Much has been said and written about missing or unlocated participants.  But much less has been discussed about what some describe as recalcitrant participants—those who decline to deposit or negotiate the check that pays a distribution.

Imagine this situation.  A profit-sharing plan (with no 401(k) arrangement) permits a distribution after a participant has severed from employment and attained age 60.  The plan requires a distribution after a participant has severed from employment and attained normal retirement age.  After the participant severed from employment, about 40 mailings—including disclosure notices, revised summary plan descriptions, summary annual reports, and benefit statements—were sent to the participant’s address, and nothing came back as undelivered.  After this participant’s normal retirement age, the plan’s administrator mailed the participant a check for her required distribution.  The participant is not missing; rather, the administrator has solid proof that the distributee accepted delivery of the plan’s mailing.  After eight months, the payee has not deposited or negotiated the check.

What steps should the plan’s administrator take next?

What are the big recordkeepers doing with problems of this kind?

Alternate payee fails to inform plan administrator of remarriage, which was to terminate immediately upon her death, her remarriage, or the participant's death. She remarried in 2002. Her new husband died in 2005. She married him in secret,  across the Country as to not raise any flags. We accidentally found out she was married last year. We alerted the pension plans of the modified fraudulent and terminated QDRO. THE JUDGE TERMINATED THE SPOUSAL SUPPORT AS OF 6-5-2002. The plans are telling us good luck with our problem. After all, how would they know if she remarried. She had different lies to different people. She move d 6 times over the past 16 years and never once did she update her marital status. The one plan cut her off on May 1, 2018. The other is still paying her. We get nothing and she is cozy and well off due to her deceased husband's NFL and University PROFESSOR'S pension, along with his SSA. We did find out she changed her SSA over to his. He had a substantial career being he was 82 when they married.

OUR QUESTION

What are our possible remedies? The plans are not claiming liability. The Inspector General is also involved. Do we have her arrested for the abuse of an elder, blind and dementia suffering person? Can the plans recover her over-payment and return it to us? Is there insurance that protects either plan or the payee?

HELP!! THANKS

Good afternoon to all,

Our client, a P.A. we will call Company A, sponsors an active 401(k) plan.  Very soon (like in 2 weeks), Company B is buying Company A.  Company B, not currently our client, sponsors an active SIMPLE IRA plan.

Company A will continue to exist and pay salaries to its owners out of receivables through 12/31.  The staff of Company A will be paid by Company B from 08/15/2018 forward.  The owners of Company A will continue to make deferrals out of their salaries but the employees of A will no longer have any mechanism for making deferrals to A's plan.

Company A, in a perfect world, would have liked for Company B to assume sponsorship of Company A's existing 401(k) plan, open it up to all of Company B's employees, and move forward with as little disturbance as possible.  However, we are pretty sure that Company B can't have a SIMPLE IRA and assume sponsorship of a 401(k) plan in the same year.

Company A's next preference would be to have Company B take over the existing 401(k) plan as of January 1, 2019.  This leaves the employees of Company A without a way to make deferrals from 08/15 through 12/31 since they have no pay coming from Company A anymore after 08/15.  Is that permissible, to just suspend their ability to make deferrals and then have them be able to once again on January 1?  

Has a partial plan termination been triggered by the change of how the employees get paid as of 08/15/2018?  

If it matters, most of the employees of A will still be employed, by B, as of 08/15/2018, but not necessarily in the same jobs they had before.

It should be noted that at this moment we do not know (and neither does our client) whether this subject is addressed in the buyout agreement and we do not know the wishes of Company B. 

Any advice on the correct way to handle this will be greatly appreciated! Thanks in advance.

We would like to offer lump sums to current retirees upon the termination of the DB plan.  The PBGC has no issue with it but IRS Notice 2015-59 indicates that the IRS is going to publish retroactive regs which will eliminate the option under 1.401(a)(9)-6, A-13 to offer lump sums to current annuitants in the event of plan termination.  I've seen various articles which seem to indicate that they don't anticipate the IRS eliminating the lump sum options on plan termination but the notice appears to indicate otherwise.  Anyone have any recent experience with the IRS on this? 

I have a cross tested 3% safe harbor plan.  The plan uses W-2 compensation and excludes post severance and post year end compensation.  There were a few employees who terminated 12/31/2016 but received their final W-2 in January 2017.  I know that they should receiver the 3% safe harbor non-elective for 2017  However, if the profit sharing allocation conditions are you must be employed on the last day of the plan year or work 1 hour of service in the plan year, would they be entitled to the gateway contribution?  Technically they did not work any hours in the current plan year even though they have wages and hours reported on the census. 

Does anyone have a worksheet showing how to discount contributions made back to the beginning of the plan year where there are missed quarterlies.  I know we need to add 5% penalty to the effective interest rate on payments that should have been made as of the quarterly due date to the end of the plan year.  My question is on Schedule SB line 19c, is it ok for the discounted contributions (with the effective interest rate and penalty rate where applicable) to  be less than the MRC as of the beginning of the plan year?

