Plan Document says a participant can get a hardship distribution for the safe harbor reasons.  Participant submits documentation for medical expenses (say $1,000) and also to prevent foreclosure (say $10,000).  Asking for $11,000 in one distribution to cover both.  Is that permissible?  Assume the plan language doesn't speak to that.

Thank you.

In regards to line 6g, if a plan that is filing on a cash basis, should it still include participants that have a receivable at the end of the year?  These participants would have a zero balance without the receivable. 

Basic HCE 101 but I'm getting old! Employee A owns 90% of a company,  employees B & C each own 5%. Employee B makes over the compensation amount for an HCE. Employee C does not. However, employees B & C are married.

Is employee C considered an HCE though she does not own ore than 5% and does not meet the HCE compensation requirement?

An individual establishes an S-Corp.  He is the only owner, no employees.  He wants to start a 401k plan for himself. His income for 2018 consisted only of 1099-MISC income, coded as nonemployee compensation (box 7).  It was paid to him and reported on the 1099-MISC but was coded using his SS#, not the S-Corp EIN.

Is this income eligible to be used for 401k plan purposes?

Thanks

A plan is on a calendar year. 

EE is eligible to participate on their date of hire, and the entry date is the first day of the month coinciding with or next following the date they satisfy the eligibility requirements. 

EE was hired on 11/25/2015 and is >21 years old. There is no termination date.

Until what date are they still considered otherwise excludable based on:

Option 1: The group includes participating employees who have not satisfied the IRC Section 410(a)(4) entry date period applicable to them – in other words, they are treated as otherwise excludable employees until the earlier of the first day of the next plan year after attaining age 21 and completing one year of service or 6 months after satisfying such requirements. This is the maximum waiting period under the Code.

Any comments or thoughts would be much appreciated! Thanks! 

Can i you apply for a Medical Hardship withdraw if you have not paid anything on the outstanding medical bill or do you have to have paid on the outstanding medical bill in order to apply for a Medical Hardship

I took out a 401k loan of 20k in 2015.

I just repaid the remaining balance of $6700.  

Does that loan affect the maximum allowable amount because it's old?  Or does the balance of that loan at any point in the last 12 months lower the maximum available amount?

Can I take 50k or will it be 50k - the balance of that old loan 12 months ago (roughly $10,500).  Is the max 50k or 39.5k?

Yes, I DO have a vested balance over 100k.  Thanks!!!!

I understand this is a complicated topic regarding Service Contract Act.

Our client about to engage in a contract that covered under SCA and asked us how this will impact the current 401k

My understanding is SCA makes employer to pay certain wage rate and fringe benefit ( health and welfare payments) to certain service employees.

And the employer has 2 options: either to pay cash or contribute to fringe benefit. If they pay cash, it will be subject to FICA tax and employer has to pay their portion??

"Two options for paying out H&W to your service employees:

1.      Pay H&W in the form of cash. With the changes in ACA, we are hearing from our benefits partners that cash in lieu of benefits can seem as an incentive to not enroll in organizational benefits and contradicts the ACA regulations. It is important to know that if you do pay H&W in the form of cash it must be paid as a separate line item on the pay stub clearly designated as H&W.  If you incorporate it into an employee’s normal wages it is not considered H&W pay.

2.      Contribute H&W to a 401k account. Your organization can contribute the monetary value into a 401k account and remain compliant with the regulations.  It is important that your 401k plan document is set up so that H&W contributions can begin immediately through immediate entry into the plan.  The immediate entry does not mean the employee can self-contribute to the 401k immediately; it means that they are set up with an individual account on your 401k Plan.  In addition, it is recommended that your plan clearly spell out that employer contributions are not eligible for any discretionary matches provided by the organization. Lastly, the employee should be informed of how to access his/her H&W funds.  "

If they pay cash: My questions are if they pay cash toward 401k plan, then how this will affect vesting?. Will this "employer contribution" 100% vested or based on current vesting schedule (I read somewhere that this is 100 vested)? How this "employer contribution" will affect that employee current 401k deferral? And I don't think this "employer contribution" is subject to any matching? 

