the following passed the House (as part of the Family Savings Act)

basically, no more notice needed if 3% safe harbor. why o why can't this be effect now so I wouldn't have to worry about notices this month!!!!!!!!)

plan can be amended anytime during the year

plan can be amended after the end of the year (before deadline for refunds) if increased to 4%

SEC. 102. RULES RELATING TO ELECTION OF SAFE HARBOR 401(k) STATUS.

(a) LIMITATION OF ANNUAL SAFE HARBOR NOTICE TO MATCHING CONTRIBUTION PLANS.—

(1) IN GENERAL.—Section 401(k)(12)(A) of the  Internal Revenue Code of 1986 is amended by striking ‘‘if such arrangement’’ and all that follows and inserting ‘‘if such arrangement—

(i) meets the contribution requirements of subparagraph (B) and the notice requirements of subparagraph (D), or

(ii) meets the contribution requirements of subparagraph (C)(2) AUTOMATIC CONTRIBUTION ARRANGEMENTS.—Section 401(k)(13)(B) of such Code is amended by striking ‘‘means’’ and all that follows and inserting ‘‘means a cash or deferred arrangement—

(i) which is described in subparagraph (D)(i)(I) and meets the applicable requirements of subparagraphs (C) through (E), or

(ii) which is described in subparagraph (D)(i)(II) and meets the applicable requirements of subparagraphs (C) and (D).

(b) NONELECTIVE CONTRIBUTIONS.—

Section 20 401(k)(12) of such Code is amended by redesignating sub21 paragraph (F) as subparagraph (G), and by inserting

after subparagraph (E) the following new subparagraph:

(F) TIMING OF PLAN AMENDMENT FOR EMPLOYER MAKING NONELECTIVE CONTRIBUTIONS.—

(i) IN GENERAL.—Except as provided in clause (ii), a plan may be amended after the beginning of a plan year to provide that the requirements of subparagraph (C) shall apply to the arrangement for the plan year, but only if the amendment is adopted—

(I) at any time before the 30^th day before the close of the plan year, or

(II) at any time before the last day under paragraph (8)(A) for distributing excess contributions for the plan year.

(ii) EXCEPTION WHERE PLAN PROVIDED FOR MATCHING CONTRIBUTIONS.—

Clause (i) shall not apply to any plan year if the plan provided at any time during the plan year that the requirements of subparagraph (B) or paragraph (13)(D)(i)(I) applied to the plan year.

(iii) 4-PERCENT CONTRIBUTION REQUIREMENT.—Clause (i)(II) shall not apply to an arrangement unless the amount of the contributions described in subparagraph (C) which the employer is required to make under the arrangement for the plan year with respect to any employee is an amount equal to at least 4 percent of the employee’s compensation.’’.

(c) AUTOMATIC CONTRIBUTION ARRANGEMENTS.—

Section 401(k)(13) of such Code is amended by adding at the end the following:

(F) TIMING OF PLAN AMENDMENT FOR  EMPLOYER MAKING NONELECTIVE CONTRIBUTIONS.—

(i) IN GENERAL.—Except as provided in clause (ii), a plan may be amended after the beginning of a plan year to provide that the requirements of subparagraph (D)(i)(II) shall apply to the arrangement for the plan year, but only if the amendment is adopted—

(I) at any time before the 30^th  day before the close of the plan year, or

(II) at any time before the last day under paragraph (8)(A) for distributing excess contributions for the plan year.

(ii) EXCEPTION WHERE PLAN PROVIDED FOR MATCHING CONTRIBUTIONS.—

Clause (i) shall not apply to any plan year if the plan provided at any time during the plan year that the requirements of subparagraph (D)(i)(I) or paragraph (12)(B) applied to the plan year.

(iii) 4-PERCENT CONTRIBUTION REQUIREMENT.—Clause (i)(II) shall not apply to an arrangement unless the amount of the contributions described in subparagraph (D)(i)(II) which the employer is required to make under the arrangement for the plan year with respect to any employee is an amount equal to at least 4 percent of the employee’s compensation.’’.

