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!

One of our employees was overpaid in 2018 for Dependent Care FSA. She is going to pay this back in 2019. For tax reporting in 2018, should this be included as taxable income?  How would it be treated in 2019 (the payback)? 

Any assistance is appreciated.

Thank you!

Accepting that a one-participant 401k is standard 401k, with a very short list of one-offs. I have a few questions with regards to employee after-tax contributions. Specifically, the contribution deadlines and source of the contributions. Let me start with the things I think I know and ask questions of the things I am not sure about.

Self-employed individuals can make their employee elective and employer contributions from personal funds on or before their tax filing deadline including extensions.

• Is there any reason that is not also true for employee after-tax contributions?

S-Corp 2% employer elective contributions are deducted from compensation not already received with a pay date on or before 12/31. The contribution must be deposited as soon as it can reasonably be segregated from the S-Corp's assets. The S-Corp has until its tax filing deadline including extensions to make its employer contributions.

Any ERISA 401k plan I am aware of that allows employee after-tax contributions, requires them be contributed from after-tax W-2 wages. However, I seem to remember conversations over the years, that nothing precludes direct employee after-tax contributions from personal funds provided that in the unlikely event the plan document and administrator procedures allow it.

1. Is the deadline for S-Corp 2% employee after-tax contributions 12/31 or the S-Corp's tax filing deadline including extensions?
2. Must the contributions be made from the S-Corp shareholder-employee's after-tax W-2 wages or can the contributions be made from personal funds?

Plan has immediate eligibility for salary deferrals, but has a 1 year of service for Safe harbor non-elective.  No other contributions in Plan.  Assets are greater than 60% for Key EE's.  I know plan is subject to ADP testing for the otherwise excludable group.  My question is:  Does the deemed not-top heavy rule apply to those with less than 1 year of service and who are not eligible for the SHNEC?  Or, are they required to receive a top-heavy minimum?

The S corp owner has received a W-2 compensation payment, additionally he has received 1099 misc. from the same corporation. Compensation in the plan document is defined as W-2 wages or earned income for self-employed individuals.

Can we use the 1099 misc. line 3 “other income” as income in addition to the W-2 wages?

Participant has informed my client that they are over the 2018 402(g) limit because they did the maximum deferral at their other job.  Participant entered my client's plan as of 10/01/2018 and deferred a small amount.  The participant has requested this small amount of contributions be refunded as excess.   

As far as the 2018 ADP testing in my client's plan,  do I need to remove the deferrals for this person from the testing?

I know that I would have to remove them if the overage was all in my client's plan, but am unsure of the process when there was no excess, only the request of the participant.

Thanks in advance! 

Hi.  I am sorry if I am asking a question in the wrong place, but I have been trying to find info and can't seem to get it. You all seem extremely knowledgeable. My husband is in a construction union in NY. They have what I think is a VEBA.  I searched online on ProPublica and it says that it is defined as a Voluntary Employees Beneficiary Association with a NonProfit Tax code Designation of 501(c)(9). I think money is paid into the account by the employer. Reasons withdrawals are allowed are listed below.

I am wondering if the union member should be paying Federal and State income tax for all withdrawals, especially for medical withdrawals.  We have had to withdraw money for very sick and disabled children. The withdrawals were for things like coinsurance,  copays, special education schooling, speech therapy, etc.  Those withdrawals have been reported on a 1099-misc.  Is this correct?  Is there a way the union could have this set up so union members would not have to pay income tax on medical withdrawals? 

Thank you for your help.  This is not my area and I can't seem to find anyone at the union fund office who has a clue.

Withdrawals can be made for the following reasons:

1. DEATH OF PARTICIPANT (ATTACH CERTIFIED DEATH TRANSCRIPT)

2. UNEMPLOYMENT, DISABILITY OR COMPENSATION (PROOF OF PAYMENT FOR PERIOD CLAIMED)

3. HOSPITALIZATION, MEDICAL OR DENTAL BILLS NOT REIMBURSABLE (SUBMIT BILLS)

4. ADDITIONAL ASSISTANCE BENEFIT (PROOF OF ECONOMIC HARDSHIP - ATTACH STATEMENT)

5. SEVERANCE BENEFIT (SUBMIT PROOF YOU HAVE WITHDRAWN FROM THE INDUSTRY)

Company creates digital media for distriubtion on websites. Custoemrs pay a subscription to watch a tutorial on line regarding how to do a particular task.  Let's say for example it was cooking.

Does that sound like it would be a service business?

Employer is negotiating with a prospective new hire.  Is it possible to amend a prototype document to allow this individual to enter immediately so long as the individual is not or will not become an HCE?  It is a safe harbor 401k.

Unusual situation. Suppose safe harbor match, with a per payroll match. Deposit requirement for match on deferrals made in a given quarter is therefore by the last day of the following quarter.

Reasons don't matter, but payroll system is such that for most employees, the match is actually deposited per payroll. For other employees, system won't handle it, so deposit of their safe harbor match is proposed to be made monthly or quarterly. 

This seems to me to fall under the "other right or feature" category in 1.401(a)(4)-4(e)(3), and therefore subject to BRF testing. And so, as long as these employees represent less than the 50% safe harbor percentage, it would pass. Other opinions/thoughts?

We are planning to upgrade from Relius version 2018.1.0 to 2018.2.0 but we are facing some challenges with the GetPlanData call in Relius Connect. It is failing and we do not know why. It was working in 2018.1 but is not working in the 2018.2 test environment.  Has anyone else experienced this problem? If so, would you share details of the resolution?

Thanks in advance for your response!

A very small SH 401(k) plan has five eligible participants.  Two are deferring, one HCE and one NHCE.  Two other HCEs are not deferring, and one (now deceased) NHCE did not defer.

In 2018 the plan sponsor made the SH match every pay period (by choice - not required).  The NHCE who was deferring received a few dollars too much match as of the end of the year.  The extra amount equals 0.07% of the NHCE's annual compensation.

So there is what amounts to a miniscule profit sharing contribution made to one NHCE which causes the plan not to meet the exemption to the top heavy rules. 

What are the options for addressing this?

Thanks!

My client has three owners, and one of them who owns more than 5% has a son-in-law working there.  I don't think he (SIL) is attributed the  FIL"s ownership, but wasn't 100% sure.  The daughter is not an employee.  

Participant enrolled 2 employees early in 401k and plan is 3% non elective safe harbor.  Do they refund 401k or can they make 3% non elective safe harbor and keep 401k.  This is only employer contribution to plan.