So how the employer knows which fringe benefit to pick including group health insurance, life insurance, and a 401(k) savings plan? Can employer chooses whatever they like?

Thank you and I appreciate all the inputs.

If effective date of ESOP is 1/1/18 and service for vesting is measured from the effective date forward, how do you calculate the vesting for someone hired 2/9/16 under the elapsed time method?  From 2/9/17-2/8/18?

Can you prevent a disgruntled employee from participating in the company offered FSA plan was asked by a client who is having difficulty with an individual employee understanding the how the process of a Health Care Spending Account Debit Card works.  Additional information was requested for a debit card purchase and after four notices were sent out the card is shut off until the substantiation is received, the participant is now claiming his money is being held up and fails to realize the rules of the plan are being followed.  Any guidance would be greatly appreciated.

If designed to require no more than IRC 401(a)(9) requires, a retirement plan (other than an IRA) need not compel a distribution to a participant who is not a 5% owner until after "the employee retires."

Lacking a detailed rule about when for 401(a)(9) purposes an individual-account plan's participant "retires", many administrators treat severance-from-employment as the dividing line.

But is there any range in which someone who remains on the employer's roster as an employee works so little that she should be treated as retired to invoke a required beginning date?

For some examples, how about an employee who works:

20 days in one month (with no work in the other 11 months)?

one day every month?

a half-day every month?

one day each quarter-year?

a half-day each quarter-year?

(All these describe real situations.)

Is it good enough for 401(a)(9) purposes to treat an employee as not retired until a calendar year's W-2 wage report shows zero wages?

We have a client that is an S Corp. Census information from payroll co. reflected a salary for the owner. Bookkeeper said that the salary reflected was wrong because it contained share holder insurance premiums. Plan uses W-2 income.

Should these premiums be reflected in the  the compensation for 401k purposes? This plan has a SHNEC.

What are the pit falls of cross-testing a cash balance plan on a contribution / allocation rate basis? 

Is this not allowed?

Fact Pattern  - bear with me

Small law firm has two partners, two employees (NHCE). 

There is an existing 401(k) plan with a 3% Safe Harbor non-elective (will be amended to NHCE only for 2020). 

The earned income for the partners fluctuates a lot due to when they receive settlements from cases. In years where they have a lot, it would be super helpful to be able to make large contributions to the plans. I was thinking a contribution credit formula that increased the higher the compensation. Something like 100% of compensation in excess of $100,000, or $5,000, whichever is greater.

They are not opposed to doing large contributions for their NHCE. If they can be done into the 401(k) as SH and PS, that would be ideal, then they aren't committing to large contribution credits to the NHCE in the CB plan. 

Because of the ages of the partners and the NHCE, regular combined testing doesn't work well. Its okay, but one of the partners is on the younger side, and the main NHCE is older than both partners by 10+ years. The NHCE would get 2.5% contribution credit in the CB. 

I apologize, I am not an actuary and don't do a lot of work on DB plans. 

But I do plenty of rate group testing, 401(a)(4) etc in the DC world. So if I am testing the combined benefits can't I just take the (Safe Harbor + Profit Sharing + Cash Balance contribution credit) / Compensation = Rate

Then do my regular HCE NHCE rate group testing? 

One of our actuaries is thinking we would need to convert the contribution credit to the NRA annuity benefit, then convert back to present value, then use that amount combined with the SH and PS for testing. I understand his argument, but would prefer my simpler method if possible. 

The actuary is proposing just giving the NHCE a flat % of pay in the CB and avoiding this type of combined testing. But it would be much more flexible if we could customize the NHCE benefit each year since the partner's compensation changes can be quite extreme. It will be easier to do this after year end with a discretionary profit sharing contribution to the NHCE, than trying to amend the CB plan prospectively to adjust an NHCE benefit. 

