Hello,

When the document states compensation is only counted while a participant and entry is 01/01 & 07/01. Can you estimate compensation by dividing full year compensation in half or must I go to client and ask for 07/01 - 12/31 Compensation. I have a payroll report for the full year but not quarterly and client isn't great at responding. 

Thanks!

Participant leaves the company and requests distribution of plan balance. Broker processes a payout without consulting TPA. With plan sponsor consent the participant is paid out 100%.

Problem is the participant wasn't 100% vested. Any experience getting funds returned so proper amount can be withheld?

When a plan is top heavy, it is sometimes useful to amend the plan to set a $0 limit on elective deferrals for Key employees. This allows the Key employees to make contributions which will be automatically reclassified as catch-up contributions (provided they are eligible to make catch-up contributions) because they exceeded the plan-imposed limit of $0. Since catch-up contributions are disregarded for application of 416, this is a way to allow the Keys to contribute without triggering the top heavy minimum.

I am wondering if there is a way to specify that the $0 limit automatically applies in years when the plan is top heavy, and only when the plan is top heavy. In our adoption agreement (FT William) there is a checkbox in the "Minimum and Maximum Deferral Amounts" section for "Other limitations on Elective Deferrals (specify): ________". I am thinking of putting in that blank something along the lines of, "If the Plan is Top Heavy for the Plan Year, the maximum Elective Deferral contribution for Key Employees shall be $0 for the Plan Year." Possibly also adding "The application of this limit shall not restrict the Key Employee's right to make Catch-up Contributions, if they would otherwise be eligible to make Catch-up Contributions" just to be clear.

Any thoughts or opinions on this approach? Are there any issues with determining the plan limit based on the top heavy status? In theory, the plan administrator could know by the first day of the plan year whether or not the plan is top heavy for the current year, and so can adjust the keys' limits if needed.

Would this kind of language jeopardize the plan's preapproved status?

EIN does NOT change. Plan name changes, and name of plan sponsor changes, but no change in EIN, nor is there any change to the Trust id#.

This doesn't call for filing an 8822-B, since neither the address nor the "responsible party" is changing. No SS-4, since Trust id # doesn't change.

The name change will be reflected on the 5500 form when filed.

Am I missing anything here? Client's attorney is telling client IRS needs to be notified of this. If so, how? Maybe when they file their tax return?

Client received an EBSA letter today that the Plan's 2017 5500 form filing was rejected for lack of the Accountant's opinion.  I went on the EBSA website and the filing is there and contains the correct forms and Accountant's report.  The letter tells the cient to file an amended filing including the report and then notify them that the amended filing has been posted. 

Anyone else hear of such a thing?!

(edited for detail)

Does plan document with a three month eligibility specifically have to exclude part time employees if Company will not ever have any? Or can it be left blank since it is a moot point? 

Client paid out a participant in 2018 as she terminated employment and was age 65.  The only problem is that the NRA in the plan is the later of: 65 or 5th year of participation.  Employee only had 4 years of participation at termination.  She terminated one week after reaching age 65. Client does not want to ask for the unvested funds back.  Can the client adopt a retroactive amendment to change the NRA to 65 only? 

Ongoing debate regarding whether a safe harbor 401(k) plan can impose different eligibility requirements for deferrals than for match.  Opinions please!

When cross-testing a 401(k) plan, we have always used an interest rate of 8.5% and the UP-1984 mortality table.  Are those still the best choices or are others recommended.

Input welcome!

A Taft-Hartley plan we've been asked to give an opinion on has issues with late deposits - certainly of employee after-tax contributions, and also possibly the money purchase contributions.  The union is working with the plan auditor to chase down the late amounts.  Is there a potential situation where the union itself is on the hook for these amounts?

Good morning to all,

A client has posed an interesting question that I do not see addressed in our version of the Distribution Answer Book nor Sal's encyclopedia.

John will turn 70.5 on July 7, 2019.  Although he could delay until April 1, 2020, he wants to take his first RMD in 2019.

His question:  Does he literally have to be 70.5, thus taking his first RMD after July 7, 2019, or is any date in 2019 okay (like tomorrow for instance)?  My first instinct is to think that any day in 2019 should be fine, but I don't know that for a fact.

Thank you in advance!

During the course of an audit, it was determined that an incorrect amount of compensation was used for the owners of an S-Corp (Payroll records showed a gross amount of wages; however, one of the line items was for "reimbursements", which was not reported on the owners W-2). Therefore, all of them had excess annual additions (both for a Safe-Harbor nonelective contribution and discretionary employer profit sharing) for 2017. The Plan Sponsor wishes to correct this error by removing the excess (and associated earnings) from each owner and transferring it to the plan forfeiture account, to use in reducing future employer contributions. In reviewing, I believe that this can be self-corrected in reading the IRS Fix-it Guide.

