Good morning to all,

I have been asked to research the following:  " Is it acceptable for salary deferrals to be funded well after the end of the plan year for self-employed individuals, i.e. sole proprietors. This is in the case of an ERISA plan, not a solo 401(k) plan. "

Your thoughts, opinions, and explanations of your practices are appreciated, as always.

I have a plan that could be one of the worst plans out there and now is interested in getting into compliance.

1. They did not notify employees of their right to participate. 

We did the QNEC calculations and they were deposited. What is reported on the 5330 and which line?

2. They have not deposited the full Top Heavy contribution in 5 years. What do I need to do? Which correction program should I use.

3. We went back until 2012 to correct late 401k deposits. I was not aware of the deposits being late because they appeared to be on time. (not egregiously late and they replied no to our late deposit question every year).

All of the deposits were done and we went back and did the earnings calculation. Needless to say a 5330 was not filed for prior years. What should I suggest they do?

Can someone tell me how to easily explain to a client what a revenue sharing payment is and how it's generated and paid to the TPA.  We receive basis points on assets but I  need to explain exactly how that affects the participant accounts.

HI:

Is 20% Mandatory Withholding required on QDRO's that are NOT Rolled Over to another Qualified Plan or an IRA.

Thanks for your help in advance.

DPSRich

I have a plan that is top heavy and is also making a safe harbor match and new comparability profit sharing contribution for 2018. All participants are receiving a safe harbor match contribution that is equal to at least 3% of their compensation, which counts towards satisfying the top heavy minimum contribution. 

I know that if a participant is only receiving a safe harbor matching contribution that they are not treated as "benefiting" for purposes of the gateway test. But if those safe harbor matching contributions are being used to satisfy the top heavy minimum contribution requirement, does that change how the safe harbor matching contributions are treated for gateway purposes?

We took over the admin of a plan that uses a safe harbor enhanced match formula. However, the document does not state the calculation period for the safe harbor match formula. The SPD and safe harbor notice just say participants will receive a match of 100% of 4% of compensation.  I asked the document provider to point to the calculation period and they provided the following sentence from the plan doc:

The Employer may make ADP Test Safe Harbor Contributions at the same time as it contributes Elective Deferrals or at any other time as permitted by law and regulation.

The document provider is adamant that the calculation period is not required to be in the safe harbor notice, SPD or adoption agreement. They say this language provides the most flexibility so the plan administrator can  decide at any point if the calculation will be done per pay-period, quarter, annually. It is a pre-approved plan document.

I have never seen a document silent on the safe harbor calculation period. Is this common?

I active and 1 inactive partner in an LLC taxed as partnership.

DB plan contribution generally is not supposed to create a loss, (I can't find the thread on that subject but I believe there is at least one) to a sole proprietor. Is it also true to a partnership where profit & loss pass through to 1040?

Plan is 4% safe harbor and definition of compensation is W-2 income with all pre-tax contributions included.

Plan does not specify any exclusions from compensation.

Plan provides participant the option to elect/amend contribution to defer up to 100% of bonuses.

From a practical stand point -

Even if the participant does not elect to have a deferral taken from the bonus amount, should a 4% safe harbor match still be made?

They seem to think this Bill has a chance to pass the Senate as well.

A couple of the provisions are:

One of the differences between the House and Senate bills is when participants will be required to begin taking distributions from their retirement plans. The House bill increases the required minimum distribution age to 72 from 70 ½, while the Senate bill makes no change.

(I think I liked last year's Bill better which would have ignored min distr if total balance was less than 50,000. the last time they disagreed we ended up with top paid group election because one group wanted HCEs based on anyone with comp > XXX while the other group simply wanted top 10% highly paid or something like that as I recall so they compromised)

Businesses with long-term, part-time workers must also allow them to become eligible for retirement benefits.

(It would be interesting to see how it is determined who is 'long term part time and who is short term part time.)

I'm working with an EACA calendar year Plan. They'd like to do an re-enrollment on June 1st to increase anyone under 4% up to a 4% deferral rate. Plus also turning on deferral acceleration to auto increase each June 1st by 1% up to 6%.

Are there any Annual Notice issues since this would preclude us from making this amendment mid-year? We plan on providing a Plan amendment notice to everyone and send out multiple communication pieces.

Thanks for your help.

We have a participant in a 401(k) plan that took a plan loan in 2017 and two (2) hardship distributions two months apart in 2018.

