Just curious about something. Situation is this:

A non-profit has an ERISA 403(b) plan. They came to us a couple of years ago - plan was a mess. Document out of compliance, no 5500 forms EVER filed, ACP testing was never done, etc., etc. - huge clean-up VCP project, and 5500 forms (audited) filed under DFVCP, etc., etc.

They just got notified that they are going to have the plan audited by the DOL. I'm curious as to whether this is purely random, or if the DFVCP filing triggered this audit - not that it matters. Any thoughts on this?

Wishing all BenefitsLink Folks a very happy and healthy new year!  I have learned so much over the past 15+ years or so from actively participating and also just lurking from time to time. 

I have a question regarding participant fee disclosures and corporate fund actions (i.e., actions taken by the fund issuer to rename, merge, or otherwise change one or more of their funds).  Historically, when the action affects the investment information provided in the notice, we have produced an updated fee disclosure and sent it to the plan sponsor with instructions to distribute to participants.  Corporate actions happen almost weekly, and some of our clients have complained about having to distribute updated fee disclosures multiple times throughout the year. 

Some advisors/service providers I’ve talked to have stated that it’s “not technically required” to provide an updated fee disclosure or other notification of a corporate fund action, but I can't seem to find any supporting guidance or analysis that excuses the plan sponsor from having to notify participants when the investment information in the disclosure changes due to a corporate action.

Can anyone point me to guidance or analysis on this issue and/or would you be willing to share the approach you take to assist plan sponsors with notifying participants of a corporate fund action that affects their plan? 

Thanks and Happy New Year!

What is the actual deadline for funding their deferrals for 2018?  Is it 12/31 or the due date of the tax return.  They have only partially funded their deferrals throughout the year?  Thanks!

Hi all. I've recently become aware of the apparent limitations re: maintenance of a 5305-SEP while also having a Solo 401(k). I will try to spare you the unnecessary details and just hit the relevant points...

I have a small side business that is all but inactive at this point. I used to use a SEP-IRA for retirement savings related to this endeavor, but moved things to a Solo 401(k) in 2010. The SEP did, however, remain open (albeit empty) at that point. I made one additional contribution to the 401(k) after setting it up in 2010 but it has otherwise been essentially idle, just sitting there holding the existing funds.

In the intervening years, not having been aware of the restriction related to 5305 SEP-IRAs while maintaining a qualified plan, I made a handful of small-ish employer contributions to the SEP on my behalf. Don't ask why I did it this way, convenience or naïveté I guess.... Regardless, this was done during a time when there was no actual activity with the 401(k); again, I just made that one contribution after setting it up in 2010 and then left it alone.

So... Here we are.

Please note that I have no concerns about over-contributions or anything like that. The SEP contriibutions were safely below any relevant limits, and I never even contributed to both in the same year. Nonetheless, I have just discovered that these SEP contributions may not have been technically allowable, and am trying to figure out what (if anything) to do.

To complicate matters a bit further, I have since converted those (formerly deductible) SEP contributions to my Roth IRA. Thus, I actually wound up paying taxes on them, but the money is no longer in the SEP to "undo" if I wanted to somehow pursue that course of action.

One option would be to just do nothing and let this mistake fade into ancient history. This would have been the default course of action if I hadn't stumbled across the info alerting me to the potential problem. In this case, I probably would've gone through life none the wiser. Barring an audit in the near future (knock on wood) this issue would probably have been lost in the sands of time.

The other option would be to (somehow) fix it. The problem is, I'm really not sure how to undo this, or if it's even worth pursuing.

Fingers crossed that I will relay my question in a coherent manner.  SHORT QUERY: I didn't contribute more than is allowed to my solo 401K for 2017, but I (somewhat accidentally) contributed way more than necessary and took our AGI too low. Can I correct that?

