A client just supplied me with their 2018 W-2's showing total employee deferrals of $22,000. When I balanced the assets of the plan from their brokerage statements, the total deferrals amounted to$20,000. I thought that the missing $2,000 was simply a contribution in transit that would show up early in January, 2019. Unfortunately, only $1,000 showed up in January leaving the plan $1,000 short. When I questioned the office manager, she indicated that the November contribution of $1,000 was never deposited and wants to know if she should deposit this amount now. As I see it, there are a few issues:

1) employee deferrals are cash items. Therefore, the remaining $1,000, yet to be deposited, cannot be considered employee deferrals for 2018.

2) If 1) above is true, then the individual W-2's reflect excessive deferrals amounts and need to be re-done. Conceivably, if individual 2018 personal tax returns have been already filed, they may need to be re-filed.  

3) Since the $1,000 has been in a corporate account rather than the 401(k) since November, could this be a prohibited transaction?

4) If the adjustments for most (there are only about 6 in the plan) would be relatively small, if there anything that can be legally done to make this mess just go away?

Hello,

If the paycredit rate (say 5%) is enough to pass the 401(a)(4) test, but not enough to meet the Top Heavy benefits, what do you do?

Say an employee earned $1,000 in paycredits for 2018.  Plan passes 410b and 401a4.  Say the hypothetical account balance for the employee is $2,000 as of 2018, but if the employee terminates now and therefore receives the Top Heavy minimum, the amount must be increased to $5,000.  So you know the paycredit for 2018 is not enough for the "distribution" amount....

Do you increase 2018 pay credit for this person with a discretionary amendment?  I don't think 11g amendment applies since there is no failed test?

If you leave the paycredit at $1,000 for 2018, do you inform the client that the actual payout amount would have to be $5,000? 

Creating a DC plan would be the best option, but let's say the client is not interested in adopting one.

Thank you!

401(k) Plan has a discretionary match that is calculated after end of the plan year.     The ACP test fails and there is a return of excess to process.   However, the employer won't be depositing the match until probably May or June.     Do we still process that distribution by March 15 even though the deposit hasn't been made?    Doing so would take the withdrawal from the participant's current account balance.   Or do we wait until the match has been deposited and pay the 10% excise tax penalty?   

Plan A matches based on total gross pay, but for purposes of the match, they want to amend the Plan effective 1/1/2020 to exclude a lot of different compensation items.

I assume I still have the flexibility to leave the plan on prior year testing, thus getting one more year of the "inflated" ACP results?  In other words, I know in 2020 the ACP average for the NHCE's is going to take a hit, but I'll still be using the 2019 averages anyway.

I suppose it's the flip side of a company discontinuing the match in 2019, forgetting to switch to current year testing, and then resuming the match in 2020 (a scenario we all agree means 100% refunds for the HCE's). 

Can a safe harbor plan exclude the employees of one member of a controlled group? Can the plan be separated into SH and non-SH?

Hello! I would like to get your input.If there is an outstanding 403B loan for example 15k in Vanguard. The employer switch to a new carrier and now 100k of 401 money is moved to Fidelity. If a new loan is processed with the new services, would the 50k IRS limit apply? The loans are in two different service providers but in the same employer's 403 B plan. Your input is highly appreciated. Thank you. 

Hello.

The owner of a plan is going to be terminating his plan in 2019.  He also attained age 70 1/2 in 2019.

His first distribution calendar year is 2019, and his required beginning date is 4/1/2020.

He intends to terminate the plan in 2019, and payout all account balances prior to 12/31/2019.

His account balance will be rolled over into an IRA.

My question is:  would he need to have his first RMD processed in 2019 since his first distribution year is 2019, or can his entire balance be rolled over because his required beginning date is not until 4/1/2020.  

Thank you very much!!

Can someone please help answer a few questions? Attorney offices keep pawning me off to other attorney offices and I"m getting nowhere. 

Husband was receiving an injury related retirement pension from the city he worked in. He elected me as the beneficiary after we were married. He had been divorced prior, and It was noted in the divorce decree that his wife was to receive half. She filed a joinder for the Plan Administrator, but a QDRO was never completed.  He passed away in December,  2018, but the city denied me his benefits due to their requirement of a 1 year waiting period and he died in month 9. ?  Ex wife is now filing a QDRO and will be requesting a judges signature in lieu of my husband's to proceed. I believe the Plan Administrator is cooperating with this. 

All I need to know is what my role is in this-- do I have any rights to contest that she receive anything or is this solely based on a judges decision? Do I need to submit/appear in court/have legal representation for anything?  The Ex mentioned something about me "signing off" on her filing.  If that's the case and I have the right as the official beneficiary to block this process, I'd want to offer her a split of the benefits to 'sign off' for approval.  The divorce was in CA. 

Thank you 

I've managed to confuse myself on an AFTAP/deemed burn issue. 

Plan Year = Calendar Year

Prior Year AFTAP > 100% because assets exceed funding target, so prefunding balance does not have to be subtracted from assets for AFTAP (but not FTAP) purposes.

Current Year AFTAP not certified by 4/1, so presumed AFTAP becomes last year's AFTAP minus 10%.  Presumed AFTAP is over 90%.  No deemed burn applies at this point.

Valuation is run in May.  Current year assets are less than funding target, so prefunding balance must be deducted from assets in AFTAP calculation, resulting in an AFTAP of slightly less than 80%.

Restrictions would apply, and there is enough prefunding balance so that a burn can bring AFTAP up to 80%.  Is there a required burn triggered by the actual valuation results here?

I'm thinking the answer is yes, but I haven't seen this happen in this way many times before.

Insights appreciated.

