When calculating the Age 70.5 Required Minimum Distribution on a participant account holding a life insurance policy, regarding the life insurance policy, does the RMD calculation include the value of the death benefit, does it use the cash value for the calculation, or does it include both?

Does anyone have any thoughts on what the likelihood is that the IRS will assess penalties under Code Section 6721 on a hypothetical ALE that failed (for no reason other than a lack of knowledge of the requirement) to timely file with the IRS Forms 1094-B and/or 1095-C for 2016?

Plan sponsor wants to reduce number of active investment vendors under the 457(b) plan from 5 to 3.  They will close the 2 discontinued investment vehicles to new contributions,  but will allow participants to keep their current balances in those investment vehicles (for now). Going forward, new contributions may only be made to the 3 remaining vendors. 

I can't find anything under federal, state or relevant local law that governs these changes or addresses any participant notice or timing requirements).  Other than any potential collective bargaining agreements, am I missing anything?

 Is there a required notice period?

A fiscal year TIAA plan was amended for the last plan year to change their 100% vested employer match to an enhanced Safe Harbor Match. The plan sponsor continued to deposit the SH Match in the match accounts instead of setting up a SH Match account.  Should they just approach TIAA to have them move the SH into its own account along with allocable yield?

For bankrupt employers, HATFA §2003(c) generally revised IRC §436(d)(2) to provide that the AFTAP is determined without regard to the adjustment of the segment rates under IRC §430(h)(2)(C)(iv) to determine benefit restriction under §436(d)(2) . For non-collectively bargained plans, the statutory amendment deadline was the last day of the 2016 plan year with the IRS having authority to extend this deadline. Question: Has this deadline been extended by the IRS, if so, to when? Also, what is the remedial amendment period that applies here if the deadline was missed. For example, even though non-collectively bargained, would this plan be eligible for the extended remedial amendment period under Notice 2016-80, i.e., 12/31/2018.

Good afternoon.

I am looking for some recommendations for vendors who can provide plan documents and other services for starting a 457b plan for a small charity where there will be less than 5 participants (probably just 2-3).

Thank you,

I have a client with a db plan who has reached age 62 and has a 415 max lump sum available to him (of $2.8M).  I'm not an actuary, so please bear with me.  I've been told that the maximum lump sum actually declines from age 62 to age 65.  Is that correct?

Also, the plan's about $500k short on assets currently.  The client is the 100% owner.  Do they still have substantial owner waivers?

Finally, if the client decides to fund the shortfall so that he gets his full $2.8M, does he need to do that all in one shot?  What if he wants to fund it over the next 12 months or so?  Do I have to worry about his 415 LS going down?

Thanks so much for your help...!!!

Employer has 401k and 457b plan.  An HCE will terminate 1/1/19.  He thinks he can take a distribution from the 457b plan, and have that count as compensation for the 401k plan (which he could defer on and get matched.)

I don't work on 457b plans but this doesn't seem right (?)  The document says compensation excludes payments received by a nonqualified unfunded deferred compensation plan, only if the payment would have been paid to the employee at the same time if the employee had continued in employment.

How do the 457b and 401k rules integrate with respect to compensation?  Thank you!

Hello. 

Company A's business entity is partnership.  There are 6 owners of company A   Two of the partners' net earnings are negative before any calculations are made.  Profit sharing amount is determined for rank and file employees.  Do these owners also receive a share of the cost of the profit sharing (based on their ownership %)  taking their earned income to a greater negative amount?

Since there earned income  for plan purposes is negative, we are reflecting their comp as zero.  Should these two partners be included on the ADP/ACP test?

Under the 409A exemption for stock rights, an "option":

means the right or privilege of an individual to purchase stock from a corporation by virtue of an offer of the corporation....

If you have an otherwise exempt option (i.e., it meets all the substantive exemption requirements of nonqualified stock options) but the option is to purchase employer stock from the majority shareholder of the employer, do you still meet the 409A exemption? 

The definition in the 409A regs is carried over from Section 421. Also, Section 83 has rules governing the purchase of employer stock from another shareholder in connection with the optionee's performance of services for the employer. It treats the transaction as being routed through the employer for tax purposes. I see no cross-reference or carryover of a similar concept under the 409A regs.

Thoughts?

EDIT: On further reflection, because the tax treatment is already fixed under Section 83, could the option be issued directly from the employer, then the controlling shareholder could have the same number of his shares redeemed by the employer upon the optionee's exercise? That avoids dilution of the minority shareholders, which was the original goal. 

Issue 1.  Ineligible participation:  Plan sponsor allowed an ineligible employee to participate in the plan too early during 2017.  For whatever reason, the client does not want to retro-actively amend to correct this specific person's participation.   This plan processed a refund of the deferral and forfeiture of the affected employer match today, 10/9.  (Yes, today.  Don't get me started on that story.)

Issue 2. ADP-ACP refunds:  The plan is also tested; failed ADP-ACP (of course) and corrective refunds are being processed.  Again, it is October.  Obviously, well past 3/15.

12/31/2017-ending plan year...  Both issues occurred in the same tax year and being corrected in subsequent (current) year.  I am either rusty, brain-mushy, or both...  But, I cannot seem to recall and need a solid favor here, my friends.  Please provide a quick sanity check: Can we report both of these bad boys on one 5330...  Yay?  Nay? 

For any replies, please accept advanced thanks!

