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?

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.