Can an employer have as an excludable class of employees by specific name?  For the 401k plan we are drafting, the employer wants to exclude HCEs (about 15) but not exclude 3 of them.  For excludable class, could they have in their plan document something to the effect that "all HCEs are part of the excludable class, except individual A, B and C"?

Any thoughts?

Thanks

One of my governmental clients has acquired a not-for-profit entity with an ERISA 403(b) plan.  The governmental 403(b) is voluntary only, with employer matching contributions made in a governmental 401(a).  The ERISA plan does allow for matching and discretionary contributions.  Other than universal availability, are there any control group coverage/testing issues to be considered?  

If the 5500 is prepared on the accrual basis of accounting would a participant have an account balance at year end for the purposes of Line 5c on Form 5500-sf if a participant did not have any money in his/her account as of 12/31 but did have a receivable for a contribution deferred prior to 12/31 that was received after year end?

Have a new client - all employees are family members and all are HCE.  Want to adopt a 401(k) plan for 2018.

I know the 3 month rule for safe harbor plans.  But for non safe harbor plans unable to find specific guidance.  Something from my past says that all participants have to have an effective availability to the Plan.  If all HCEs with the ability to bonus out at end of year for 401(k) any issues with adoption in December for a calendar year plan?

An individual-account (defined-contribution) retirement plan doesn’t share longevity and mortality risks.  So that aspect isn’t a reason to organize a plan around a particular employer.

A recent survey suggests about 60% of those employers that maintain a retirement plan would drop it if a government-organized plan were available.

https://www.pionline.com/article/20181210/PRINT/181219911/survey-dc-execs-would-end-their-own-plan-for-a-state-plan?newsletter=defined-contribution-digest&issue=20181210#utm_medium=email&utm_source=newsletters&utm_campaign=pi-defined-contribution-digest-20181210cci_r=145845

Regarding many of the employers, a government-organized plan should have better scale and purchasing power to get services.  And for many participants who would have been in micro or small plans, one’s expense for investment funds should be no worse (and might be better).

Setting aside one’s personal interest in continued business or employment, what are the arguments for and against government-organized plans as an alternative to employer-organized plans?

Not for profit hospital has a 457(f) plan where contributions are made for non-employed physicians as compensation for taking call for the hospital.

There is a 3 year vesting period for contributions.

Once contributions vest they become taxable to the participant, whether distributed or not. Hospital issues the participant a 1099-MISC reporting the vested amount (contribution plus applicable earnings) in Box 6 Medical and health care payments.

I find nothing in the 1099 instructions to support this, whereas 457(f) distributions are specifically addressed in the W-2 Instructions for Box 1, bullet point 15. However, W-2 Box 1 compensations is applicable to employees, whereas the physician participants in the call pay plan are not otherwise employees of the Hospital.

Is the reporting of this income on a 1099 appropriate? Or does the 457(f) arrangement by default qualify the participants as employees, and this should be reported on a W-2 instead? Any guidance on this is appreciated.

Small DB plan is terminating 6 participants, not PBGC, not being submitted to IRS.  Termination date is 12/31/18. The owner wants to take an in-kind distribution. The document does not currently allow for it, but it is an option on the prototype checklist.  

If the plan allowed for it,  does every participant have to be given the option to elect an in-kind distribution?  Could this amendment be done post-termination date? The owner (an attorney) wants to be the only participant allowed to elect an in-kind distribution. I have done a lot of plan terminations but never one that included in-kind distributions. What else do I need to look out for? 

VCP and significant or Un-significant?  Is this a 100% make up contribution?

Sponsor wants to name the CEO and highest HR position as plan trustees, rather than naming names. They say they have incoming officers sign to accept trusteeship and notify departing officers of their removal as trustee. Is this ok?

I wouldn't think these officers would change very often, and they're going through the right steps anyway, so I'm not sure of their motivation to do it this way.

I find myself confused with controlled group determinations that involve trusts. I read everywhere that trusts which have ownership interests in another business attribute the ownership to the beneficiaries. But does the ownership ever attribute back to the grantor? Say if the trust is revocable and thus ultimate control over the ownership still rests with the grantor would the ownership not attribute back to the grantor?

Any guidance would be appreciated. 

I have not seen this before and would appreciate your insight and comment.  A cash balance plan was established in 2015 with the plan year beginning 01/01/2015.  In reviewing the Annual Funding Notice the company has not made a contribution to the Plan in the first two years of its implementation, 2015.  Their Annual Funding Notice is confirming that no contributions have been made in 2015 and 2016.  Their Plan Adoption Agreement clearly outlines the benefit that should have been funded for:

[ X ] Group One:. An amount equal to:

[ X ] $ 190,000 for each Determination Period.

.[ X ] Group Two:  An amount equal to:

[ X ] $ 93,000 for each Determination Period.

[ X ] Group Three: All Other Participants. An amount equal to:

[ X ]2.50 percent of Compensation during the Determination Period.