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to plan years beginning after December 31, 2018.

DESCRIPTION OF H.R. 6757, THE “FAMILY SAVINGS ACT OF 2018”

Delay in adopting provisions for nonelective 401(k) safe harbor

Under the proposal, unless a plan provided at any time during the plan year that 401(k) safe harbor matching contributions applied to the plan year, a plan can be amended to become a nonelective 401(k) safe harbor plan for a plan year (that is, amended to provide the required nonelective contributions and thereby satisfy the safe harbor requirements) at any time before the 30th day before the close of the plan year.

Further, unless a plan provided at any time during the plan year that 401(k) safe harbor matching contributions applied to the plan year, the proposal allows a plan to be amended after the 30th day before the close of the plan year to become a nonelective contribution 401(k) safe harbor plan for the plan year if (1) the plan is amended to provide for a nonelective contribution of at least four percent of compensation (rather than at least three percent) for all eligible employees for that plan year and (2) the plan is amended no later than the last day for distributing excess contributions for the plan year, that is, by the close of following plan year

Nevertheless, the Family Savings Act’s prospects in the Senate remain very uncertain.

Section 3(40)(A) of ERISA provides that the term “multiple employer welfare arrangement’’ (MEWA) does not include an employee welfare benefit plan that is established or maintained under or pursuant to one or more agreements that the Secretary of Labor (the Secretary) finds to be collective bargaining agreements ("CBA").

For purposes of section 3(40) , an employee welfare benefit plan is “established or maintained under or pursuant to one or more agreements which the Secretary finds to be collective bargaining agreements” for any plan year in which the plan meets a certain requirements. One of the requirements is (generally speaking) that at least 85% of the participants in the plan are Individuals employed under one or more CBAs. 

My question - There is no explanation in the regulation or the preamble that states when during the year this 85% test should be conducted (i.e. first day, last day, etc.) . Does anyone have any guidance they can point me to or an opinion they don't mind sharing on this issue? 

Thank you.

Hi,

A participant is deferring 6% of pay and receiving the 4% safe harbor match. His match suddenly dropped down to 2% then to 0%. Upon questioning the payroll rep, I was told that it was because the participant reached the annual safe harbor compensation limit. 

So his match was capped at $8250.00 even though he had not reached the $275,000.00 limit yet. I have never heard of this.

Is this correct?

Thank you!

Prospective client started SIMPLE IRA in early 2018, but wants to start a 401(k) plan for 2019.

The problem we are faced with is the 2 year rule for distributions from the SIMPLE.  

Can they start the 401(k) for 2019, cease contributions to the SIMPLE as of 12/31/2018, and just not terminate it until the 2 year clock has run on the contributions to the SIMPLE?  

Any idea when they coming out? Have been holding up the open enrollment process waiting for the new "official" rates.

Nowhere near 20 employees, but they would like to ELECT to be covered by, or provide, COBRA benefits. Can they do this?

The standard distribution fee from the plan is 75.00.  If a participant is "forced out", however, the fee is 125.00.  The forceouts are always the amounts that are less than 1,000.  The original theory behind the additional fee was that there is additional work involved in setting up the rollover IRA.  For amounts, however, that are not rolled to an IRA, i am concerned that this fee could be looked at as discriminatory since it essentially is only going to be applied to NHCEs.  Any input is appreciated.  Thank you.

I am meeting with an employer about starting a 401k plan.  Details are sketchy but for now, I was told that its a husband and wife who own the business.  However, the wife (who I am told is very much involved with the business) receives 1099 pay from the company.  No W-2,  no other compensation from the plan.  

(1) I've never seen this arrangement before; is this acceptable?

(2) So the spouse has no company wages and would not benefit in a new company 401k plan.  But could the wife have her own plan, based on 1099 pay?  If so, controlled group issues come into plan. But she needs to have a business to have a 401k plan.  Which she does.  But is paid via 1099 from it.

