.

I'm also concerned about losing familiarity with all of the options available for my own selfish purposes (i.e., being an expert on what my own document can do which I have due in part to seeing it entirely all the time).

I have a client whose current recordkeeper does not charge any annual loan maintenance fees for outstanding loans.  The client is now considering moving to a different recordkeeper, one which DOES take annual loan maintenance fees.  For those loans already outstanding,  is a fee disclosure to participants valid to then start charging annual fees to their loans after conversion?

A fully vested NHCE participant, age 59.5, requested an in-service distribution last year of their entire account from a 401(k) plan, to do a direct rollover to an IRA. The plan sponsor approved. However, the plan does not have an in-service option at age 59.5, it has age 60 for some reason. They did not reach age 60 until this year. They currently do not intend to pay it back to the plan.

EPCRS, Rev. Proc. 2019-19, 6.06(4): Make-whole contribution. To the extent the amount of an Overpayment adjusted for Earnings at the plan’s earnings rate is not repaid to the plan, the employer or another person must contribute the difference to the plan. The preceding sentence does not apply when the failure arose solely because a payment was made from the plan to a participant or beneficiary in the absence of a distributable event (but was otherwise determined in accordance with the terms of the plan (for example, an impermissible in-service distribution)).

To me, the above (bolded) means the employer does not need to repay the amount to the plan. Let me know if you disagree.

The question I have is the tax reporting of the distribution. Was it actually rollover eligible? Or because it violated the plan's in-service provision, is it to be reported as taxable? Would the answer change is this was distributed in error before age 59.5 and the payout included deferral accounts?

The document not withstanding - can you roll an IRA into a 401(k) plan?  I seem to remember that you can’t.

I am an employee who has a sum invested in an unfunded NQDC plan with my employer.  The plan document states distribution triggered by separation will be distributed in 5 annual (yearly) payments.  For obvious reasons I would prefer distribution to be extended to smaller annual payment over a greater time period.  For example if sum held in NQDC plan balance at separation equals $1M it will be distributed in 5 annual payments of $200K.  I would prefer 10 annual payments of $100K or 20 annual payments of $50K.

If in principle both the employee and employer agree to this, can it be done?  I am aware of the risks due to the plan being unfunded and extending the time from 5 years to longer.

Hello,

I have a participant trying to designate their children per stirpes as the primary beneficiary using a non - standardized prototype plan document.

Participant specifically writing on form  My Children - Per Stirpes same terms and conditions as the XXX Trust Dated XXX 

Is this allowed? My document simply states that it must be an individual or trust and while the individual is a person how would we determine who those surviving heirs would be? Would that be the executor of the estate?

Thoughts?

A Safe Harbor 3% nonelective plan decides to make a matching contribution to the plan in addition to the 3% SHNE. This matching contribution is 100% of deferrals contributed up to 6% of compensation. Is the ACP test required for the entire matching amount or just the amount greater than 4%?

I've discovered hiding in plain sight a VCP correction for a SIMPLE IRA maintained by an employer who became an ineligible employer by exceeding the 100 employee limit in 2 prior years.

The correction appears to allow the contributions to stay in the SIMPLE IRA accounts but also appears to require an additional sanction of at least 10% of the "excess amounts" plus loss of the employer deduction for the "excess amounts."

My question is what are the "excess amounts"? If none of the contributions exceeded the employee deferral limits or the employer contribution limits does that mean we have no "excess amounts" and no additional sanction?

Good day! We are in the process of taking over a 401(k) Plan and I have just discovered that there is an outstanding loan balance for a participant who terminated employment in 2017.  She continued making payments until June of 2018, then no more payments.  The prior TPA should have had the loan offset as of 9/30/2018, the end of the cure period. 

I will need to offset the loan now, but it has been accruing interest since last June.  I will request that the recordkeeper (Hancock) offset the loan using the balance on 9/30/2018, which is the date that this should have been done.  Do you agree?  I don't think it is fair to the participant to have to pay any additional interest.  Also, I do not see anything in EPCRS about a late loan offset and I don't want the participant to have to redo 2018 taxes, so do you think it is okay to have this reported as 2019 taxable income even though it should have been 2018 income?

Any guidance would be appreciated!

I am trying to determine if the fees charged by the CPA firm to audit the large plan can be charged to participant accounts or taken from forfeitures.     

The plan document (SPD) says the following:  

The Plan will pay some or all Plan related expenses except for a limited category of expenses, known as "settlor expenses," which the law requires the employer to pay. Generally, settlor expenses relate to the design, establishment or termination of the Plan. See the Plan Administrator for more details. The expenses charged to the Plan may be charged pro rata to each Participant in relation to the size of each Participant's account balance or may be charged equally to each Participant. In addition, some types of expenses may be charged only to some Participants based upon their use of a Plan feature or receipt of a plan distribution. Finally, the Plan may charge expenses in a different manner as to Participants who have terminated employment with the Employer versus those Participants who remain employed with the Employer.
 

