A profit sharing plan uses a 6-year graded schedule for it's employer allocations. The plan has never been top-heavy, but in a couple of years it will very likely become top-heavy.

The adoption agreement has a slot for electing a vesting schedule for top-heavy purposes. That section states for any year the plan is top-heavy, the top-heavy vesting schedule applies to the extent that it is more favorable than the plan's regular vesting schedule.

For some reason, the top-heavy vesting schedule is a 5-year graded (0,20,40,60,80,100) - one year quicker than the 6-year schedule. The employer would like the 6-year schedule to be applied when the plan becomes top-heavy.

The document then goes on to say that the top-heavy vesting schedule applies to all benefits within the meaning of 411(a)(7) except those already subject to a schedule that vests at least as rapidly as the schedule above. And only for participants with an hour of service after the plan becomes top-heavy.

The plan document spells out some rules for amending the plan's vesting schedule. Since the plan is not top-heavy yet, do those rules for amending the schedule apply to the top-heavy vesting schedule?

If they do apply, the plan states employees with 3 years vesting "may elect to have the nonforfeitable percentage computed under the Plan without regard to such amendment." With the plan currently not top-heavy, that election does nothing - they are still on the 6-year schedule. What choice are they making, for example, between schedule A or B: what would be vesting schedule A vs. what is vesting schedule B that they get to elect from?

Physician works for hospital as W-2 employee and maxes out in the hospital 401(k); same physician also operates small clinic as Sch C using off-duty nurses (1099 workers) and has SE income from Sch C.  Can physician establish SEP for himself for SE income from Sch C?   if yes, do 1099 workers have to be included in SEP?  Is physician limited on SEP contribution due to participation in 401(k) at hospital?

Thanks!

Deferred vested participant died after RBD.  When calculating his actuarially-increased benefit (from NRD to RBD), the lump sum amount is below the Plan's threshold for a mandatory cashout.  RBD was 4/1/10, DOD was 11/6/17.  We've already established that his Estate is due the mandatory cashout, however, would interest need to be applied to that lump sum and if so, from RBD to death or RBD to distribution?

The document for a plan sponsored by an S-Corp where the only employee is the 100% shareholder states "If this plan is not subject to ERISA, the Employer shall deposit elective deferrals to the Trust as of such time as is required by the IRS and DOL."

The DOL 7-day rule does not apply to a non-ERISA plan, right? So what is the deposit deadline for any withheld deferrals?

In a 403(b) plan, we have a participant that exceeded the 2018 402(g) limit by $84. Since the time of the deposit, he has had a loss of $3 on the $84. There is some confusion as to what we send back to him and what is reported on 1099-R. Do we issue a check for $81 and report $81 on the 1099-R? Do we send him $81 and report $84 on the 1099-R? Do we issue a check for $84 and report $84 on the 1099-R since that is the amount he exceeded the limit by? Or something else? TIA for your comments.

Hoping someone can provide some input on a rather obscure split dollar issue. 

Employer extended one loan to employee's ILIT to buy second-to-die life insurance policy. Everything occurred before 2002/2003 and arrangement has never been modified. The arrangement was unsecured, i.e., no collateral assignment, just a note from the ILIT to the employer promising to repay with interest. Payment is due upon earlier of (1) sixty years later; or (2) 90 days after death of employee and spouse (both still living). Loan obligation now far exceeds cash value; significant additional premiums would need to be paid in to maintain policy. ILIT has no other assets. 

It appears that any loan forgiveness by employer would create compensation income to employee. 

It also seems to me that if the policy lapses (again, no collateral assignment or documentation at insurer), then both employee and spouse die later, the last one to die would have income (or income in respect of a decedent) at some point. 

Any way to complete a rollout without taxing the unpaid/forgiven loan amount?

My 22yo daughter is quitting her job where she had a 401(k). She already has a SEP IRA and a Roth IRA from before.

Will she be allowed to roll over her 401(k) balance directly to Roth IRA (Yes, I understand it'd be a taxable conversion)? If not, and she must roll over to a Traditional IRA first, may it be her SEP IRA, or must she open a separate Traditional IRA just to hold the rollover from her 401(k) for a few days till she converts it to her Roth IRA?

Please advise on the simplest legally-allowed way to get her 401(k) balance into Roth.

Thank you,

MK

Hi all.

Company A acquires Company B, Company B's 401(k) plan merged into Company A's plan as of 1/1/18.  In looking at HCES for 2018 Plan Year, do 5% owners of company B now employed by Company A with no ownership in Company A count as HCES?  What about employees earnings $120,000 or more in Company B in 2017?

Any help would be greatly appreciated.

Thank you  

The effective date of a restatement is generally the first day of the plan year in which the restated document is adopted. However a retroactive amendment, particularly an -11(g) amendment, can be effective back to the first day of the prior plan year provided it is adopted in time. For example you could adopt a restatement in April 2019, effective 1/1/19, then adopt a corrective amendment in September 2019 effective 1/1/18.

