A company is owned 100% by an ESOP. The only contributions are made by the company. The company executives voluntarily decide they want to reduce the executives' compensation contribution percentage to a much lower percentage than is being contributed for other employees. Am I correct in assuming that to do so without a plan amendment to that effect creates a plan failure that needs to be corrected?

I terminated a Cash Balance Plan in 2018.  We were unable to locate two participants so their account balances were sent to the PBGC under the missing participants program.  The PBGC audited this termination and sent me and email stating that the payments made for the two missing participants was not calculated correctly.  Both individuals had benefit values in excess of $5,000.  I was told I needed to use their standard calculation method applicable to traditional defined benefit plans.

Is this correct?

If the lump sum value was less than $5,000 would the account balance be the correct amount to send to the PBGC.

Thanks,

Can an employer offer longer COBRA duration, for example 30 months instead of 18 for a class of employees - executives, or salaried but not hourly? Assume that the employer does not subsidize the premium.

If a plan transfers out of a MEP and into a single employer plan there would be a blackout notice provided to participants upon the beginning of administrative activities to transfer moneys out of the MEP. But when preparing the first year 5500 for the newly birthed plan does the single employer 5500 need to state that the plan went through a blackout period because moneys were being transferred from the prior MEP? I can understand indicating a blackout on say a record-keeper transfer within the same single employer plan, or even the MEP suggesting a blackout occurred when money left its plan, but I'm on the fence about the newly created plan. Thoughts?

Assisting a 403(b) client with a question regarding whether to perform match true-up calculations and what may or may not need to be done for prior years.  Their Recordkeeper had prepared their plan document and the language is not as clear as one would prefer (Adoption Agreement or Basic Plan and Trust).  The client has been paying in their employer match on a payroll basis each year.  This year during the plan audit, it was determined that the plan document language bases the match calculation on Plan Year compensation and the Recordkeeper indicated that a true-up would be needed.  

This had never been mentioned to the client in the past either by the recordkeeper, prior plan auditor or their TPA that was hired on a limited-scope basis to perform certain additional tests that were not handled by the recordkeeper.  

The client is trying to determine if they do have to calculate and pay in the required true-up match, how will this impact all of the prior plan years that they have NOT done this or is there any other options available for correcting this problem.

Before getting ERISA counsel involved, I wanted to explore all possible options for the client.  

Everyone's comments are greatly appreciated!  Gotta love the Friday projects....

Trying to get a sense of what I'm up against before purchasing.  Only one of my coworkers has taken this exam and it was quite some time ago...  I have 3 years of experience in the retirement industry (got my QPA in February 2018) but would like to tackle this sooner than later. 

Specifically, how long do the modules alone take to complete? How much time should I allot to study for the written exam afterwards? Would it be beneficial to purchase all 4 elective modules?

Any help would be great..  Thanks!!

Can a deposit made during during one plan year be partially deducted in that year and partially deducted in the following plan year?  (The total amount was within the limits to be deducted in the first year.)

A non-electing 403(b)(9) church plan has an employer with several operational errors. The employer is currently working towards submitting a VCP application. It has been identified by one person in this organization that part-time employees working 20 hrs/week or more were never given the opportunity to participate via salary deferral. Now, the plan is not subject to the Universal Availability rule, BUT the overall plan document indicates default eligibility for deferral participation as 20 hrs/week UNLESS an employer overrides this eligibility with a statement on its Employer Adoption Agreement in which they can raise or lower the hour threshold. This employer did not indicate a threshold for eligibility on its Employer Adoption Agreement. However, one of the individuals believes because the employment offer to one or more part-time employees stated there would be "no benefits" with the part-time position(s), he believes that there was not an operational failure to follow the written plan document.

Is he right? Is this a case of "facts and circumstances" in which the employer could justify not giving an opportunity to participate because the employment offer stated no benefits would be available? 

Thanks in advance for your responses.

