This is new for me and any insight shared would be appreciated. Our company purchased an organization with a MEP last year and we would like to merge the 20 facilities/employer plans into our single ER Plan.   Can we handle it like a standard trust-to-trust conversion - addressing any protected benefits?  I heard there are special consideration for MEPs, however I couldn't locate any conversation on unique issues we need to consider.   Thank you.

Safe Harbor 401k Profit Sharing Plan provides:

401k+Catch-up for all

3%SHNEC for all NHCEs only

Discretionary PS, each Participant own rate group

25 HCEs, 2 are owners

100+ NHCEs

Employer would like to contribute the following:

2 owners 9% PS

Remaining HCEs 1% PS (Plan is NOT TH)

NHCES only the 3% SHNEC, 0% PS -- this satisfies the G/W minimum

Can this be done or must the NHCEs receive "some amount of" PS?

We have a client who is historically non-responsive and difficult to work with, so we were very excited when they decided they wanted to terminate their 401(k) and Cash Balance Plans. 

To ensure everything took place that needed to take place, we mailed notices out to the participants and gave the client 45 days to return the signed termination amendments.

The client has 2 more days to get the executed termination amendments back to us.

I've never had a situation where a client never signed and returned a termination amendment, and I can't find anything that points to this in particular.  Suppose the termination date comes and goes and we still have not received the signed termination amendments.  Is it okay that the client signs the amendments after the plans' termination dates?  (The Cash Balance Plan is not subject to PBGC by the way).

If a Plan uses the definition of pay that is W2 compensation subject to income tax at the source (code section 3401(a)), and the Plan further has no pay exclusions of any type and the basic document does not automatically exclude any types of pay from the definition of compensation, if the employee is given a gift card with a value of $500 that the Employer has to report the cash value of the gift card on the employee’s W2 for the employee to pay income tax on when the employee files his/her tax return at year-end, is the employee eligible to salary defer on this journal entry to the payroll system?

 This is a taxable fringe benefit that is added-on/provided to the payroll provider at year end for W2 reporting purposes for the employee.

 Does the answer above change if the Plan uses a definition of pay that is based on code section 6041/6051 (which is income reportable on Form W2)?

 I believe the answer is NO using 3401a compensation and YES using 6041 compensation.

 This tends to happen with other taxable fringes that are yearend add backs to the payroll system for purposes of getting onto an employee’s W2.  S-Corp Health Insurance and Personal Use of Company Car as two other examples.

 Thank you.

The employee contribution limits for SIMPLE IRA and SIMPLE 401k is currently - $13,000 for Employee Contributions and an additional $3,000 for employees over 50 years of age.

Does anybody know whether this limit applies individually to Simple IRA and Simple 401k or combined. Example is if the employee is over 50 and contributes to both Simple Ira and Simple 401k in the same year. Is the overall limit still $16,000?

We are looking to implement PTO charge back and PTO buy up but we are looking for numbers to present to the board for approval. Anyone know where I can find any sort of statistics with numbers. Something that we can define. We are a manufacturing and technology group. It would help to know what level of employees use this kind of benefit. Any help would be appreciated.

Thank you

Potential client has ownership interests in a few management companies.  Each company was set up to manage one operating company that has employees.  Each management company receives 100% of its business from the operating company it manages.  Client has no ownership of operating companies and management companies have no employees.

Each pairing is a management affiliated service group.  Payments from operating pass through the management company to an equity holding company.  Equity holding provides client with K-1 self employment income.  This income reflects on 1040 SE.

The management companies are disregarded where the client has self employment income with regard to the management companies? 301.7701-2

Tracing the income to a company within an affiliated service group, does that designation attach to the income , precluding client from adopting a 1-man DB plan in his sole proprietorship with the net earnings?  Or would the client sole proprietorship fall outside the affiliated service group, as the income comes from enough operating companies that the 50% management business is not met?

Executive terminates 12/31/17 and is paid a 2018 W-2 for $800,000 distribution from a nonqualified plan for payment in Feb 2018.  Plan defines comp as W-2.  For 401(k) deferral purposes is this eligible comp based on the 2 1/2 months post-severance rules or is it severance pay that is not eligible comp?  Thanks!

Hello,

We are implementing a 401k match with year end true up next year.  For those of you with this in place, what percentage of overall match happens during the year vs. the year end true-up?   I realize this will vary from company to company but looking for some general numbers.

Thanks,

Ryan

Facts: A company filed their first (and only) Form 5500 return for their H&W plan in 2013. The BOY count that year was > 100, with the EOY count dipping below 100 participants. Thus, they stopped filing because they satisfied the small plan exemption. They also did not use the 4R code.

In 2018 the company was purchased by another company, and will now be  under that new company's H&W plan.

Question: Since that single Form 5500 was previously filed, should a final Form 5500 be filed to inform the DOL/IRS the plan no longer exists? There is a 5 year gap since they only had to file in 2013.

Your thoughts on this matter is much appreciated! Thank you.

We have a client whose business was taxed as a sole proprietor until 12/31/2017.  Effective 1/1/2018 he elected to become an S-Corp.  The owner was under the impression that he could defer like he was still self-employed, and then max-out after the year end.  He also assumed that his shareholder dividend could be used as compensation.  His 2018 W-2 wages were $0.

I’m not sure how he actually deferred throughout the year without compensation, I think he took what he considered draws and contributed them into the plan.

Now we have a plan where an owner with $0 W-2 wages thinks that he deferred $9,000.

How would this “deferral” be corrected?

·         Should it be returned to the owner as a 415 excess?  This would generate a 1099.  This was my original thought for correction, but how could someone get money returned when technically they didn’t have it to defer to begin with?