A complicating matter here is that one of the owners left in 2018 and rolled his account balance over to an IRA.  Technically, I believe, he has an excess IRA contribution subject to excise tax until it is removed from the IRA account. However, the plan sponsor does not wish to inform the owner of that. The amount was around $4,000, so I don't know if it's material enough to warrant pursuing further with the former owner.

Any comments on the above would be helpful, thanks!

I have one of my client terminating a 401K plan, however there  be a spin off and part of the participants from the terminating plan will be moved into a guardian plan.  Any idea what a  Guardian plan is and will this impact the termination by any way?

Hello!

If a client adds a non-SH match effective 7/1 and sets the plan up, at the same time, with per-pay deposit but annual computation (match true-up), what wages/deferrals should be used when calculating the annual match allocation? Would it be the wages/deferrals from after 7/1 when the plan was amended or would it be eligible wages for that year?

If possible, I would love a reference showing this in the Code.

Thanks!

I have a client who has a radiology practice, and offers medical benefits to all employees and radiologists, but they need to work the equivalent of 30 hours per week to be eligible for the benefits.  It is only one class.  They have a radiologist who’s dropping to 65% working time.  She is currently on medical benefits and wants to stay on.  Can they create a class that would allow “radiologists only” to be eligible for benefits if they work at least 60% of the time (24 hours per week or more).  I think the answer is yes, but does that in your opinion create a potential discrimination problem?  Any other issues?  Thanks

I've never heard of beneficial interests before, but I am now learning that the shares of a surgical center owned by a hospital are held for the "beneficial interest" of the surgeons who perform their surgeries there.  Now, its an affiliated service group either way (i'm omitting details, take my word for it!), but I am curious as to how the controlled group rules are impacted by beneficial ownership.  

I'm reading it's the same concept as Merrill Lynch holding 10MM shares of Facebook in it's own name for the beneficial interest of its brokerage account customers.  (i.e., the account holder owns the securities, albeit indirectly).

Any insight appreciated!

Client is interested in a lump sum window - they did one a couple of years ago with limited success, but want to consider "sweetening the pot" to improve the take rate. 

Is there a way to enhance the lump sum value without also increasing the annuity benefit? My thought is no, because the QJSA must be as valuable as any other option except a lump sum determined using applicable mortality and interest. So I don't think I can just use better AE assumptions, like an artificially low interest rate, to drive up my lump sum, correct? 

Can I use different overall assumptions and/or calculation methodology just for the window period - as it is not considered part of the accrued benefit? For example, could I add 3 years to a person's assumed age and/or decrease the actuarial reduction for early commencement, and calculate the lump sum as the present value of the immediate annuity rather than the annuity deferred to NRA? I'm sure I can do the first part, but not sure about changing the lump sum calculation methodology.

The goal is to enhance the attractiveness of the immediate lump sum compared to the immediate or deferred annuity.

Thanks

A plan excludes bonuses in the definition of compensation. If the plan can pass 414(s) testing, I know I can include the bonuses to calculate the ADP's. 

My question is, can this change from plan year to plan year (i.e. one year include bonuses in ADP testing, the next year exclude bonuses in ADP testing)?

Plan uses compensation, excluding taxable fringe benefits, as the definition of compensation for plan purposes (eligible for deferrals, match and PS).  NOTE: Catch-up contributions are not eligible for match.

Participant A’s gross compensation is 160,000 and comp less fringe benefits is 150,000.

We are running the ADP test using gross compensation as it provides better results.  The issue is the plan is failing the ADP test and refunds are needed. The  ACP test passes. 

Participant A is having refunded to him $5,000.  Remaining deferrals are $11,500 which yield an effective deferral rate of 7.67% (using remaining 11,500 deferral divided by plan definition of compensation for deferral purposes of $150,000).

Match is calculated as 50% of first 5% of deferrals and 10% of next 5% of deferrals.

Participant A initially received match of $4,500.  Even though the ACP test did not fail, I believe that match needs to be forfeited since his effective rate of deferrals has changed.  I calculate the amount of match that needs to be forfeited as $349.50.

Is my reasoning correct?

Now we have Participant B.  Participant B is not required to receive a refund as $1000 has been reclassified as catch-up.  Because some of her deferral has been reclassified, is she now required to forfeit the match associated with these funds since catch-up is not eligible for match?

When I was deferring compensation into the Nationwide Agent Deferred comp plan, I was running the business as a Sub S Corporation. Upon Retirement, I shut down the Sub S Corp and now the company will only make the annual distributions payable to The Sub S corporation. 

Of course my bank will not cash the check. Since Nationwide Insurance refuses to update the registration, do I have any recourse? 

Thank you!