KJ

I got a question from a client and the person that normally handles our Cash Balance Plans are out.  They wanted to know what happens if the cash balance investments perform poorly.  Is the employer on the hook to make up the lost interest?  Is it annual (additional required contributions for the shortfall)?  

Sorry for the question, just wanted to hopefully get back to them quickly.

Thanks in advance!

Can a board resolution be used to state the maximum deferral percentage that can be deferred by the HCE group  and also state that any amount over the average by any HCE who has or will attain at least age 50 by the end of the 2018 calendar year will be considered a catch-up contribution?

A sponsor adopting an open MEP decided to start its own plan.   So they gave notice to the MEP and the balances for the active participants were rolled into the sponsors new plan.   Balances for terminated people were left in the MEP though.   Should the balances for the terminated people have moved as well?

Have another recent situation when the plan sponsor was acquired by another company and the acquired sponsor is transferring into the acquiring entity's plan.   Again, do the balances for participants terminated prior to the acquisition move into the acquiring entity's plan?

Both Relius and FTW will rollforward a plan and enter the end of year participant counts as beginning of year counts.

Are people increasing that figure by the 1/1 entry dates?  NOTE:  I would OF COURSE take them into account for purposes of determining an audit requirement.

Based on the fact that FT/Relius pre-fill those figures, I have to make the assumption that they do not think this is a big deal.  Just curious if others think maybe it's not worth the time it takes to count them up each year.

So let's assume there is a successor plan rule violation - 401(k) or 403(b) plan, doesn't matter for purposes of this question. All participants in the terminated plan rolled their assets over to the new plan, which was established prior to the 12-month period.

How would one even present this for correction under VCP? Anyone tried this, asking the IRS to allow it? Etc., etc.? - I don't recall ever seeing this - successor plan questions usually come up prior to the termination of the first plan. Any "fixes" that the IRS approved? I wouldn't think that this is very common, but maybe it is.

Individual currently owns a non-qualified VA, he is the owner and annuitant, contract had a ratchet and guaranteed minimum withdrawal benefit.  The ratchet has expired so he is looking at exchanging into a new 
VA contract.  

The current contract has the owner as the annuitant and his spouse as designated beneficiary.  He is looking at exchanging into a VA where he will be the owner and he and his spouse will be joint annuitants.  Does this qualify for a 1035 exchange?   Best I've found in trying to research is that the Service has not directly addressed this.  The wording in the code and regs is vague at best, saying: 

The exchange, without recognition of gain or loss, of an annuity contract for another annuity contract under section 1035(a)(3) is limited to cases where the same person or persons are the obligee or obligees under the contract received in exchange as under the original contract.

Clearly the current owner/annuitant would be the same obligee.  But is the spouse, who is currently the designated beneficiary in the existing contract an "obligee", as she would be under the new joint contract?

Thanks.

I'm talking to a plan I'm looking to take over, and they are getting close to the audit threshold.  Luckily, they have two separate businesses in their controlled group, so I'm thinking about splitting the plan into two identical plans to avoid the audit (yes, we'll charge them a little more, but nothing near what the audit costs).

The assets are on a product platform.  One of the issues of the plan is that very few of the participants have balances, so I can deal with manually separating the download, but is there a problem with all the participants staying in the same 'contract'?  Is this a master trust?

Thanks.

Small DB plan Trustee pays for investment courses from Trust assets (about $1,500 from $750,000 of assets).   Could this be construed as a plan expense?  I think probably not, however, in the context of a DB plan for which the Trustee is main participant and ultimately having to meet minimum funding it may not make a difference.

The ultimate question is whether this type of expense is proper to begin with or legitimately a settlor or personal (to the Trustee) expense.  In the context of a DC plan it could make a difference.

