Is there any permissible situation where a 401(k) can exclude employees that work less than 1,600 hours in a year? 

I am well aware of the IRS guidance on excluding part-time employees that work less than 1,000 hours, but I am so flabbergasted to see a 1,600 hour participation requirement  in a plan restated in 2018 that I feel I must be missing something...? 

Hi all,

Am I reading the regulations correctly?  A 401(k) plan can eliminate their 3% nonelective Safe Harbor contribution mid year, without showing that the company is operating at a loss, as long as the notice that was distributed in December of the prior year included language that the Safe Harbor may be suspended?

Thank you!!

safe harbor 401(k) plan for medical practice has 3% SH NEC only to NHCEs.

During 2018, physicians over age 50 deferred $24K rather than $24,500 due to clerical error by payroll person.  Can they designate $6,000 as catch-up, leaving $18,000 to count toward their maximum annual addition of $55,000?  Or do they have to count the first $18,500 as regular deferrals before counting any as catch-up?  Trying to make room for increased profit sharing.

Thanks!

To date I have successfully passed the ASPPA RFP and DC-1 working toward the QKA designation.  However, I am hung up on the DC-2 test.  The odd part is I pass the practice test but not so successful on the actual test.  I have been through the materials and taken many practice test.  Not sure how to proceed at this point.  

Suggestions?  

Thanks!

We have a client with a 401(k)/profit sharing plan with prevailing wage contributions. We just discovered that in 2018, they increased the rate of prevailing wage contributions, causing a large nondeductible contribution amount. We can reduce it a bit by pushing a post-year-end deposit into the 2019 fiscal year deduction. 

Another option to further reduce the nondeductible amount may be to retroactively amend the plan to bring in an excluded class, and employees who had not met initial eligibility, and give them a profit sharing allocation (the plan is not Top Heavy). I know this would require approval under VCP to be sure it's acceptable. If the client were to do that (assuming waiving the VCP submission), what would likely be considered a "meaningful benefit"? Would 1% of compensation work, or should be more conservative and give them 3% (to match what the IRS considers the minimum for Top Heavy)? They will still have a nondeductible amounts, with a 10% penalty and offset to the 2019 404 limit.

Thanks.

Good morning to all,

Last year I did a massive review of all of our clients and got the 8955-SSA reporting ship shape, going back as far as we had records and being sure everyone was reported correctly.  (These are all DC plans, mostly 401(k)s).  On page 2, Part III, Item (g), I reported the vested account balances of those who had not yet been paid out.

I am now reviewing a 2018 report for a colleague who has done an 8955-SSA and has reported the participant's total account balance instead of the vested account balance.  The instructions for 2017 and 2018 are not specific, just saying ""For defined contribution plans, enter the value (in whole dollars) of the participant's account."  It really doesn't address the fact that their total account balance and their vested account balance are (often) not the same thing.  

What are the rest of you doing?

Thanks for your advice and tips as always.

Plan sponsor currently does not impose any last day/hours of service requirement to receive a match.  Match is discretionary and is only made at the end of the plan year.

Plan sponsor wants to add a last day/hours requirement for 2019.  Can that be done effective March 1, 2019 if it only applies after March 1st?  For example plan sponsor wants to apply current rules for all contributions for January and February, but impose the last day/hours requirement for any match made anything after March 1st. 

Thanks in advance for any guidance.

Reading through the new publication 560 just released and I'm struck by how they seem to go out of their not to call attention to the fact that Section 125 premiums reduce eligible compensation.

It seems the only reference to this rule is that when it describes those pre-tax contributions that do not reduce compensation, 125 deductions are not listed.

And of course it's stupid that your EMployer should be rewarded for making you pay more for health insurance premiums, or that you should be penalized for being older because your deductions are increased as premiums increase.

Does the IRS not want me to follow this rule?  It seems if they did they would say "hey, watch out - 125 deductions reduce comp!"

A plan participant has provided a copy of his divorce decree to the plan administrator. The divorce decree stated that 100% of the participant's account balance under the plan is to be transferred to his ex-spouse. The plan administrator determined that the divorce decree is a qdro (approved), and as such, has transferred the employee-participant's account balance to his ex-spouse.

