I know bizarre question....

A company is in the final stages of restating and merging a traditional NQDC plan and a SERP into a Phantom Stock Plan and is intending to roll the benefits accrued under the NQDC and SERP into the Phantom Stock Plan. I'm coming in at the end to review documents...

The SERP promises to pay a certain benefit amount to participants upon certain future events (i.e. normal retirement, disability). Company wants to effectively "rollover" benefits accrued to date under the SERP into the Phantom Stock Plan, keeping the same distribution terms for 409A compliance. Going forward, no new benefits would be accrued under the terms of the SERP. Participants would be eligible to receive phantom stock going forward. The "rollover" balance from the SERP could grow based on the phantom stock value (but not be reduced). There is no acceleration of the timing of payments of benefits accrued to date. 

My questions are:

1. Is this really a termination of the SERP, and if so does that preclude the adoption of the Phantom Stock Plan (even though there is no acceleration of payment under the SERP)?

2. If not, are the new benefits yet to be accrued under the Phantom Stock Plan bound by the prior SERP distribution provisions? I initially thought not, but am now wondering if the Phantom Stock granted in the future would be considered a replacement for the full normal retirement benefits previously promised under the SERP? 

Any and all thoughts would be appreciated. Thanks!

Facts: Employee (participant) has a QDRO designating that his ex-wife receive ALL of his benefits under the 401(k) Plan. 

Employee is now requesting documentation from the Plan that his ex-wife stated receiving benefits under the Plan. The Plan Administrator does not wish to provide this information to employee.

Question: In denying the employee's request, is Plan Administrator obligated to provide the standard ERISA claims procedure rights (appeal process, etc)? In essence, is an employee who no longer has any benefits under the Plan as a result of a QDRO still deemed a Plan Participant? And if so, must he/she receive notice of ERISA rights to appeal?

Your insights are greatly appreciated. Thank you!

It remains unclear how much effort a single-employer individual-account retirement plan’s administrator must put into finding another address for a participant if the administrator receives information suggesting that the participant no longer is at the address the participant furnished (and perhaps neglected to update).  Administrators have expressed concerns that some EBSA examiners suggest unreasonable efforts.

Some of the tension results because not all of an employer/administrator’s cost is visible as an expense.

Of those service providers that offer § 3(16) services, do any of them offer the service of finding better addresses on “missing” participants?

Does that service have a distinct fee, or is it embedded in an overall fee?

If there is a distinct fee, is it charged against the account of the to-be-located participant?

We're taking over a plan with several loans outstanding, and the plan sponsor has never known that they could pass loan admin fees to participants (if properly disclosed), so they are now interested in doing so.  If I tell the investment product to take loan maintenance fees from participants, they will do so from all participants with loans - they can't exclude certain loans.  Is there any issue with starting to charge the annual fee to the existing loans once they've gotten a disclosure notice that this will start happening?

A profit sharing plan accepts rollovers on behalf of employees who haven't met the plan's eligibility requirements.  I would image such employees would technically be considered participants and included in the participant count for Form 5500 purposes.  Would you include them in the annual testing before they meet the eligibility requirements?

We have a client who sponsors both an ESOP and a 401k plan.  ESOP owns 100% of company.

Client is looking to split the 401k plan into 2 separate plans - one a safe harbor plan and one a tested plan.  We know that we will have to run the ABT for the plans as the coverage test will not pass the 70% threshold.

Right now the ESOP and the 401k plan use different definitions of compensation.  It seems that the same definition of compensation must be used to run the ABT.  Can the plans still apply 2 different definitions of compensation for allocation  purposes and just use the same definition for testing purposes?  Or do both documents need to specify the same definition of compensation?  The ESOP currently excluded commissions in excess of $150,000 (and yes, there are a handful of employees for whom this exclusion does apply.)

S-corp is paying a dividend payment to the ESOP. As I understand it, this can be used towards the repayment of the exempt loan. According to IRC 4975(f)(7), this isn't a prohibited transaction.

Agree? If so, another question - for tax purposes, they S-corp is apparently considering this dividend as 2018. But, it is being contributed to the ESOP within a few days. Is this considered an ESOP contribution for 2018, or 2019, or can they choose either?

Thanks!

I have  a plan who 2018 is the first  top Heavy Year. The docs say to allocated TH Minimum to All. However, the only 2 NHCE EE"s termed during the year so are not eligible for a Top Heavy. However if I allocate the TH to just the 3 HCE then I fail coverage, and have to bring in those 2 NHCE.  Also the Plan is terminated 12/31/2018.

Thoughts?

I don't do a lot of these plans, so I'm looking for some guidance.  I've got an LLC with 4 partners, all active, and 3 rank and file employees.  HCEs are excluded from Safe Harbor,  Using permitted disparity because all rank and file are older than 2 of the partners.  The oldest partner is retiring, and doesn't want to fund anything for himself.  The other 3 partners all want to do the maximum.  Is there a way to accommodate this, or is it an all or nothing situation?

I know the IRS does not allow participants to change their election amounts mid-year (absent a qualifying event).

I'm thinking it should be OK to switch brokers, however, as long as the the election amount does not change. The biggest obstacle would presumably be gaining approval from both brokers.

Anyone have any experience with this?

Many thanks in advance!

What does everyone thing of the following idea?  Would it work?

A lot of clients are in the enviable position of not needing the income from the RMDs.  Therefore they are continually looking for ways to defer or reduce minimum distributions.