Any thoughts are appreciated.  I will find out more shortly but this seems kind of odd.

Thanks 

New owner only plan effective 1/1/2017.  Owner reaches age 70 1/2 in 2017.  Vesting is 6-year graded and vesting prior to effective date of plan is excluded.  As of 12/31/2018, the owner would be 20% vested.  When would the first RMD need to be distributed? 

Since we deal with mostly small plans, our actuary uses the 12/31/2017 accrued benefit x 12 to get to what the RMD lump sum requirement is for 12/31/2018 rather than monthly installments.  I'm getting hung up on the fact that although the owner is 0% vested as of 12/31/2017, he is 20% vested as of 12/31/2018.  Would a distribution be required for 12/31/2018 or not until 12/31/2019?  The argument from our actuary is that since the calculation is done based on the prior year accrued benefit, the first distribution wouldn't be required until 12/31/2019.

HI,

An one participant owner only DB plan wants to terminate and roll the assets to an IRA . I recall an old post where it was mentioned that since the plan is terminating and rolling the assets to an IRA the first RMD would be allowed to use the DC method. I this indeed allowable and what if for the current year he needs to take two RMDs (as the first was deferred) can he take both RMDs based on the DC Method and then roll the remaining assets to an IRA?  Thank YOU.

Is there a reasonable time frame you can allow for a plan sponsor to pay out a lump sum after a temporary window has expired? Let’s say someone claims their packet was lost and they had to resend, does a sponsor have to honor the payment, say within 30 days, 60 days, etc?

I have two companies in a control group. Each company sponsors its own plan. Currently the plans are identical.

They run their own payroll and have their respective benefits managers. One company now wants to add a Roth provision. Other than the potential for a BRF coverage issue is there any rule that requires this specific (or any other plan design feature) be coordinated between plans provided each could pass the BRF test?

I have a $900,000 plan with 30 lives.   One deceased participant has an account of $300,000 in this pooled account.   We run quarterly valuations.  The trust value has dropped 7% since the end of the last quarter.  Are we permitted to run a special valuation to pay him and two others out?  The other two distribution elections just happened to come in at the same time.  

I would hate for all of the other smaller accounts to absorb the loss.

Regards, 

Pixie

My company's ESOP terminated after sale of the company.  80% of the funds were distributed one year after the termination event.  The remaining 20% were supposed to have been distributed at the 2 year mark but the company is now stating that the distribution is delayed indefinitely because of "an issue with the Trustee."

I'm posting here because while legal guidelines for distribution of a still-active ESOP are pretty clear, I haven't been able to confirm the guidelines for full distribution of a terminated ESOP.  How long can the company delay on the remaining 20%?

Thanks for any insight!

Good morning to all,

We have a client, a medical practice, with one owner-doctor, 100%, and two non-owner doctors, along with some rank and file employees.  The plan was set up to exclude "non-owner doctors" from eligibility to participate in the plan.  All the doctors are HCEs.

Now, the owner-doctor would like to make an offer of employment to a new non-owner doctor and he wants to make the plan available to just this new non-owner doctor but not the two non-owner doctors he already has.

We were thinking about amending the plan to simply exclude the two existing non-owner doctors by name.  As we have never done that before, we are not 100% comfortable doing it without asking the advice of the experts.  Would you do it that way or is there another technique?

As an aside, every year when the rate group testing is done for the new comparability profit sharing contribution, our software includes the two existing non-owner doctors in the test, even though they are not eligible to participate in the plan.  We are not 100% comfortable with that, either, and would like to know if this is really right.  The fact that they are HCEs and they do not get a contribution helps to pass the tests and that doesn't really seem "fair" but if it is permissible, we will continue to take advantage of it.

Thank you in advance for your advice!

How should participants be reported who were originally reported with a Code A, then reported as a D when they began receiving benefits, but then payments cease before the participants are paid out? 