OK, I know this has been asked, but some threads are from 2003 & 2004, so I wanted to ask again.  A client received a DOL letter (out of Philly) last month about the late deferrals reported on their 2018 5500.  This client had already contributed lost earnings to participants and filed Form 5330 with the excise tax payment.  The letter says "It is important to note that some plan sponsors who make late remittances of participant contributions decide merely to calculate lost earnings using the VFC calculator, and deposit that amount into the plan, but do not file a VFCP application. This informal process is not the same as filing a VFCP application, and does not protect a plan sponsor from potential audit by EBSA."

In the last month, I went ahead and filed the VFCP application on behalf of the plan sponsor because I don't know if they would otherwise be targeted for an audit.

Questions:

1) If it will be time consuming and costly (to the plan sponsor) to determine actual earnings for each affected participant and payroll, are you using the DOL calculator even when not filing a VFCP application?  I believe the answer is yes for the majority.

2) What potential penalties could the DOL impose if they audit a plan that has corrected the prohibited transaction by filing the 5330 and paying the excise tax, albeit with earnings determined using the DOL calculator.  I would think none, but maybe they would require the full application?  Either way, no one wants the DOL to audit a Plan and I would like to reduce the probability.

3) Are any of you opting for the VFCP filing for all late deferrals from the get go (before the client receives a DOL letter)?  We give our employers the option, but we charge an hourly rate for this that would always FAR exceed both the lost earnings and the excise tax, so it is cost prohibitive.  Unfortunately, with these DOL letters being sent to plan sponsors, they are getting freaked and we end up doing the filing anyway.

An employer recently decided to terminate their calendar year 401k asap and would prefer to have 2019 be the last year that admin is needed.  The SH contribution is the 3% nonelective.  I wanted to make sure I have the right procedure in mind after trying to read the regs but finding conflicting information on some of the threads here.     

If I understand, the soonest that the plan can be terminated is no earlier than 30 days after the issuance of a participant notice which says that the plan is terminating and how the employer's obligation to make SH contributions will end on the plan termination date.  At this point it looks like 9/15/19 would be a likely plan termination date.  A 'maybe' SH notice was not issued for 2019.

The employer will need to not only contribute the 3% SHNEC based on compensation through the date of the plan termination, but also pass the ADP test if any deferrals are made by the HCEs.  The plan also allows for cross-tested PS contributions, and if any are made the ACP test would need to also pass.  The 415c, 402g and 401a17 limits would all be pro-rated for an 8.5 month short plan year.   

All contributions must be made during 2019 and all assets must be distributed by December 31, 2019.  A 5310 will not be submitted.  Is there anything that is being overlooked?  Thanks in advance for all help.

Terminated employee continued to be paid after termination due to payroll error. Employee deferrals were withheld from the erroneous "post-termination pay" and contributed to the 401(k) and employer matching contributions were made on those deferrals. The error was caught and employee repaid the post-termination pay to the employer. But in the meantime, he took a distribution of his entire 401(k), including the deferrals and matching contributions attributable to the post-termination pay (that he since repaid).

I am clear that the employee deferrals are considered Excess Amounts under ECPRS, the overpayment is considered a corrective distribution not eligible for favorable tax treatment, and certain notice and reporting obligations apply.

But I cannot find a clear answer on the employer matching contributions? Are they considered Excess Allocations under ECPRS requiring repayment to the plan by either the participant or the employer?  But since they were contributed to the plan in error to begin with (and we're still within the same plan year), it doesn't seem rationale to me that they would be required to be repaid to the plan. The amount in question is apx. $300.  Or can they be considered Excess Amounts and treated the same as the employee deferrals? Essentially just considered taxable income to the employee? 

Thanks in advance for any thoughts.

We have a client that is bringing on board a new physician assistant.  Their 401(k) Plan has a one year of service with semi annual entry dates.  They want to amend the Plan to allow this employee to participate immediately.  Any thoughts on amending the Plan and under eligibility naming this individual specifically as being a participant in the Plan?  I am told this employee will be compensated well below the HCE limit (around $90,000 a year maximum compensation).

Thanks in advance.