Long background story: I am 56 and had $84K of self-employment (sole proprietor) income in 2017 and established a solo 401K for myself ONLY on 12/28/17.  My husband has an S-Corp and I seldom know where his numbers will come in. In 2016 we paid a lot of tax because his income was surprisingly (to me) high in 2016. Thinking it would be the same in 2017, I contributed $3300 to my HSA, $13000 total in to IRAs for both of us, $24,000 EE to my new solo 401K and $15,500 ER to the solo 401K.  At the 11th hour of completing our 2017 taxes in September 2018, it became apparent that our AGI was going to be below 0 (!) after a big, unexpected (to me) loss came through from his business to our personal return.  For Affordable Care Act /Advanced Premium Tax Credits reasons we REALLY needed our AGI to be at least $13K higher than it was about to come out .

I had already wired the  2 separate (EE/ER) amounts in to my large brokerage plan provider, but I reduced line 28 on our tax return from $39,500 to $26,500. The brokerage's retirement accounts department had told me I could just send them a correction memo (which I did) and designate $13,000 of what I had sent in to be for 2018 rather than 2017.  Now that I read a lot of the great information on here, though, I can see that they shouldn't have told me this. I have evidence of the memo I sent them and when, but when I sign in to my account, they still have only the entries for $24,000 EE and $15,500 ER (i.e., they ignored the memo they breezily told me to send them).  

What recourse do I have? Our accountant just retired and the lovely person who has taken his place is hard for me to communicate with (couldn't reach him that last week due to holidays). Is there any way to legitimately recategorize/ recharacterize/ reclassify (not sure which is the right term) $13,000 of my solo 401K contributions from 2017?  If not, how about those darned IRA contributions I made? 

I thank you in advance for any feedback or insight as I hang my head in embarrassment. I realize my spouse and I need to improve our communication and that I am a poster child for the pitfalls of DIY solo 401K plans, big breezy brokerage house plans, etc. :/

Per the ESOP plan at my former employer, I’m to receive 3 annual payments of what’s listed on the stock certificate.  The first payment was almost 4 months late and several hundred to an attorney to get him moving.   The second payment will be past due as of January 2.   Do I need to get the attorney again, or can I rattle his cage some other way? 

We filed an 8955-SSA for 2010 reporting 1 participant that was paid out (code D).  We were just notified by the Participant that he was informed by SSA that he had benefits due him.  Debating whether we should send a letter to SSA with a copy of the return previously filed or add said participant to the next SSA.  Has anyone run into this before and/or what are your thoughts?

We have a plan that was terminated 12/31/2017. IRS considers a plan terminated if all assets are distributed within 12 months of the termination date. 

There are two participants who could not be located and the client directed 100% of each participant account payable to an eligible rollover institution that accepts and establishes IRA rollovers for missing participants.

The checks were prepared last week and mailed to client, payable to the financial instution.  If the checks are mailed ASAP to the rollover institution, is the plan closed since the money came out of the plan; or is the plan considered when the rollover institution establishes the IRA accounts?

Medical practice sponsors 401(k) plan. A nurse practitioner terminated employment in early December, and has not worked for the plan sponsor since termination.  However, the NP will receive commissions on collections through the end of December.  What is the impact on the retirement plan if the NP receives a paycheck (with employment taxes withheld) as of 12/31 even though the last day worked was several weeks prior to that?

Thanks!

An employee has submitted paperwork to show he has experienced a divorce as a Qualifying Event.  However, he didn't submit a divorce decree, but, rather, other documents such as a Partial Mediated Settlement Agreement.  Is this sufficient?  Even if it is, is it OK for me to require an actual divorce decree instead?

403(b) plan sponsor identified errors in adoption agreement dating back to 2014 resulting in differences between the operation of the plan and the document. We plan to submit a VCP proposing a retroactive amendment to the plan. 

Question is this - should plan sponsor adopt an amendment NOW (by 12/31) to make these changes for the 2018 plan year and file the VCP for 2014 - 2017, or wait and include 2018 in the proposed amendment submitted in the VCP?

