Hi all - I have seen threads discussing the issue of amending a safe harbor plan's definition of compensation mid-year.  It seems people are in agreement that you cannot amend to exclude Compensation mid-year because this would reduce the safe harbor contribution.  I have a client that would like to exclude auto allowance pay starting 7/1/2019 (a calendar year plan). 

Notice 2016-16 prohibits the following change-

• A mid-year change to modify (or add) a formula used to determine matching contributions (or the definition of compensation used to determine matching contributions) if the change increases the amount of matching contribution, or to permit matching contributions.  This type of change is possible if certain conditions are met.

If my client amends to exclude auto allowance mid year, it would decrease the safe harbor match for the remainder of the year (they allocate each pay period).  The above only prohibits a plan from an amendment that would increase the safe harbor contribution.

So, can I amend mid-year without it having to be retro to 1/1/2019?  If NOT, what am I missing?

Thanks,

Kathryn

Can my employer pay more for a co-workers health insurance, who is married, than for my health insurance as a single person?

My employer pays 100% of my health insurance, but they also pay 100% of my co-workers' family health insurance policy (which covers my co-worker, his spouse and his children).  We have the same job, with the same job title and responsibilities.  But I believe that since family policies are likely 3-5 times more expensive than a single policy my co-worker is receiving a larger dollar benefit based on the cost of his family policy vs my single policy.

Is this legal, or is it a discriminatory benefits policy based on marital or family status and not a bona fide job-related classification?

Expanded Self Correction Program - EPCRS Rev. Proc. 2019-19

Only glanced at it, but early Christmas on Easter from the IRS??

It seems to me this plan sponsor is avoiding FICA tax.... The plan sponsor has a job-defined pay scale and adds a percentage to each employee's wages based on years of service. This added percentage ranges from 2% to 16% of their job-defined wages.

For example, an employee may have an annual job-defined wage of $40,000 plus 10% ($4,000) based on the employee's years of service, for a total annual salary equal to $44,000.

There is a salary deferral arrangement under their plan. There is also an employer non-elective contribution. There are no key employees and no hce's. Each employee's salary is determined as of the beginning of the plan year. The plan sponsor is a church.

Each year, the plan sponsor allows each eligible employee (separately) to determine whether their percentage of pay based on years of service is paid as wages or whether it is deposited into the plan as an employer contribution fbo the employee.

Thus, the plan sponsor is effectively reducing an employee's annual wages for FICA tax purposes based on the employee's election regarding how they are to receive compensation for a portion of their annual salary.

Would you agree?

And should not these "employer" contributions be considered employee salary deferrals?

The plan excludes "seasonal" employees. If an employee goes from working 1000 hours a year and being eligible to then working less than 1000 hours and becoming labeled "seasonal", do they then become ineligible to contribute? If so, upon what day are they considered ineligible? For example, the life guard worked 1001 hours in 2017 and entered the plan on 1/1/18 (semi-annual entry dates), but then the next summer he only worked 600 hours. Can he become ineligible on 7/1/18, or do you have to complete the year in order to see total hours and then he becomes excluded on 1/1/19? 

So the DOL Regs, and EOB both say essentially "All participants must receive the SAR."  

We have always interpreted this to mean all active/eligible employees plus any terms with balances determined as of the last day of the plan year.

But I can;t seem to find anything that says that excplcitly.  What do people think?  Do you know of anything more specific? 

This may be too simple, but if for 2019, an individual over age 50 contributes $6,000 to his roth IRA, can he still do $25,000 to the 401(k) plan as either a pre-tax 401(k) contribution or as a Roth elective deferral to the plan?

Thank you

Hello:

I worked for a company for 12 years and was a participant in the profit sharing plan (100% employer funded). The vesting period was 1 year for 100%.

I left the employer a few months ago. I recently received notice that I received a profit sharing plan payment for my work in 2018.  

The plan provider has changed since I left, and my new provider shows that I am 0% vested. 

I believe I am entitled to receive the distribution because I was 100% vested at the time of my departure. I would like to roll this money over into my new retirement account.

Can anyone provide some helpful information on this?

Thanks!

We had a new earnings code used for  group of associates on our last payroll that was not setup correctly as 401k eligible.  It was caught after 1 payroll and will be corrected on the subsequent run.  So while everyone who elected a deferral had their deferral calculate on part of their earnings, there were some whose contribution did not calculate on all of their earnings due to this code.  For example, base salary $500, new commission code $100, 10% deferral should have been on $600, but we took on $500.00

Proposed correction method is letting everyone who was affected know that they can increase their deferral to make up for any part on their end, and let our match true up catch anyone who missed a match contribution.  (safe harbor plan, match contributions every payroll with true up at year end)

Comments?  We at first thought we had to do QNEC on match, however, would get double match at true up time.

