This is a case where I was SO sure I knew the rules and it appears that I do not!  

A client has a Top Heavy 401(k) plan with deferrals, Safe Harbor enhanced 4% match, and integrated profit sharing.  They use all of it - maxing out the doctor/owner via the profit sharing contribution and contributing whatever is required for the rank and file. The profit sharing has a last day and 1000 hour requirement.

One participant worked less than 1000 hours every year except for 2014.  That one and only year, she got her 1000 hours, met eligibility for the first time and got into the plan.  For 2015, she did not defer and of course did not get a match, but she got the 3% TH minimum.  In 2016 she began deferring 4% of pay  and got the SH match but NO profit sharing.  In 2017, same thing.  I was working on 2018, noticed that once again, she deferred and got the SH match but no profit sharing at all.  

I thought we had made a mistake in 2016 and 2017 and were about to make a mistake in 2018 by not giving her the TH minimum 3% in addition to her SH match.  I knew that if a plan had ONLY SH Match and no profit sharing at all, then the Top Heavy requirements were deemed to be satisfied.  But I believed that from the moment you gave the HCEs 3% or more in profit sharing, you had to be sure that all of the NHCE participants got at least 3%, even those who didn't work 1000 hours.

I questioned the software vendor as to why the under 1000 hours participant did not receive a 3% TH minimum for 2016-2018 and I was told that the employer doesn't have to give her a TH minimum 3% profit sharing contribution because she got 4% in SH Match and that takes care of it.  

So if there had been 4 under 1000 hours participants in the plan, and 2 deferred 4% of pay and 2 deferred nothing,  the 2 who deferred and got the SH match get NO profit sharing, and the 2 who didn't defer anything would get the Top Heavy minimum 3%?  That hardly seems fair or right, but what do I know......

I just want to run this up the flag pole and be sure that others agree.  If this is really right, so be it - what do you say?

Thanks as always.

We sent a terminated 401(k) Participant a letter stating we would roll their account into an IRA if they did not return a distribution form.  At the time their account balance was < $5,000.  Now, 45 days later, we have not heard back, but their account balance has increased to > $5,000.  Can they still be forced out of the Plan?

HCE defers $6,000 for 2018. He's over 50.

Employer makes a $55,000 profit sharing for him.  Total Annual Additions $61,000. $6,000 is catch-up.

What do I put in the ADP test?  $6,000 or $0.

Hi all,

I am working on a plan that is Top Heavy and is only allocating a 3% nonelective Safe Harbor for the Plan Year. No other employer contributions or forfeitures.

The plan excludes compensation while not a participant, so I have allocated a Safe Harbor contribution to a participant based on her partial year compensation.  I did so because I thought that Top Heavy minimums were waived if the only contribution was the Safe Harbor.

I am being questioned on why I did not allocate Safe Harbor based on the participants full year gross compensation.

I cannot find documentation showing which way is correct ( I am hoping mine is). 

Could anyone point me in the direction of a regulation that says a plan is exempt from the TH minimums as it is not considered TH in a year when the only contribution is a SH?

And if this is correct, do you agree that the SH can be allocated on partial year compensation?

Thank you all so much!

A participant's loan was deemed in 2014. He received a 2014 1099-R for the balance. However, a loan payment was applied to the loan balance in 2015 and the loan was deemed again later that year. He received a 2015 1099-R for the balance. Should one of the 1099-Rs been reversed? The participant is currently an active employee.

Sponsor of SIMPLE IRA has employee who did not elect to defer until mid year.  Then she deferred 7% until the end of the year.  Employer pays match up to 3% each pay period.  At end of year, the employee had averaged, say, 3.5% and should receive 3% match on full year compensation.  Employer says he doesn't want to pay true-up, that he put it in each pay period and because she chose not to start making deferrals until mid year, he should not have to pay the additional match.

Is that an option in a SIMPLE IRA?

What are the risks of not making the additional match contribution?

The employee is unaware that she may be entitled to additional ER match.

Thanks!

Employer switched payroll companies mid-year 2018.  Due to some type of error participant defers $20,000 during 2018, but the relevant parties (participant, employer, payroll company) think that only $18,500 has been deferred.  The participant is catch-up eligible.  The issue is that W-2 was prepared and taxes filed assuming a contribution of $18,500.  

Is there any way to get around this, other than by amending the W-2 and tax return?  Employer prefers that it be distributed to the participant similar to an excess deferral, participant is okay with that, but I'm not aware of anything that allows that.

Thanks in advance for any guidance.    

Hello! First time here. It's great to see so many HR professionals and the advice you're giving here is invaluable.

I've created this infographic about employer benefit trends throughout 2019 and into 2020. It includes benefits that employers are trying that you may not have even heard of. Take a look and let me know what you think.