403(b) plan sponsor wants to adopt an amendment on 12/31/18 to change vesting of employer matching contributions from immediate vesting to 3 year cliff (100% vested after 3 years) , effective 7/1/18, for all employees hired on or after 7/1/18.   

Is this a violation of the anti-cutback rules?

Hi everyone!

On the annual information questionnaire we send to clients, we ask if their company shares the services of any employee with any other business entity.

Their bookkeeper has responded that he works for 3 other companies, 2 that pay him as a W2 employee, and one as an independent contractor.

The owners of the company do not have any ownership in the other businesses in which this employee works.

My question is - do I care?  Would I only have an issue if any of these companies had common ownership?  Is there anything else that I should be asking?

Thank you very much!!!

I have a client with a 401(k) plan which will be merged into the 401(k) plan of their parent company on April 1, 2019. The parent company has asked the client to freeze contributions (but not loan payments) effective January 1, 2019. Is the client required to provide the plan participants with any advance notice of this freeze?

Asset sale occurred 11/2, plan termination effective date is 11/3, seller (sponsor of plan being terminated) says employees were terminated on 11/1. This is a tested plan but only owners are HCE's. There are no Employer contributions.

Can non-owner employees be paid out on 11/30 before any year-end work is done technically on the basis of being terminated employees vs. for the reason of the plan termination?

DBP amends its final pay formula as of 12/31/2012 and provides a new/better final pay formula effective 2013. The accrued benefit as of 2012 is frozen - benefit service and final average earnings - so total accrued benefit is A+B. However, the plan also limits benefit service to 25 years but does not specify how that limit applies with respect to the pre-2013 and post-2012 benefit formulas. The prior actuary (it's always a takeover case) applied the limit on the latest service. 

Extreme theoretical example, a person hired in the 1980's could hit the service cap under the old formula, work another 25 years (so 50 in total) and not accrue another cent, while a new hire in 2013 could work 25 years all under the new formula and have a substantially higher benefit than the 50-year employee.

Putting the fairness argument aside, are there any statutory issues of concern here? If so, would it matter if the pre-2013 FAE was not frozen so that the service-limited person's benefit could increase for salary increases?

Thank You and Happy New Year!

We are in the process of splitting a plan into 2 plans so that there is no longer an audit.

The intent is that the effective date of the new plan and the amendment to the old plan (removing some employees) is 1/1/19.

We know that audits are determined based on the number of eligible employees in the plan at the beginning of the plan year.  So if count on 2018 Form 5500 at end of year is 130 and on 1/1/19, 60 of these participants are now participants of plan 002 and no longer participants of plan 001, am I correct that as of 1/1/19 the counts in both plans are now less than 100 and no audit is required? 

A client is the majority owner of Company A and a minority owner of Company B. He will acquire majority ownership of Company B in January of 2019.  The ownership will be enough to establish an A+B controlled group.

Company A maintains a small plan with a safe harbor match and A21+1YOS for eligibility, Company B maintains a large (audited) plan with a non safe harbor match and A21+3MOS for eligibility.   We are working on a new plan design to fit the needs of both A and B, but we don't have a clear solution yet.  Neither company has adopted the plan of the other company.  B's plan would probably pass coverage no problem with A's employees not benefiting, but A would fail miserably.

We can rely on the transition rule until we have a solution and then make the solution effective 1/1/2020 right? 

Client currently sponsors an ESOP and a tested 401k Plan.  The ESOP owns 100% of the company stock.  Both plans are audited.

Client is interested in breaking their current 401k plan into 2 separate plans to avoid the cost of audit.  The two plans would consist of one safe harbor plan covering salaried employees and one tested plan covering hourly employees.  All HCEs would be in the safe harbor plan as would 32.97% of the NHCEs.  The remaining 67.03% of the NHCEs would be in the tested plan.  Can this be done when the third plan sponsored by the client is an ESOP?  We have not encountered this situation before.  Can anyone provide guidance or reasons this is not feasible?