·         Should the money revert back into the company somehow, as an operational error (possibly failure to follow the terms of the plan, with no 1099 issued to the owner)?

As a side question, I thought an owner had to take reasonable compensation in an S-Corporation.

What are the thoughts on this scenario - a plan sponsor sends out a fee disclosure as they are switching to a fixed recordkeeping fee. After the notice is distributed its realized that the fee is actually going to be less than what's reflected on the notice. Can a revised notice be sent out with less than 30 days notice, given that its a benefit to participants?

For the past 20 years of ADP testing, when refunds are necessary, we provide the client with a form to give to the HCEs that explains the reason behind the refund, and a place for the HCE to make a withholding election.  The form offers them the choice of, 1)normal 10%, 2) a percentage or dollar amount over 10%, or 3) no withholding. 

The form also comes with a W-4P and option 3 includes instructions that if no withholding applies then the W-4P must be completed in addition to our form.

We then use this information to complete the recordkeeper's refund distribution form for the client.

We now have a recordkeeper that is insisting that for ANY withholding amount that is not 10%, they want a signed W-4P.  Additionally, if the participant wants, for example, 20% withholding, they want the participant to change the $ sign on line three to a % sign and indicate 10%, as that would be 10% additional to the normal 10%. Notwithstanding how confusing that would be for the participant.

They are insisting that the IRS requires W-4P not just to elect to be exempt, but for anything other than 10%.

I do not see anything in the instructions on the W-4P that requires the form to be used if a participant elects say 20% withholding, and do not see why our election form would not satisfy that purpose, especially since our form is much clearer in the instructions for the participant.

Do others require a W-4P in all situations? 

I do not mind changing our procedures if we are not doing it correctly, but just want to be certain first that we actually aren't doing it correctly.

Thanks!

Plan says that claims must be submitted within 45 days after end of plan year. But the provider doesn't even send bill until the end of February. Would you:

A. pay the otherwise allowable claim, as soon as possible but within 45 days of the participant's receipt of the bill

B. amend the plan (retroactively?) to provide a longer run out period

c. deny the claim, since not received  by the deadline

d. other?

P.S. - I should have put this in the original post, but FWIW, I believe the answer is "c" - as per 1.125-1(c)(5).

Let's say a participant is over 70 1/2 and took a full distribution as a rollover and let's say that his RMD was not processed by mistake. What would be the correction method for this mistake if the participant already deposited the check into the receiving IRA? Is amending the 1099-R to reflect that a portion of the distribution is an RMD and requesting the participant to take out the excess from the IRA the only method?

Thanks.

Trust is the beneficiary of an individual's 401(k) and Roth IRA.  Trust specifies distributions be made to decedent's children at age 25, 30 and 35, distributing 1/3 of their share at each age.  First distributions were made from the taxable account, which is now mostly distributed.  Remaining distribution to be made from the IRA account.  If a distribution is made from the IRA funds, can it be rolled over to an inherited IRA for the trust beneficiary?  What are the options?

Thanks!

We have a plan that was supposed to exclude the HCEs from the matching contribution.  The original plandocument didn’t have the option.  The new plan document does, but the box wasn’t checked.  The plan was promoted as no contribution to HCEs in all the meetings and materials.  We are giving it to them for 2018, but don’t want to for2019.  Can we retroactively exclude the HCEs for 2019 effective back to 1/1/2019?

It appears from my research that a safe harbor 401(k) plan that uses the 3% nonelective contribution on plan compensation that does not satisfy the "safe harbor" definition of compensation and fails the 414s compensation test is a problem.

It appears the method of correction is to base the 3% safe harbor contribution on a "safe harbor" definition of compensation which may or may not need an amendment depending on how the plan is written.

I am wondering if there are any alternatives other than having the employer deposit additional contributions.  For example, can one run the ADP Test on the basis of a "safe harbor" defn of compensation?

To illustrate, a plan defines compensation to exclude bonuses and OT pay. a participant earns $70,000 of total compensation of which $20,000 is excluded as OT pay.  The participant defers 5% of pay, or $2,500 (i.e. $50,000 x 5%).  The company deposits a 3% safe harbor amount of $1,500 (i.e. $50,000 x 3%).  At year end, it is determined the plan defn of compensation fails to satisfy 414s.  Must the employer deposit an additional $600 (i.e. $20,000 excluded pay x 3%) or can they first run the ADP Test on the basis of full compensation.  Is it possible for the employer to first run the ADP Test on basis of using the total wage (i.e. the participant defers 3.57%, calculated as $2,500/$70,000) to see if the ADP Test is satisfied?  If it is possible to run the ADP Test and it fails, may the plan be remedied by having the affected HCEs receive a refund of the excess deferrals on this basis?

Is the stipend compensation included in plan compensation?

401(k) plan - employees are paid regular hourly wages, plus a stipend for meals, lodging, etc. when traveling. The sponsor specializes in providing services to other areas so the stipend makes up a large portion of the company payroll. I believe these are also sometimes called per diem payments. (not to be confused with per diem employees). 

The plan document defines plan compensation as W-2 Wages without any exclusions (so fringe benefit is not marked as being specifically excluded). 

"Wages within the meaning of Code §3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statements under Code §6041(d), 6051(a)(3), and 6052, determined without regard to any rules under Code §301(a) that limit the remuneration included in wages based on the nature of location of the employment or the services performed."

It's clear that the stipend in NOT a reimbursement, as it is based on the government rates, and not actual expenses. It's also clear that the stipend is not taxable income and doesn't appear on the W-2. But plenty of things don't appear on the W-2 (FSA elections for example) but are still included as comp. 

I don't have familiarity with this type of compensation. Thoughts? Other Benefit link threads that have covered this?