This should be easy...

An employer has late deferral deposits in 2016 and deposits the lost earnings on all late 2016 deposits in 2017.  I am reporting the total of late deferrals on the 2016 & 2017 Form 5500-SF on line 10a.

Question -  Do you show the "lost earnings" deposit in 2017 as earnings on the Form 5500-SF OR do you show it as an employer contribution?  I have always shown as an employer contribution because it is a deductible contribution; however, I have reason to question this method.  What do you do?

Thanks!

Plan recently discovered 5 or 6 people who had requested deferral percentage reductions that were never implemented. Most are short term, but others go back several years. None of the participants has noticed the error.

Client wants to notify the participants and ask them if they want to take the money out of the plan (including match and income) or leave it in. Not sure that this is permissible. Haven't run into this particular failure before, and cannot find anything terribly helpful in EPCRS. My inclination would be to forfeit all if they want to correct, and pay the lost salary outside of the plan.  

If a legitimate "change in status" takes place during the plan year, is there a specific timeframe by which the employee must make a change in election? I'm looking at a document that was done in 2008, and it doesn't specifically address this question. I presume it must be prospective only, and can't be retroactive?

As an aside, does a new union contract effective during the plan year constitute a "change in status?" Seems like it should if it changes the level of benefits/reimbursement with regard to health insurance, and maybe this is contemplated under 1.125-4(f), but it isn't specifically listed under 1.125-4(c)... and could a health FSA election be changed in this circumstance? I'm thinking I saw somewhere that it can't.

Thanks.

K plan sponsor has bonus plan that says to execs: Every year, if you make more than $275k, I will give you a bonus equal to your Box 1 W-2, without any limit, times 6%, minus the 402(g) limit, and then all that multiplied by $.50. So if I make $400k, my bonus is $2,750, which is $24,000 (6% of $400k), minus $18,500, or $5,500, times $.50. The intent is basically to make up for the missed match based on the statutory limits, which it does not do perfectly, but anyway, that's what they do.

But then they also say that to get the bonus you have to have deferred into the plan, at least something. They do not penalize execs who defer less than the limit (e.g., defer $10,000), but they do exclude you if you deferred $0.

This violates the anti-conditioning rule of Treas. reg. 1.401(k)-1(e)(6)(ii), right? And the result would be the same if instead of only excluding those who did $0, they reduced the product of 6% times comp (e.g., the $24,000 in my example) by the sum of the 402(g) limit and the difference between the 402(g) limit and what the exec actually contributed (but not to where your bonus was negative, obviously), which would seem more rational than just basing it on whether the exec did or did not defer at all.

If this is a violation of the anticonditioning rule, what is the fix under EPCRS other than stopping it? Seems hard to believe the IRS would say you have to go back to all the folks you excluded and pay them the bonus they would have received if the employer had not conditioned payment of it on 401(k) participation, which is the only correction I can think of that would put folks in the position they would have been in but for the violation.

We have two issues with our annual bonus plan for management: 

First, the bonuses are going to be lower than they would have been due to the negative, unexpected impact of tax reform.   We want to calculate bonuses without taking into account his impact.

Second, we have individual and project objectives, because people have been focusing on project objectives, their individual objectives are going to be down. We want them focusing on project objectives, so we don't want them to be punished and would just like to pay out individual objectives at 100%. 

I'm worried about three things, and would like to know if you have any thoughts/concerns on my worries or any other thoughts and concerns. 

1) The plan doesn't give us the ability to adjust for tax reform (we have built in ability to adjust for other things, just not for this).

2) ISS doesn't like discretionary awards. 

3) We're worried backing out the negative impact of taxes will blow 162(m) for one employee. 

Thanks in advance!

An IRS agent wants an EZ filer to change to full 5500 filing with schedules, because sole participant takes RMD and has non-standard asset (private loan).  I don't see that in the instructions for 5500EZ.  Any authority for this request?

If a plan sponsor with a calendar year DB plan is located in a covered disaster area for Hurricane Florence, their 5500 filing deadline is January 31, 2019.

Is the minimum funding deadline also extended past September 15, 2018?

Client has 26 pay periods per year, resulting in two months (Mar & Aug) having three pay dates.  The clients payroll system is unable to process voluntary benefits, including 401(k) deferrals on a 26 pay period basis (not sure why, just what I've been told).  As such, although there are 26 pay periods per year, deferrals for the retirement plan are pulled from only 24.  This fact has been widely communicated and is standard knowledge to employees.

Question: has anyone seen anything in the code that would prohibit this arrangement?  I'm slightly concerned for those employees who elect a % deferral, as their total deferrals for the year will be slightly less than the % they've selected due to the two additional pay periods not receiving any deferral withholding.

Thanks in advance for the assistance.

There is a participant who exceeded the 402g limit in 2017 by $98.18.  What is the fix now that so much time has gone by?

Thanks!