An alternate payee would like an application prepared so that they can start receiving their benefit. Plan Sponsor is ok with this as long as the alternate payee pays for the application to be prepared…is this allowed? Document does not provide much help. 

One of the owners in a business (not yet 59 1/2) has already gotten all the plan assets he can via hardship distributions.  Now he wants access to more, but was told that he can't due to the terms of the plan.  So, now he's decided to "terminate employment."  The plan is that he will eventually be rehired.  Of course, there's no way we can sanction this attempt to circumvent the plan provisions.  Where do I look for guidance on this?

Question: An individual cannot contribute to an HSA once they are enrolled in Medicare. However, if they enroll for Medicare on June 1, could they have contributed to an HSA for the first 5 months of the year in question? If yes, how much could they have contributed? Is the maximum prorated for the 5 month period?

Thanks for any replies.

A former employee/participant requested a rollover be made to their new plan at Great West.  They filled out the paperwork with the address/etc at GW.  However, when the former "platform" John Hancock issued the rollover check, they mailed it to the former employer.  They in turn immediately sent the check to the participant.  It was all done in a period of less than 3 weeks.  The former participant is now "up in arms" about the check not be sent directly to the rollover address.  She is hounding the former employer about it.  Someone told her that it should be spelled out in the SPD.  I thought that was an administrative call.  Any thoughts?

The proposed regulations for the affiliated service group rules exclude corporations, other than professional service corporations, from the definition of a first service organization.  I can find any guidance on whether a subchapter s-corporation is a corporation for this purpose.  Is anybody aware of any guidance or has anybody heard anything about this, perhaps informally from the IRS?  

What are the penalties of starting a Qualified Plan in a year when a SIMPLE IRA is in existence? I know you are not allowed to terminate a SIMPLE-IRA mind year but what if no one elects to make contributions to it?

In 2017 on advice of prior accountant, 2 employee shop, both 50% owners set up a SIMPLE IRA for 2017 and continued for 2018.

Contributions for 2017 were funded.

No contributions have yet been made for 2018 and the 2 owners will be the only eligible employees of the SIMPLE IRA in 2018. They are having a much better year than expected and their new accountant would like to do a 401(k) plan with PS component to maximize deduction.

If they establish a 401(k) with PS what is the affect on the following

1 - The existing SIMPLE IRAs that hold only the 2017 contributions?

2. The SIMPLE-IRA if no contributions are made for 2018?

3. The SIMPLE-IRA for 2018 if contributions are made for 2018?

4. The newly formed 401(k) Profit sharing plan?

I know you are not supposed to have a SIMPLE-IRA and Qualified Plan in the same year but if the penalty is remove the $0 of 2018 contributions along with  the $0 of earnings, is there really a penalty for having both?

CPA for an Attorney who has her own plan (no employees) has set up payroll for the end of each month, but plans to deposit 401(k) each month prior to the payroll date (ie the 20th). Is that okay?

When answering yes to this question, it asks us to enter the MyPAA filing confirmation number.  I didn't do the PBGC filing yet.  How do I get by this short of just doing the PBGC filing?  For 2017, it is a new plan and the PBGC filing was due therefore 90 days after plan effective date, mid-March.  Since we are busy with contribution numbers in the spring, we usually just let the first filing be late and pay the very small penalty (1% of the unpaid premium is peanuts)  Since 6c is new, it is throwing me off.  Any feedback?

Hello, 

If an employee quits and gets rehired as a consultant with no benefits, do he/she have the ability to cash out their 401K? 

Thanks for your help! 

I'm prepare a Schedule H (Form 5500) for a 2017 calendar year 401(k) plan. The plan merged with another plan effective on 1/1/18. The majority of mutual funds were liquidated around 1/28/17 which was the trade date reported by the financial institution & received by the other plan on 1/2/18 which would be the settlement date. How should these transferred plan assets be reported on the 2017 Schedule H?

All of the guidance on the IRS website refers to "50% of the participant's vested account balance" when calculating the amount available for a participant loan.  When you are calculating the amount available for a second loan with a first loan outstanding, do you include the outstanding balance of the first loan in the "vested account balance"?  It appears from the example in the EOB that you should include the outstanding balance of the first loan but wanted someone else's opinion?

Thanks

Just took over a new plan and haven't seen this in a long time - the employer reimburses investment fees through thru the trust instead of paying directly.  I believe this is considered a contribution when they do that.  Does anyone have a cite that clarifies this? 

Rosemary C. Raymer, ERPA, QPA, QKA

Prospect sold his company (s-Corp) effective 2/1/2018 - strictly asset sale.

Employees were terminated 12/31/2017 and were not hired by the purchaser.

Remaining employees are seller and spouse, no common law employees

As of 2/1/18, it is the same company but with a new name, employer ID# same.

Seller wants to start a defined benefit plan. Since the corp EIN  the same, is it feasible to start the plan 1/1 under the old corp, then change sponsor and name of plan 2/1?

Or make effective date 2/1 and prorate the salaries 12/11ths and have a short year 2/1-12/31/2018.