My question: Was a separate qdro document required? Or was the plan administrator correct in processing the qdro (balance transfer) based only on the divorce decree?

company started SIMPLE IRA plan beginning 10/1/2018.  The company operates on a calendar year.  When calculating the SIMPLE IRA match, can you use compensation for the full year, or only from October - December?

Thanks!

Participant elected in 2015 to contribute Roth 401(k).  From 2014 through June 2018, the participant contributions were inadvertently set up as pre-tax in all respects (w-2 reporting, deposits at recordkeeper, withholding calcs, etc). 

What to do?  Note: The participant has since rolled his entire balance out to an IRA, but if it helps we can start by assuming the money is still in the plan...

Current plan document allows for in-service distribution for participants who are over 59.5 and employed for 5 years. The withdrawal is restricted to once a year. The client wants to amend the plan to allow multiple (periodic) payments of in-service distribution for participants who are over 70.5 and leave the restriction for once a year for participant who is 59.5. is this allowed?

We have a 401(k)(12) ???? harbor 401k plan with the basic match that we want to restate to a QACA safe harbor match 401(k) plan under 401(k)(13). Can the QACA match have a 2 year vesting schedule not just for new hires but also for existing participants with a traditional safe harbor match account that is 100% vested? Our document sources these accounts separately- there is a separate definition of QACA match in the document. Any thoughts would be appreciated!

Plan is self-insured.  I've been told a plan administrator can override a denial and authorize payment be made for claim previously rejected.  IS that accurate?

I am representing a client who is being offered a job with a new company, except that the company does not offer a 401(k) plan. She is likely to accept the offer but thinking of funding a traditional IRA as an option to replace the 401(k) her new employer will not provide. She also has a side business which she hopes to continue to maintain and is considering a solo(k) to help her fund her retirement through that business. Would the maintenance of the solo(k) result in her being treated as an active participant in a retirement plan for IRA deduction purposes? I did some preliminary research on this and nothing I have seen specifically addresses this. Since active participation is reported on the W-2 issued to an employee, I would tend to think that the answer should be No but wanted another set of eyes to back me up. Thank you.

Any word yet on proposed changes to hardship withdrawals?  Is anything final?

Running the ADP test for a traditional 401(k) plan based on compensation net of salary deferrals. A participant has compensation of $300,000 so she is being limited to $275,000. When we reduce her compensation for $18,500 of salary deferrals, is it subtracted from $300,000 or the $275,000 of limited compensation?

Thanks.

Hello,

When the document states compensation is only counted while a participant and entry is 01/01 & 07/01. Can you estimate compensation by dividing full year compensation in half or must I go to client and ask for 07/01 - 12/31 Compensation. I have a payroll report for the full year but not quarterly and client isn't great at responding. 

Thanks!

Participant leaves the company and requests distribution of plan balance. Broker processes a payout without consulting TPA. With plan sponsor consent the participant is paid out 100%.

Problem is the participant wasn't 100% vested. Any experience getting funds returned so proper amount can be withheld?

When a plan is top heavy, it is sometimes useful to amend the plan to set a $0 limit on elective deferrals for Key employees. This allows the Key employees to make contributions which will be automatically reclassified as catch-up contributions (provided they are eligible to make catch-up contributions) because they exceeded the plan-imposed limit of $0. Since catch-up contributions are disregarded for application of 416, this is a way to allow the Keys to contribute without triggering the top heavy minimum.

I am wondering if there is a way to specify that the $0 limit automatically applies in years when the plan is top heavy, and only when the plan is top heavy. In our adoption agreement (FT William) there is a checkbox in the "Minimum and Maximum Deferral Amounts" section for "Other limitations on Elective Deferrals (specify): ________". I am thinking of putting in that blank something along the lines of, "If the Plan is Top Heavy for the Plan Year, the maximum Elective Deferral contribution for Key Employees shall be $0 for the Plan Year." Possibly also adding "The application of this limit shall not restrict the Key Employee's right to make Catch-up Contributions, if they would otherwise be eligible to make Catch-up Contributions" just to be clear.

Any thoughts or opinions on this approach? Are there any issues with determining the plan limit based on the top heavy status? In theory, the plan administrator could know by the first day of the plan year whether or not the plan is top heavy for the current year, and so can adjust the keys' limits if needed.

Would this kind of language jeopardize the plan's preapproved status?