1) Does family attribution apply with RMDs?  In other words, a 70.5 year old man is an employee of his wife's company.  Is he considered "more than 5% owner" for RMD rules?

2) If someone starts taking RMDs, and later discovers she doesn't have to (never should have started), does she have to keep taking RMDs each year?

Thanks all.

Client's plan sets normal retirement age at 59.5.  We have 6 active employees, all over 59.5, who are invested in the guaranteed rate investment option in the plan.  Per the group annuity contract, if a plan participant takes a non-benefit sensitive withdrawal from the guaranteed rate option, the withdrawal is subject to a market value adjustment.  The market value adjustment formula is punitive. 

The annuity contract specifies that "Participant retirement, as defined in the plan document" is considered a benefit sensitive withdrawal.  The plan document also allows in-service withdrawals at 59.5.

I'm interpreting this fact pattern to say that if I recommend to these 6 participants that they roll over their moneys in the guaranteed rate option to an IRA, that they should all be able to do so without imposition of the market value adjustment.  And they don't have to retire to do so, they can continue working and contributing to the plan.

Is my interpretation defensible?

Interesting question, I think.  (Maybe not!)

In determining HCE status, Employer does NOT make the top-paid group election for its five 401(a) plans.  It is desirable for coverage testing that it not make that election.

Does the "consistency" requirement of the top-paid group election rules mean that the Employer cannot make the election for any of its non-401(a) plans where HCE status is relevant?  In this case it is for a 129 plan. 

Hi- I am at the point I am going to need to take a $8000 401k hardship withdrawal to pay medical bills. I will be paying a penalty and taxes on this  My question is, can I then deposit the money into my HSA account and reimburse myself tax free for these medical expenses?

A plan sponsor has been notified by Social Security that 2 of its employees have invalid SSNs. These 2 employees have worked for the plan sponsor for several years, W2s have been issued, and both are Plan Participants.  This recent notification has come as a surprise to the plan sponsor, given until now there has never been a notice of any kind. The plan sponsor asked each employee if the SSN being used was provided in error and if either has another SSN (either due to typo or ascertaining a valid SSN) - to which both said the SSN the plan sponsor has on record is correct and that they have filed tax returns... the plan sponsor is still trying to get to the bottom of this.

Qs: If either or both are in fact illegal aliens using invalid SSNs (stolen or otherwise), are they entitled to their plan accounts? If so, what taxpayer ID number would the plan need to report on 1099R when distributed, or would the Plan use the one on record currently even though it is known to be invalid? If not, is it a forfeiture or is there some other action necessary?

Thank you for any insight anyone can share on this matter.

 I have a client whose SEP Plan was recently audited by the IRS resulting in corrective contributions to employees.  As part of the closing agreement, the IRS wants the client to adopt a prototype SEP plan document and also provide notice to employees of their benefits.  Anyone know where I can find a sample notice letter?  Just want to make sure I don't leave anything (important) out.  Thank you!

Need to file 5500s back to 2002 for a small plan.  Have a few questions.

Will all the filings appear on EFAST2 for public viewing?

If so, how should the Schedule P be handled since it requires a signature and will be attached as a PDF?  Should it be treated as an SB an only have the fiduciary's initials?

Participant A is age 77, so he has been taking annual RMDs for 7 years. In his first RMD year, he took out his RMD in December. Every year since then, we have advised taking his RMD in December and not any earlier to satisfy the "generally consistent" annual annuity distribution that he would be receiving from an insurance company if his annual annuity came from such as source.

Now, he is really pressing us to allow him to take his RMD earlier in the year. Can we make some sort of one-time adjustment to allow this? He would like to switch to taking his annual RMD on March 15th every year.

Let's say the plan failed ADP testing and a participant has both Roth and Traditional sources. If the plan document does not state the order in which the corrective distributions should be done, how would you process the corrective distributions? Would you process it proportionately from each source or would you start with Traditional source first and then do Roth source if the amount exceeds Traditional source.

Thank you. 

So we have and existing 401(k) plan that wants to add a SHNEC, this can not be done mid year?  I assume it needs to be started January 1 for a calendar plan year.

Is there a 30-day notice requirement for simply adding a new fund to a 401(k) lineup, not mapping any assets to it?