He is repaying the loan, and now wants another hardship distribution, which he does not qualify for.

The total sum taken from his account is over $200,000. Question, if the plan were to be audited, would not the IRS consider this a breach of fiduciary duty to have signed off on these distributions?

We're having a little trouble trying to figure this out. We have 3 separate plans for 3 different companies that are considered a controlled group. All plans have exactly the same provisions (in short they all fund a 3% safe harbor and 50% up to 6% match).

We just found out they had a 4th company that they never told us about. The 4th company has it's own plan as well. However it has different benefits. The plan has 183 employees 180 are NHCEs 3 are HCEs. 

Let's just say the 3 other plans have 1300 participants combined 300 are HCEs and 1000 are non-hces.

How do we determine what testing has to pass in order for this 4th company to stand on it's own with different benefits?

When the plan document election requires a $500 minimum on distributions, both termination & in-service would a recurring distribution of an amount less than $500, e.g. $150/mo be considered to violate that and create an operational violation?

Question concerning a controlled group with matches which vary by division.  I know ACP is required but assume there must be more testing (benefits rights and features?).  What would the testing be which must be performed in addition to ACP?

Thanks!

Patricia

An employee died, had six children on the plan. Employee was divorced. Four different moms. We are not aware of any court orders. We provide subsidized COBRA for 24 months. Questions: Who do we offer COBRA to and and at what rate - do we offer at the subsidized employee + child(ren) rate (and net out the employee only rate) to each mom?

A company with an existing 401(k) plan is preparing to create a wholly owned subsidiary.  The subsidiary doesn't yet exist.

The company wishes to create a separate 401(k) plan for the subsidiary. 

In the first year the subsidiary is being set up, it may consist of HCEs only.  In time they will have rank-and-file employees and combined plan testing should be fine.  The first year is my concern.

If the subsidiary and its plan do not currently exist, can we take advantage of the transition rule in the first year of the new plan?

401(k) client has an issue with its welfare benefits and is asking me to point them in the right direction.  I don't do welfare benefits at all so I figured id see with you guys if this sounds like "standard practice".  I have a feeling there is fault on more than one party here, but it sounds like everyone involved are just pointing fingers at others.

Company offers several different welfare options in addition to health insurance, such as FSA, dental, short term disability , etc.

Starting in mid 2018 (at least) through March 2019, some payroll deductions were never made.  For example, one participant did not have their dental and FSA deducted from their paycheck starting in October 2018.  It was discovered in March of 2019.  Dental benefits were paid for and participant was credited with the elected FSA amount, so I assume that those were paid with company assets since payments exceed deductions.    

The proposed solution is to just double up deductions each payroll starting in April 2019 until the participants have "paid" for the benefits they were credited with.  Is this a common solution when you are talking about 5-6 months of deductions spread over more than one plan year?  It sounds "fair" that the participants should pay for the benefits they received, but the participants also have a higher taxable income in 2018 than they should had everything been done right. 

Any input would be appreciated.

Thanks.

Has anyone run into a situation where a client's accountant demands that a 100% owner of a company be allowed to take a distribution of moneys because the client fired himself? They also revealed that the owner is in dire financial straights. This is a SH plan with no hardships allowed. I'm calling BS, and told them to hire an attorney to write us a letter telling us that the termination would allow the owner to take a distribution of plan money.

They could also terminate the plan.

Is there another way I should be thinking about this?

Have a 3 participant DB that terminated and has excess assets (about $40k).

Our document indicates that the excess can be allocated in any non-discriminatory manner.

In this case it is a husband and wife plan with one younger employee. The husband and wife are each 70.

The wife has participated for over 10 years but has had very small accruals (I think 1% of pay for the past 10 years).

The business owner would like to be able to allocate most of the excess to his wife. 

Would there be any problem with attempting to do that and using accrued to date for 401(a)4?

I would think accrued to date would have the effect of spreading out the excess as though it were additional accrued benefits over all the past years. Perhaps making it so it would have the effect of her earning 2% of pay rather than 1%.

Thanks.    

A 401(k) Safe Harbor Non-Elective, with New Comparability PS has different eligibility for the 401(k)/Safe Harbor portion and the PS portion. If someone enters the Plan mid- Plan Year for PS purposes, do I use full year compensation or PS Participation Date compensation for (a)(4) testing purposes?