Are there any issues with adopting an amendment with an effective date prior to the effective date of the document being amended?

Hello all.  I have a participant who had an account at Morgan Stanley.  His vested account balance was less than $200 so the client, after many tries,  had him cashed out; however, despite many emails from me to Morgan Stanley that he was only 20% vested, they cashed him out at 100%, so he got around $800 too much..  It's a 10/31 plan year and I only discovered this last week when I did the valuation and looked at his March statement.  Is there any recourse? Pretty sure the participant is not going to give the money back and the client has since moved the funds to Charles Schwab, so this person doesn't have an account at CS.

Assuming the top-hat exemption was filed with DOL when the plan was established, is there a requirement to notify them of a termination?

Any sites on this would be tremendously appreciated...

These things are the best hidden topic I think I have ever seen.  Does anyone have an article that talks about how these work?  I can't find anything in the regs. The EOB doesn't mention them.

In general I know they are mandatory ee contributions as a condition of employment which the IRS treats as Employer contributions.  Do I have the long and short versions of it just about right?

Suppose an employer sponsors a 401(k) plan with a 25% match (non-safe harbor). This plan will fail the ADP and ACP tests for 2018. They will refund to HCEs.

They want to adopt a Cash Balance Plan and a Profit Sharing Plan for 2018.

The 401(k) plan, Cash Balance Plan and Profit Sharing Plan all pass 410(b) on their own using the ratio percentage test. All of the same employees will benefit in each plan.

For 401(a)4 and Top Heavy, can the 401(k) plan be tested on its own and the Cash Balance Plan and Profit Sharing Plan be tested together? Or must all 3 be tested together?

Thank you.

Can an Employer convert an existing Profit Sharing Plan to a Roth Profit Sharing Plan? No 401 (k) deferrals, possibly Profit Sharing contributions.

Any help would be appreciated.

Thanks DPSRich

Hello   I have just found out in the past few days that my 401k plan was transferred to another company and is now in the blackout period.  I had left the company 6 months ago but I am still a participant. I had planned to move it to an IRA. I also have more than a half million in the plan . The only way I found out is that another  former employee was trying to get into his account and was locked out. It looks like that the company’s 401k administrator did not notify and give notice to any past employees in the plan. I called my former employer’s HR person and was told they have all my contact info and I should have received an email in October. I had told her I did not receive anything and told her at least one other had not received any email or any other correspondence concerning the transferring our 401k plan to another company. While on the phone the owner of the company overheard our conversation and told the HR person that she will have to get back to me. Two minutes later I get an email from the company’s 401k administrator showing an October 26^th email giving the info of the 30 days notice and the black out period.   FYI - all the employees were removed from the email chain and confirming that I did not receive it at that time. It is now in the blackout period. I called the new  401k company  (Fidelity) and was told they could see I have zero balance but were having issues registering me to have a new account set up. They also said they could not give me any info since they are in the middle of the blackout period that started in late November. I made calls to two other past employees and were told they did not get notice either. I have calls into the old 401k company to see if I can find out what was my final balance when they transferred it over to fidelity. If I had known I certainly would not have allowed this to happen without changing things up. I know they still have not given any info to the past employees that also did not receive any notices also . I think they are concerned it will open up a can of worms. What recourse do I have if I lose money during this transition? What are my rights? 

Let's say a plan has an in-service distribution option for matching and non-elective contributions. A plan previously did not require participants to be 100% vested to take an in-service distribution from these sources. Can a plan be amended to allow in-service from these sources only if the participant is 100% vested?

Thanks!

Question for my fellow admins.

I know that 10% withholding is required on RMDs, but in practice do you withhold 10% unless the participant completes a W-4P, or do you process the RMD with no withholding unless the participant tells you otherwise?

A participant in one of our client's 401(k) plans has died.  The beneficiary form lists her trust as the beneficiary.  The decedent's daughter is the sole beneficiary of the trust.

The trust's administrator is asking if it is possible for the plan to pay the daughter directly to an inherited IRA, rather than pay to the trust.

The plan document does not have any language pertaining to this particular request.

Has anyone run into a similar request? 

Our thinking, as the TPA, is to have the Plan Administrator refer to their legal counsel.

Thanks very much.

I have a terminating DB Plan covered by the PBGC that recently paid the liability to the PBGC through the missing participants program. I had confirmation from the PBGC that the plan could use the missing participants program. The participant just reached out claiming that their paperwork just came in the mail (doubtful as it was sent a few months ago, and again as a follow up). They are looking to roll over their lump sum into an IRA. What would the correct steps be? Could the plan sponsor ask the PBGC for the money back to pay the participant? Or does the participant have to wait until all of the paperwork is finalized and then seek payment from the PBGC?

Does anyone have a suggestion for fixing ADP Refund for 2017 done by prior TPA in May and then done again in October?  2 people were paid out twice.