What is the difference between a VCP filing and VFCP filing? I understand one is for operational failures, and the other for fiduciary violations, but can they ever overlap? Are you ever required to file both?

We are the actuaries on a plan the IRS is reviewing to see if the plan meet's 401(a)(26) meaningful benefits. 

The IRS actuary is taking the position that meaningful benefits are determined by taking the end of year total accrued benefit, dividing it by years of credited service and then dividing by testing compensation.  The actuary then compared this result to see if it meets the "0.5% meaningful test".  

Using the accrued benefit seems contrary to our understanding of 401(a)(26).   All information we have on this points to using just the annual credit (as an annuity) and dividing by testing pay.  

Does anyone have any thoughts on this?  Also, has anyone else seen this interpretation by the IRS? 

Thank you.

Just wondering how everyone out here would view this:

Plan is a large employer.  There's a 50-on-5 match, payroll period basis.  Not safe harbor, and they do choose, operationally, to make the match deposits each week.

Everyone's deposits for 2017 were fine except somehow, an owner's missing one week's worth.  $375 in 401(k) deferrals and a $187.50 match.  (He's salaried and these amounts were consistent every week.)

If this were a small plan, they'd have the 7 business day safe harbor.  Since they are prompt with their deposits, there's at least some sort of argument that, "Hey, we *could* say one deposit was 30 weeks late.  Or we could say that the next 29 deposits were all 1 week late - but within 7 business days."

Anyway, that's not exactly where I'm going with this one - I would like to at least suggest that the fact that the guy's been getting match contributions all along, that those almost serve to "cover" the 401(k) amount due by the deadline for the deposit.

At no point during 2017, was his account underfunded relative to his payroll withholdings.  The plan sponsor has a requirement to keep pace with the funding of the deferrals, and not the match (which could be deposited up until tax filing day in 2018).

I suppose a potential snag is that if this "early money" went in before the paycheck that was missed, then it could be construed as accelerating funding of the plan.

Can you tell I'm trying to avoid reporting $375 on the 5500 and preparing a 5330?  :)
Thanks.

Our company allows medical (actually, all) deductions to go into arrearage when an employee is on an un-paid LOA.
I always recover the deductions in the same year, but now am being asked if we can spread these out over a longer period, which would move us into the new calendar year.
Somewhere in my brain is the belief that pre-tax deductions recovered in the next calendar year become taxable, but an hour of google-ing turned up no information.

Can someone please verify (or refute) this for me?

Thank you!

Two tax exempt organizations create an affiliation (their words) by combining service offerings. As part of the affiliation, they created a single board of directors which governs both organizations. The board is comprised of an equal number of members from each organization. I have reviewed the controlled group rules relating to control of directors/trustees and will make a referral to an attorney. However, I am curios if this is a straight forward issue. Since there is a single board is it clear a controlled group exists? They are telling me that since half the board is selected from each entity, neither organization has control over the the other. Therefore, they are stating the 80% control and/or common representation of directors/trustees is not applicable. 

Thoughts?

I have a 401(k) plan which utilizes a safe harbor matching contribution.  Prior to 1/1/2018, the eligibility for all contribution sources was date of hire.  The plan's entry dates prior to 1/1/2018 were date of hire.  Highly compensated employees are excluded from receiving a safe harbor matching contribution.

Effective 1/1/2018, the eligibility for safe harbor match was amended to 1 Year of Service.  The entry dates were amended to 1/1 and 7/1.

Unfortunately, it has been discovered the client has continued to use date of hire for eligibility and entry date purposes for the safe harbor matching contribution.

My question, can an amendment be done now to take the safe harbor matching contribution eligibility back to date of hire and the entry date back to date of hire for 2018?  For 2019, the plan would move forward with the 1 Year of Service requirement and dual entry dates.

The plan does have a discretionary profit sharing contribution component.  The eligibility is date of hire and the entry date is date of hire.  Vesting is 100% immediate for all contribution types.  The ineligible safe harbor matching contributions could be characterized.

Any thoughts would be appreciated.

Thank you.

Good Morning.  Participant received an overpayment from his account.  It was from his vested account, but it was an impermissible distribution due to his age.  Attempts have been made to get the funds back from the participant, but he claims to not have the ability to repay.  I understand from reading the appropriate sections of EPCRS that the Plan Sponsor or another person must contribute the amount back to the plan.  I know in some cases, another person is a person acting on behalf of the Plan Sponsor.  My question is - who is another person in this case?  The TPA has offered to make the plan whole as they were the one that approved the distribution.  Can the TPA cut a check to the Plan for the overpayment plus earnings? Is there ever an issue with the TPA or recordkeeper correcting an operational failure where the correction method is making the plan whole (assuming the TPA and/or recordkeeper clearly caused the error). 

I have an established 401k plan with a per payroll safe harbor match.  The owner has a control group of 5 companies, of which the largest/main company is the adopting ER.  The other 4 don't participate but we use their census for testing.

The contact approached us yesterday to see if we can add one of the other companies as an adopting ER ASAP.  Am I correct in assuming that because this is a safe harbor plan, they cannot do this for 2018 since it is already past October 1 (this is a 12/31 PYE)?

Thanks for your thoughts!

My client is replacing their current plan Recordkeeper and Trustee (MetLIfe) and switching to another company.  What documents do I need to prepare to effectuate that? Is it just resolutions regarding the plan? Do all participants have to approve this reconversion? Never done this before.

Thanks