Is this an allowable administrative expense or a prohibited transaction?

The plan currently allows only lump-sums 60 days after date of term. All participants are currently active with no plans to leave or retire. 

I assume no one has a problem with me adding a) the ability to defer the distribution of an account following termination of employment, or b) adding installment options? 

All of those pesky rules that make this essentially impossible in a 409A do not apply here.

An S Corporation with the same person as sole owner and only employee has a Solo-401(k) that's been in place for a two years.  (1) Can employee deferrals and employer contributions to the Solo-401(k) be made after 12/31 but before the owner/employee files her tax return?  (2) Also, does the W-2 for the owner/employee need to document the elective deferrals? 

Hello - I notified my 401k administrator in February that I needed to remove excess contributions from the plan (I had contributed to two different plans through two different employers.  Administrator confirmed in March that the refund would be processed by 4/15.  The refund still has not been processed, and I can't get an update from the employer.   it is preventing me from filing my tax return, and I am also concerned I will be double taxed on the amount despite having provided sufficient notice and received confirmation that the distribution would be processed timely.  How can I get this resolved, and is this an ERISA violation?

My client would like to change hours required for a vesting year of service from 1000 to 250.  They would like to apply it to prior years of service for any active employee.  I tend to think if I change the definition as of current date, past years would require 1000 hours, which doesn't satisfy their intention. 

I believe they would be open to applying the new vesting year of service definition to all employees with benefits still in the plan (including those who terminated prior to the amendment).  

Retroactively changing the hours of service requirement would involve recalculating distributions and is not a good option as this is a large plan.

My colleague thinks this is possible through language in the Board Resolution for the amendment or the Preamble to the amendment.  Stating that this would apply to anyone with a benefit remaining in the plan (or possibly any active employee with a benefit remaining in the plan).

Do you think this is correct?

I have a client that experienced a partial plan termination in 2018 because more than 20% of eligible employees were terminated involuntarily.  This year, I have continued to receive withdrawal requests and have determined that, if I were to make a partial termination determination based upon January - April 2019, it would be a partial term and these 2019 terminated employees should be fully vested.  It is possible that there will be enough new plan entrants throughout 2019 to have a result that it is NOT a partial term based upon the full year.  I am hesitant to wait until the end of year, as I normally would, because I don't want to have to reinstate forfeitures when that could have been avoided. 

Does anyone make partial termination determinations throughout the year (if you have a reason to suspect a partial term) or do you always look at the plan year?  In my case, it is not a single event where people are laid off or a division shut down.  I would not say that these are related to the 2018 lay offs, either.

Is anyone familiar with the Abbott PLR that was used to implement the student loan contribution arrangement? I read the PLR, and was under the impression that this was a Non-Elective contribution, subject to all the eligibility and vesting requirements of the NE contribution - However, Empower just launched a Student Loan program, and the employer contribution will be made as a QNEC -  

my questions

1- was the PLR based on a QNEC? That term and any reference to that term was not part of the PLR. 

2. if you do proceed with a QNEC - can you place a last day/1000 hours requirement on the contribution? I assume you can't do anything about vesting

https://www.groom.com/resources/irs-private-ruling-on-student-loan-benefit-under-401k-plan-likely-to-fuel-interest/

Can you amend the eligibility requirements for salary deferrals to be more relaxed mid-year while keeping the SHNEC requirements at 1 year?

Hi all - I have seen threads discussing the issue of amending a safe harbor plan's definition of compensation mid-year.  It seems people are in agreement that you cannot amend to exclude Compensation mid-year because this would reduce the safe harbor contribution.  I have a client that would like to exclude auto allowance pay starting 7/1/2019 (a calendar year plan). 

Notice 2016-16 prohibits the following change-

• A mid-year change to modify (or add) a formula used to determine matching contributions (or the definition of compensation used to determine matching contributions) if the change increases the amount of matching contribution, or to permit matching contributions.  This type of change is possible if certain conditions are met.

If my client amends to exclude auto allowance mid year, it would decrease the safe harbor match for the remainder of the year (they allocate each pay period).  The above only prohibits a plan from an amendment that would increase the safe harbor contribution.

So, can I amend mid-year without it having to be retro to 1/1/2019?  If NOT, what am I missing?

Thanks,

Kathryn

Can my employer pay more for a co-workers health insurance, who is married, than for my health insurance as a single person?

My employer pays 100% of my health insurance, but they also pay 100% of my co-workers' family health insurance policy (which covers my co-worker, his spouse and his children).  We have the same job, with the same job title and responsibilities.  But I believe that since family policies are likely 3-5 times more expensive than a single policy my co-worker is receiving a larger dollar benefit based on the cost of his family policy vs my single policy.

Is this legal, or is it a discriminatory benefits policy based on marital or family status and not a bona fide job-related classification?