Here is the source for this graphic. Custom HCM Software Development

Thanks!

participant want to take ISWD of $50,000 from his Roth 401k account.  He is over age 59 1/2 and has me the five year rule on his roth contributions.   My question is - when the money comes out do you have to split between basis and earnings on that amount?  It should all be non-taxable because he met the requirements but so is there any reason we need to determine the amount of the earnings attributable to the amount being taken out of the plan?

Who must receive a Form 1095-C per the instructions:  Employer must file a Form 1095-C for each employee who was a full-time employee for any month of the calendar year.  So if an employee was not employed an entire calendar month, then they don't receive a Form 1095-C?  They were regularly scheduled to work 30 hours a week.  For example, employee was hired 5/16/18 and term'd 6/20/18.  They were in the 90 day waiting period.  Don't give them a 1095-C?

A small engineering firm has a 401k plan.  They are showing an operating loss for the 2018 year.  The plan sponsor would still like to deposit a discretionary PS contribution.  The plan document is clear that is permitted.  However, (details not clear on this), he has a contract with the state of New York for some/all of his business which states in part that there can be no PS if no profits.  

I am recommending legal counsel for this but just wondering:  Does an ERISA plan document take precedent over a state contract like this?  

Thanks

Are employee HSA Payments part of compensation used for 401k adp testing purposes?  Wages under Code §3401(a) is used for the plan and no exclusions.  Thank you.

Are multiemployer health and welfare plans subject to the Americans With Disabilities Act?

We have a participant who terminated during the year he turned 55. So, normally, he would have a Code 2 for the distribution. However, since he has Roth funds in the account, the code would be B2. If he had the funds in the account 5 years or more, my understanding is that he would not be subject to the 10% penalty on the earnings (because he was terminated in the year he turned 55), but would have to pay taxes on the earnings (because he's not 59 1/2). Would you agree?

We were about to tell the plan sponsor that the hardship paperwork they had sent to us looked in good order when one of our admins stumbled upon a GoFundMe page set up for the specific purpose of paying the bill that the hardship was submitted for.  A very well-supported GoFundMe page.

If we tell the Plan Administrator, they're just going to ask us what this means, and should they approve it or not.  On the one hand, one could argue that there is no longer a financial need.  On the other, there's no real proof that this was set up by the participant in question and that the money will actually get to the participant (internet scams abound).  The hardship form does have a certification that the participant has no other funds with which to pay this bill, and this was signed by the participant.  Maybe it was signed before the GFM page was created, or maybe it wasn't fully-funded at the time so they were looking to make up the rest via the hardship; I don't know.

Our consensus is that no auditor would look this far into the situation - they would review the distribution form and the payment in the light of the [proposed] regulations and everything would be fine.  No IRS agent is going to do an Internet deep dive on this - at least, I don't think it will be in their training in the next three years.

Anyone already think through this and come up with a policy?  Thanks.

The background: Solo-k client is moving assets from one Investment Company to another.  The new Investment Company requires that a client use their AA (for which we provide the service.).    So, our firm was asked to restate the plan onto our document.  Per the advisor, the plan was effective 1/1/2014. 

We always asked for the prior AA for compliance and mapping purposes.  Well, client cannot provide a document - no AA, no SPD, no resolution adopting a plan, nothing and asked that we just use our default provisions for the restatement.    This is clearly a VCP issue.  Client has asked prior Investment Company for the document, but the client claims the Investment Company will not provide any data (sounds fishy to me...) Has anyone had any experience with filing under VCP for what would be now an new plan effective 1/1/14 and basically asking relief for it not being signed until 2019? 

Any guidance would be greatly appreciated.

I have a situation in which an employer's NQ plan should have credited its COO's fully vested NQ plan account with a significant amount of employer non-elective contributions over the last 5-6 years. COO is still working for the taxable employer and the crediting failure doesn't impact how or when the non-elective amounts, once credited, will ultimately be paid to the COO.  Client would like to credit all the past-due amounts into the COO's account in 2019.  It feels like this is a likely 409A violation but I am having trouble identifying the violation since the error doesn't involve an employee deferral election or the timing or form of benefit payment.  The error does, however, mean that Form W-2s issued to the COO showed the wrong amount of FICA wages in each year.

Anyone have any thoughts as to whether and how the error violates 409A and how it might be corrected?

Thanks.

One-person plan, invested in illiquid assets. There is no cash (annual contribution is paid out annually as RMD).  Some kind of payments were due on the real estate holdings (taxes maybe) so Plan Sponsor put money into plan, separate from annual contribution, and then paid the expenses out of the plan.  Owner has informed us of this and that she treats the money as a loan to the plan, although no loan documents were ever set up and no interest payments back to owner ever made.  Contemplating what to do now.

We have a client who has maintained a plan for well over 30 years and has passed away as of last week, he was trustee on the plan.  He owned a dental practice and now there is a dentist who was renting space from him and actually caring for his patients while he was ill, this dentist is going to be buying the assets of the practice.  Question, can the plan be sold with the practice and the new dentist become the successor sponsor?