Let's say a client, age 73, retires from his company in 2019  Prior to rolling the assets to an IRA he takes his 2019 401k RMD.  He wont be subject to an IRA RMD until 2020.  

Later in 2019, he sets up his own business (consulting, Uber Driver, app developer, etc) and establishes a one-person 401k and subsequently rolls his IRA in the newly established 401(k).  It would appear to me that the owner (even though they own more than 5% of the business) would not be subject to RMDs until they separate from service

I believe this to be true due to section 401(a)(9)(C)(i)(l) "in the case of an employer is a 5% owner with respect the plan year ending in the calendar year in which the employee attains age 70 1/2...."  In other words it seems language does not require for an ownership test each year

Thoughts?

As title suggests, I have a one-person 401(k) Plan that is closing effective 12/31/18.  We are, of course, getting trailing dividends and interest well into January 2019.  Those div/int are about $1100 out of a 1.9MM plan.

Should I:

1) File a 2018 1099-R with the grand total of distribution (once all those div/int have posted, even though those dollars don't technically leave 401(k) Plan until Jan 2019)?  Or ,

2) File a 2018 1099-R for the total rolled out as of 12/31 and then don't file another 1099-R for 2019 (because those div/int amounts are so de minimus)?  Or,

3) File a 2018 1099-R for the total rolled out as of 12/31 and then a 2nd one for 2019 for those trailing div/int?

Then, the follow-up related question is about a Final 5500!  I do not want my client to have to pay me to complete a 2019 5500 just to report the distribution of those pesky dividends & interest!  The amounts are SOOOO low, relatively speaking.  If I file a Final 5500 for 2018, I should show the distributed amount as the same amount shown on the 2018 1099-R, right?

Sorry this is so long.  I searched for the answer before posting this, but cannot find anything relevant (maybe I'm not great at searching).  Thanks so much for anyone's help.

LLC  taxed as Partnership, has 2 owners in active management.  The 3rd owner is not active and not deferring.  I want to include him in testing because his zero will help. 

Is it correct to include him in testing?

Hello,

Company A purchases Company B in a stock purchase. Company A sponsors a non safe harbor plan, Company B sponsors a safe harbor 3% non elective (both calendar year plans). Purchase transaction has closed and Company B did not terminate its plan beforehand.

I have reviewed Notice 2016-16 and understand there is limited guidance on mergers when safe harbor plans are involved. However, I have a bit of a twist:

1.401(k)-3(g) and 1.401(m)-3(h) provide guidance on a suspension of a safe harbor contribution mid year. Let's say Company B's plan complies with all these requirements to remove the 3% safe harbor mid year.

I don't believe they can be merged mid year because Company B's plan needs to be tested for the entire plan year (1.401(k)-3(g)(ii)E and 1.401(m)-3(h)(ii)E). 

Can the plans merge mid year after the removal of the safe harbor contribution? Could they be merged but then tested in separate groups?

Thank you

The son of a retiree called in to our corporate office and explained the following situation.

His father is drawing social security as well as the company pension. He is applying for certain Medicaid programs that have limits to monthly income. When the retiree combines social security plus pension, he is over the limit for the medicaid program he wants to apply for. The retiree determined that the medicaid benefits are more important than the amount of his monthly pension.

Is it possible to refuse/stop/suspend pension payments? Is it different based on each plan document? Are there overall rules governing this? I reached out to the actuaries we use and they said from their research, it is impossible for him to discontinue receiving the pension payments. 

Maybe I'm missing something - can a 403(b) plan allow a certain class of employees to defer, but exclude them from the safe harbor match? I didn't think so...

Having a brain cramp today.

I have a plan that has 3 month wait, entry is date of event.

Cross-tested 3% SH plan.  Do I have to give the otherwise excludable folks the gateway if I am testing them separately?  GW will be 5%.

I've been drafting QDROs for several years for family law attorneys. I am working on my first Multi-Employer Plan (Carpenters' Union) QDRO. This is my first QDRO with the participant in payment status. The monthly benefit is $3,610.64 (disability) for the lifetime of the Participant with a 75% survivor benefit to the surviving spouse. The Marital Settlement Agreement provides that the monthly benefit is to divided equally. Since the annuity election can rarely be changed, how much does the Alternate Payee receive: 

1. $3,610.64/2 = $1,805.32?

2.  50% of the gross monthly benefit as if the participant had elected a Single Life Annuity? This would provide the AP any possible cost of living increases, etc., but could change the amount of the payment to something other than $1,805.32.

3. If 2 is chosen, what protections can be provided for the AP if the participant predeceases her?

4. Single employer plans are qualified under IRC 401. Is this also true for Multi-Employer plans?

The sample QDRO from the union doesn't really address this? Any comments are appreciated!

Is it a plan failure requiring correction if the wrong Trustee was named in the plan document?

Adoption Agreement lists the Board of Directors of the plan sponsor as the Trustee, but they actually hired a corporate Trustee several years ago. There is a trust agreement in place naming the corporate trustee.  The Adoption Agreement explicitly states that a plan amendment is not necessary to change the information in Trustee section of the agreement. 

A 401k plan converted from one investment product to another product with the same recordkeeper.    A couple, but not all, funds in the plan's core lineup changed and the account number changed.   Discovered that the notice to the participants announcing the change was not delivered.   Is the fix to forward the notice now to communicate the change?   What other correction would / should be made?   Thank you

I googled on the topic, but did not find this situation addressed in the 401k fix-it guide and no articles or citings came up regarding the specific topic....