We have two plans that are in an affiliated service group.  One plan is very large and has a high density of HCEs.  The other is much smaller with a more normal population.  The large plan isn't an issue -- it isn't affected much by being in the same affiliated service group as the small plan.  However, the testing for the small plan is wrecked by being tested with the large plan.  I am at a loss for what to do.  Anyone have this problem and figure out a good solution?

We are currently doing the administration on this plan. The company is owned by 2 people split 70/30. The 70% owner did not partake in this plan for 2018. He does want to start taking a salary and participate for 2019 to be able to be part of the profit share contribution.

This same owner has 50% ownership in 3 other companies who also have 401k plans. He contributes to one of those plans and participates in the profit share of the other 2 plans.

My question is whether he can be eligible to get a portion of the profit share within the plan that we are administering if he's getting a portion of a profit share in the other companies of which he is a 50% owner?

Of course, we cannot forget his 401k contribution in one of those companies.

Thank you for any insight anyone can give.

Buisness owner has Mom come in for 10 hours a year.  Comp is $450.  Now she was eligible once upon a time, she worked in the office for about a year and hit her 1,000 hour requirement.

Needless to say as a zero in the test, she has a nice favorable impact on testing.  Now I read through the Carol Gold Memo and Relius's response, and the memo certainly could have made accusations about this type of arrangement, but does not in any way (focsing instead on young NHCE's and frankly only the most obnoxious of scenarios).

So would you exclude her from the testing based on the Carol Gold thought process or include her without worry because Carol Gold never even mentioned this.  I'm feeling pretty good about including her but was curious what others thought. 

http://www.relius.net/News/TechnicalUpdateDetails.aspx?T=P&1=1&ID=628

A participant needing a 401k withdrawl for purchase of a primary residence.  Do the administrators of the plan contact the lending institution?  In addition if work needs to be done to the residence being purchased i.e. new roof, can that be sent in as construction costs? 

Am I right in assuming that no QDRO is necessary in the case of an annulment (since it's like the two were never married)?  Our client is questioning the documentation, which states that there was an annulment and not a divorce.

Thanks in advance!

Hi,

A DB Plan excludes union employees (covered by collective bargaining agreement). An employee was hired by the company on 3/11/15 as a Union employee and was covered under their pension plan until he moved to a Non union managerial position on 8/31/17. If the plan's eligibility requirements is 12 months, would he not enter the plan until 12 months following 8/31/17 (1/1/19 due to entry date) or would he be eligible immediately on 8/31/17 due to the service for the company since 3/11/15 (ie using the service while a union employee). Thank you.

An Employer's profit sharing allocation was pro-rata and included a last day requirement. On the last day of the plan year, an amendment is executed to change the allocation formula from pro-rata to individual rate groups.

Because the amendment was executed on the last day of the plan year, are they stuck with a pro-rata allocation for that plan year?

What form of documentation can a plan with an Individually Designed document have to ensure they maintain qualified tax status, since individually designed documents are no longer provided with IRS Determination Letters?

I have a plan (client) with a safe harbor match.  Their HCE made 166400 before bonus.  They only deferred on the base salary even though plan allows deferrals on  "irregular compensation."  The divided the $18500 between each pay period, and applied the SH Match formula each pay period.  Therefore they only matched them $6656

They had bonuses that made their compensation exceed  $275,000.  They did NOT defer on the bonuses.... I am trying to figure out if they can have the max SH match for 2018 or if they are stuck with the $6656

A client - a 501(c)(3) entity - has a contract with a local medical school pursuant to which school faculty (employed by the school) provide clinical services (treat patients) on the premises of this client.  The faculty providing the services assign their right to send their bills for services to my client, meaning the client bills the patients and receives payment.  The arrangement is that the faculty providing the clinical services gets paid 45 cents on $1 for each service provided, the rest of the money goes to support various departments of the 501c3.  The way the money collected is actually paid to the faculty/physicians is that, after my client collects the payments, it wires a lump sum to the medical school, with a list of which faculty/doctors to distribute payments to.  There is no 1099 or W-2 from my client (the 501c3).  Instead, the faculty/doctors get paid from the medical school through their regular pay stub/W-2 with an entry that says "clinical earnings".   

My client wants the medical school to contract with an insurance company to provide disability insurance to the clinical faculty.  Medical school wants nothing to do with it.  Is there a group that can be joined to allow for the provision of this disability insurance to the clinical faculty? The medical school does not want to pay the premiums, but the 501c3 client offered to cover the cost out of their reserves.  My client wants the disability benefits to be tax-free to the faculty/physicians; however, in order to do so, the premiums would have to be paid with after-tax dollars.  So for example, if the medical school agreed to do it, the medical school pays $100 for disability premium for an employee, that is then added to the employee's income, the employee than pays tax on regular salary plus the $100, and subsequently, the disability benefits are tax-free to the employee (because tax already paid on the $100).    

Is there a way that my client can pay these disability premiums? They are offering to do so.  So in other words, since the medical school doesn't want to be involved with this, can my client, the 501c3, somehow (maybe before releasing the money to the medical school) pay the disability premiums for the faculty/physicians, then issue them  a 1099 reporting it as additional income to them, such that the faculty/physicians pay tax on that extra income, and thus the benefits become tax free?  Is something like this permissible?  

I welcome any suggestions at all.  I have zero ideas.  Thanks.  

I have a Cycle A IDP filer that submitted the plan to the IRS for DL in the final cycle.  Since this restatement pertained to the 2015 Cumulative List of Changes, the document was restated effective 1/1/16.  However, it was not executed until January 2017.  Any issues?  I'm thinking not since the RAP ended 1/31/17, but maybe I'm missing something.