Some things I've already thought about - but feel free to chime in:

415: The younger partner's CB benefit is limit because of his age

404: There should be plenty of $ available to give as profit sharing and safe harbor to the NHCE and still stay within the 6% deduction limit

I apologize if I am off my rocker - I was just thinking if I can cross-test a 401(k) plan on a benefits basis, why can't I cross test the other way, a DB plan on an allocation basis? 

Company was sold and plan was terminated as of 10/31/2018.  None of the participants have been paid out yet.    Plan has a calendar plan year.     Eligibility to receive an employer non-elective contribution is 1,000 hours and employed on PYE.    During 2018, Employer put money into a suspense account for allocation at year end.   

Since the plan terminated at 10/31/2018,  would I allocated to the employees still employed on 10/31/2018?   That was my first thought, but technically the PYE is still 12/31 but the employer did not exist at 12/31 and had no employees.  

Anyone have a cite or guidance on the feasibility or legality of "reclassifying" After-tax contributions as Roth deferrals? A client who claims they weren't aware that their document does not allow After-tax to be matched is balking at forfeiting match excesses and has asked if they can reclassify the After-tax as Roth so the participants can keep their match. I want to tell them NO but I can't find anything either in support of this or opposed to it.

We  have a 401(k) safe harbor plan that is top heavy for the first time in the 2018 plan year.  There are employees who only receive Davis Bacon prevailing wage contributions who have not met the eligibility requirements for any other portion of the plan  (including deferrals).  Client is making a Profit Sharing contribution this year, so top heavy waiver no longer applies.  Does the client need to provide Top Heavy minimum contributions to these DB employees? 

We have a 401(k) plan who's sponsor is part of a controlled group.  Company A sponsors the plan, and is the only one of the controlled group that does.

The pan has immediate entry for 401(k).  The plan is failing 410(b) coverage by the ratio test.  I do not believe the ABT is available as coverage uses the fail-safe provision.

What's my remedy?  Do I bring in one or more of the employees of the members other controlled group?  Companies that have not adopted the plan at all?

§1.410(b)-7   Definition of plan and rules governing plan disaggregation and aggregation.

(f) Section 403(b) plans. In determining whether a plan satisfies section 410(b), a plan subject to section 403(b)(12)(A)(i) is disregarded. However, in determining whether a plan subject to section 403(b)(12)(A)(i) satisfied section 410(b), plans that are not subject to section 403(b)(12)(A)(i) may be taken into account.

OK, so here is my question.  the 401(k) covers all of the HCE's and the 403b covers all of the NHCE's  The first sentence above seems to suggest that I should disregard the 403b PLAN.  Perhaps what this is saying is that if I disregard the PLAN, then what I have remaining is a bunch of nonexcludable NHCE's who are not benefitting even if they all get the same employer contribution?

I want to make sure I understand what this reg is telling me I can and cannot do (I don;t actually have this scenario!).

I guess what it is also telling me is that if need the average benefits test to pass coverage for the 401k plan i have to include all of the people covered by the 403b plan as zeroes?

we have a defined benefit plan with a normal retirement age of 65 and no early retirement age.  can the plan be amended currently to add a fully subsidized early retirement age of 50?  does the IRS restrict the use of a fully subsidized early retirement age that is below a certain age or would age 50 be acceptable?

for example, an employee age 45 participates for 5 years under the plan and terminates at age 50.  after the amendment is made, can the lump sum benefit for this individual be calculated unreduced and fully subsidized at age 50 as opposed to deferred from age 65?

What is the procedure for an employer to remit federal taxes withheld from a 401(k) distribution during the year?  Must the employer enroll with EFTPS and do it electronically or can a physical form be filed with the payment attached?  We realize that Form 945 can be filed at the end of the year with the payment if the total amount withheld throughout the year is less than $2,500, but it's very likely that amount will be exceeded, so we'd like to pay the withheld amount from the current distribution at this time.  Also, is there a deadline for when such a payment must be made?  All help is greatly appreciated.