The instructions to the Form 8955-SSA state that a Code D should be used to report “a participant previously reported under the plan number shown on this form who is no longer entitled to those deferred vested benefits. This includes a participant who has begun receiving benefits, has received a lump-sum payout, or has been transferred to another plan …”

The instructions to the Form 8955-SSA have a CAUTION that states:

If payment of the deferred vested retirement benefit

ceases before ALL of the participant's benefit is paid

to the participant or beneficiary, information on the

participant's remaining benefit shall be filed on the Form

8955-SSA filed for the plan year following the last plan year

within which the payment ceased.

However, the instructions to Code A state in part “Use this code for a participant not previously reported.”  Should a Code A be used in this situation, should we report using a Code B or is no additional reporting required in this situation?

Code B states:

Use this code for a participant previously reported under the plan number shown on this form to modify some of the previously reported information. Enter all the current information for columns (b) through (g), as applicable. You do not need to report a change in the value of a participant's account since that is likely to change. However, you may report such a change if you want.

We are not aware of Code B being used in this manner.  Our understanding is that it is primarily intended for correcting or modifying information incorrectly reported.

New 401(k) Safe Harbor Plan with effective Date October 1, 2018.  Plan Year Ends 12.31.2018 so a 3 month plan year.  According to the regulations the new plan must be in place for 3 months to meet the safe harbor provision:

1.401(k)-3(e)(2) Initial plan year. A newly established plan (other than a successor plan within the meaning of §1.401(k)-2(c)(2)(iii)) will not be treated as violating the requirements of this paragraph (e) merely because the plan year is less than 12 months, provided that the plan year is at least 3 months long (or, in the case of a newly established employer that establishes the plan as soon as administratively feasible after the employer comes into existence, a shorter period). Similarly, a cash or deferred arrangement will not fail to satisfy the requirement of this paragraph (e) if it is added to an existing profit sharing, stock bonus, or pre-ERISA money purchase pension plan for the first time during that year provided that—

(i) The plan is not a successor plan; and

(ii) The cash or deferred arrangement is made effective no later than 3 months prior to the end of the plan year.

Operationally, it has taken a few weeks for the platform recordkeeper, advisor and plan sponsor to get enrollment meetings done and everything in place to start deferrals which will occur with the first payroll in November.

Is Safe Harbor Status negated if the first deferrals do not occur with the first payroll in October?  The regulation language seems to be very broad and does not specify that the first deferral must occur with the first payroll in October.  Although a very conservative interpretation could be taken to mean just that.

My understanding always was that Plans weren't required to withhold 20% on distributions under $200.  However I pulled up the 2018 Publication 15-A and in Chapter 8 it's not listed as an exception for the 20% withholding.  All that it says is:

Exceptions. Distributions that are (a) required minimum distributions, (b) one of a specified series of equal payments, or (c) qualifying “hardship” distributions aren't “eligible rollover distributions” and aren't subject to the mandatory 20% federal income tax withholding.

Does that mean that we should withhold the 20%, even on a "small" distribution or is it listed somewhere else as an exception?

Thanks again everyone!

Company A was part of a control group and was a participating employer in Plan A  (company A was not the main sponsor).  Plan involved is a 5/31 Fiscal Year End Plan.   FYI: Plan A is a Profit Sharing only plan.  Company A' s ownership changes effective 11/1/2018 and is no longer a member of the control group and intends to terminate participating employer agreement effective 10/31/2018 and wants to start its own Profit Sharing only plan.  Company A intends to sponsor a 5/31 Fiscal Year End Plan as well.

The question is: Can Company A's plan be effective 6/1/208 so that full year compensation can be used in determining  PS allocation at 5/31/2019 OR does the plan's effective date need to be 11/1/2018 due to prior participation in Plan A?

Just started a new job as an HR Generalist and we've discovered that our Employer failed to file 1094-C and 1095-C with the IRS. We are a self-insured ALE. The entire department retired this summer, we don't know what the IRS has been told.

I heard we got a letter that our extension was denied, but I don't have a copy of the letter. I don't have records of any other correspondence.

The employees did receive their forms. I am not sure where to start with the IRS.