Acme Sports is a sole proprietorship. The John Q. Owner defers on a draw throughout the year. Contributes $24,000. After end of year, taxes get done, and it turns out he has zero earned income. So there's a 415 excess to be refunded. Should the check be made out to Acme Sports, or John Q. Owner, or does it not make any difference? Since he had no income from which to defer, it seems to me that it should go to Acme Sports - but then how does one report it on a 1099? Probably easier to refund directly to John Q. Owner, report on a 1099? With 10% withholding (unless he elects out of it)?

Facts:  Small 401k plan.  Assume that all employees voluntarily choose to not salary defer for 2018 so there are no contributions for 2018 ("no deferral" situation will not be persisting into the next year).  Former employee withdraws and forfeits unvested match during 2018.  Plan document states that unvested match forfeiture will be used to reduce the employer's matching contribution.    Plan document allocation formula for matching contributions is "either a percent of deferrals or a flat amount per participant to be allocated in a non discriminatory manner."   The provision does not state that the employee has to actually salary defer to receive a match (although I would assume that is implied?).  The match is discretionary, and optional per plan document provisions.

Question:  for 2018 can the employer declare a match in the amount of the forfeiture by way of board resolution, and then allocate it as flat amount per plan-eligible participant?  Something seems wrong w/ this, however, the client would rather dispose of the match forfeiture as a 2018 allocation to the employees than amend the document to allow the match forfeiture to be used to pay plan fees (a feasible option w/in the plan document).

*****

Appreciate any comments.......

Plan has 1 year, 1000 hours, semi entry.  IMO, this is a good design for the plan because the employer is keeping out the maximum number of employees to contain cost.  There is enough part timers to warrant it.  The plan is safe harbor match 100% of 5%.

The employer is looking for a yearly entry, still keeping out the maximum he can.  I told him the yearly entry is a problem because some employees that wouldn't make the 1 year, semi entry, would likely to come into the plan.  He would like to steer clear of semi-entry because he missed an employee at 7/1 and had to make up some deferrals and sh match.

I get it, he's tight, but that's his choice and he's following the rules.  I'd do the same.

I'm stumped, because I think the 1 year, 1000 hours, semi entry makes the most sense.

Got any good scenarios?

Would appreciate thoughts on whether a trust company could have one custodial account agreement for a 403b plan that holds both 403b1 annuity contracts and 403b7 custodial accounts.  My thought is that the annuity contract has to be held in a separate custodial account (or in no custodial account at all) or the tax-exempt status of the 403b7 custodial account is at risk.  Is there anything I am missing? Any nuance in the regulations I've overlooked?  1.403(b)-8(d) seems very clear on this point.  Would a master custodial account that holds the b7 assets in a subaccount separate from the b1 annuity contract work?

Also, I'd appreciate thoughts on whether a 403(b)(7) custodial account agreement must have what I call "quasi-plan language" in it, i.e., language that states deferrals won't exceed 402g, distributions won't be made at impermissible times, etc.  The large 403b vendor agreements seem to all contain this language, but is it absolutely necessary if the plan document has the requisite language?  Does it depend on whether the custodial account agreement incorporates the provisions of the plan?

Thanks in advance for any insights/feedback.

Has anyone seen or does anyone have insight into why we haven't received an update from the IRS on hardship and loan relief to victims of Hurricane Florence, similar to other hurricanes such as Harvey and Matthew? From a quick google search, it appears that the announcement was provided within a few days of the disaster in the past. The only update I can find is with respect to tax relief, but not hardships and loans.

https://www.irs.gov/newsroom/help-for-victims-of-hurricane-florence

Calendar year plan - we filed Form 5558 to extend the 5500 and the 5330 for a client.

Now we find that the late deferrals were not for 2017 but instead were for 2015 and 2016.

The client is asking to not file Form 5330 for 2017 because no late deposit of deferrals for that plan year.

Are there consequences for extending Form 5330 and then not filing one?

Thanks.

I'm looking for the rule that states what happens to the plan if a participant is allowed to take a non qualified distribution and is unable to repay the money back into the plan. IRS corrective actions state the money needs to be restored but doesn't state the ramification if it is not able to be restored.

Good Morning -

This is a question for those who have or are working towards the CPC.  I am curious how long it took you to attain this designation (or a module if still working towards it) once you received the QPA and began studying for CPC? I'm trying to plan ahead to see how long it will take.  I plan on reviewing the modules and taking the exams at an average pace whatever that means. For example, on the QKA/QPA, I averaged about one chapter per week and with review about 3 months between each exam.  From a quick review of CPC requirements, it looks like you have 4 required modules and 2 electives with online exams for each.  You then have a proctored exam at the end. 

Thank you!

ftwilliams volume submitter - Adoption agreement says match Safe Harbor is per payroll and employer wants us to calculate a true up. Is this legal?

I have received an inquiry regarding drafting a QDRO for a health reimbursement account (HRA), which is covered by ERISA, but can't find any resources for this online.  Has anyone come across this before?

Way way back in November of 2010 DOL issued proposed regs on TDF

is this matter still hanging out there?. I can not find that these regulations were ever finalized.  Am I correct??