A contribution has been made for the 2017 plan year and the funded status is over 100% in 2017.   My understanding is, in general the “minimum funding standards” requirement under the Code require sufficient assets in the Plan to meet the current liabilities.  For example in 2015 and 2016 there is a Plan liability to provide the projected retirement benefit however no asset, contribution, has been deposited.  

My only thought is the company is not funding the Plan based on the vesting schedule which is a 3-year cliff.  Therefore for years one and two (2015 and 2016) there is no benefit calculated because there are no benefits paid in the event a participant leaves service, no vesting.  In year three 2017 they become 100% vested and are due the accrued benefit from the time they became eligible.

I believe this approach is not correct.  The “minimum funding standards” ensure that sufficient money will be available to pay promised retirement benefits to employee when they retire, no mention of when the vest.  I have not seen this interpretation before and cannot locate a cite to justify its conclusion. 

Can this be possible?  Do you agree with funding based on the vesting schedule or funding based on the retirement benefit once eligible?  Your thoughts and comments, as always are appreciated. 

We have a long term incentive plan where participants vest after 3 years.  On vesting, they receive shares of Common Stock which they can't sell.  If there is a Liquidity Event everyone get's paid for their shares.  If they terminate before the Liquidity Event, they get paid 65% of the value of the shares (this reflects that there is no liquidity or marketability for the shares at that time).  

I think the discount in the event they terminate before the liquidity event is ok, but is there any guidance as to what an appropriate discount would be?  Is 65% normal?

The Company also wants the option at termination to either (1) pay for the shares in a lump sum, or (2) pay for the shares installments up to 5 years at their discretion.  I think this violates 409A's time/form of payment rules -- do you agree?

I'm not aware of any such requirement. But is there a requirement that non-SH employer discretionary matching contribution percentage be declared by any certain time. My understanding is that this is left to the language of the plan.

Does anyone have any authority on this.

Thanks!

I have a governmental entity setting up a 457 plan and wants to provide a match as well.  We are planning to have a paired 401(a) plan so  employees get to defer up to the 457 contribution limit each year.  For the document , does the 401(a) document just have the employer non-elective language with each person being in their own rate group?  In that case, the client will fund the match contributions only for those who made 457 deferrals, and since governmental entities are not subject to nondiscrimination - your allocation amount doesn't have to satisfy any testing.   I may be overly complicating how to draft the 401(a) vs 401(m) document items.    It doesn't seem like my 401a plan needs any matching contribution language since that plan will not have an deferrals. 

Does anyone have any experience naming a "backup" Trustee for a 1-man Profit Sharing Plan?  The plan document only states that the business would name a subsequent Trustee if in the even of death, etc.  He wants to have it stated somewhere who would control the Plan.

Thanks in advance!

Participant turned 70 1/2 this year and died in late November.  His RBD is 4/1/19.  Spouse wants to roll over the entireaccount now.

I believe the RMD must be taken first.  Others in my office are sticking to the RBD of 4/1 and she can roll out the entire amount.

Who is correct?  Cites?

Group:

Facts/assumptions as follows.

Client owns an S-Corp and sets up an S-ESOP with 20 eligible participants/employees. Value of S-ESOP stock is $20k when sold to ESOP Trust and loan is established to be paid off within 5 years.  100k shares outstanding.  Assume 6 yr step vesting.  ESOP Loan paid off by yr 3.

TPA informs me that stock is allocated proportionately to payoff of ESOP loan.  By yr 4 all of the 100k stock has already been allocated to the above-referenced 20 participants.

Q: What happens when 3 new employees begin work in yr 4 and begin to vest by yr 6?

Q:  How do you properly allocate shares/benefit to new employees?  Is TPA correct?

I'm informed by the TPA that the only way to provide a benefit to the 3 new employees  is if - and when - the original 20 ee's retire/leave and then forfeit their allocated stock shares.  At such time those retired shares (proper terminology?) can be allocated to the 3 new ee's.

Can Plan Sponsor issue additional stock for allocation?  or is the TPA correct?  I can't seem to find guidance

on this matter.  Thoughts, comments and resources would be much appreciated.

Thank you!

I have a plan that's a closed MEP. The participating employers have common ownership but it's not a control group. One of the participating employers is leaving the plan, effective as of the last day of the plan year. 

Is this considered a partial plan termination?

Should the employees who are part of the leaving employer be accelerated to 100% vesting?

Hard to believe this has never come up, but...

Participant died mid-year. S-corp owner. Rightly or wrongly (and I have no opinion) "he" is receiving no W-2 income for 2018, but his ESTATE received a check for his accumulated wages or whatever that is being classified as W-2 income, paid to the estate. Is this compensation considered as W-2 paid to "him" for plan purposes?

We represent Buyer in a carve-out transaction.  The subsidiary that we are buying is the legal employer of its employees, but HR functions are centralized at parent level.  Several employees of sub who are coming to buyer will receive retention bonuses post-closing, paid by the Seller.  The legal question is whether, where the services are not provided (and have not been provided) directly to seller but to PHS and the consolidated group is being split by the transaction, which is the proper entity to conduct payroll withholding on payments made after the closing?