I left a company in September 2017.  Their practice was to pay Safe Harbor non-elective payments to 401k plans the year after service.  I contacted them recently to find out when the contribution would be made to my 401k plan for my 2017 service and they told me that no further contributions were expected to be made into the account. So essentially I received no contribution for my 2017 service.  My question is, what recourse do I have in this situation?  I checked my SPD and the only verbiage I could find on the payment is the following:

"Your Employer will make Safe Harbor Nonelective Employer Contributions to all eligible Participants who are Non-Highly Compensated Employees if you were eligible to participate in the Plan during the Plan Year.

These contributions satisfy certain Internal Revenue Code requirements and eliminate the need for the Plan to perform certain non-discrimination annual tests. You will be 100% vested in these contributions when made. These contributions may be distributed under the same circumstances which allow your Deferral Contributions to be distributed (i.e., death, disability, separation from service, and termination of the Plan without the establishment of a successor plan) but you may not request a hardship withdrawal of these contributions. In addition, prior to the beginning of each Plan Year for which this election to make Safe Harbor Nonelective Employer Contributions continues to apply, the Plan Administrator will provide written notice to you describing your rights and obligations under the Plan and informing you that the Plan may be amended during the Plan Year to provide that the Employer has elected to make a Safe Harbor Nonelective Contribution of at least 3% to the Plan for the Plan Year."

What are annual requirements necessary to qualify for Safe Harbor Nonelective contributions?  I would think service through September should be sufficient.  Is it a % of the year worked, something else?

TIA for any help.

Let's say a participant contributed over the 402(g) limit in 2017 to the plan and the error wasn't discovered until after April 15? How would this issue be corrected?

My understanding is that if the participant exceeded the limit at just one company, that means that the plan is at risk of disqualification and the excess needs to be distributed even if the participant is not terminated. Is that correct? Also, I read that the 10% penalty would apply as well as the 20% Federal tax rate. How would that be coded? Still code "8"?

Thanks.

Complete brain freeze here...

The calendar-year safe harbor plan has a 12-month elapsed time eligibility to defer, and the owners hired their daughter in August 2017... who deferred $5K in 2017 (and more in 2018 so far, of course).  We got the 2017 annual data yesterday.

Going "by the book", what's the right ordered solution here; what is violated "first"?  My first thought is that she violated her 'personal 415 limit' and that it has to be distributed to her and is taxed in the year of distribution, but that seems way too easy.  Also, I'm remembering something about double-taxation under 402(g)...?

Thanks.

We have a plan that was part of a controlled group.  As of 6/28 it was spun off and is now a stand-alone plan.  How do we do testing for 2018?  Do we have to do half the year as controlled group, half as a stand-alone?  Or can we just test based on how everything sits as of 12/31/18?  Does anyone know a section of the code or regs that deal with this issue?

Thank you in advance.

If a Top Heavy Plan has only deferrals, safe harbor matching contributions, and prevailing wage contributions, does it lose it's free pass?

I know that it gets a pass if only deferrals and the safe-harbor contributions are made, but does the prevailing wage contributions blow that up or is there another exception for those contributions?

Now, what happens if the eligibility for prevailing wage is immediate and the other contributions are 21 & 1 YOS? Usually that would blow it up too, but again I don't know if there is an exception for prevailing wage contributions. 

Thanks in advance!! 

Plan year runs 1/1/17- 12/31/17. HRA is terminated 4/30/17. Must a Form 720 be done? Are fees based on the period 1/1/17-4/30/17?

I have a 401k plan that is asking if they can merge into the plan of another employer.  There has been no transaction between the 2 companies.  They are still separate ongoing entities.  The employees in my 401k plan have all had their employment terminated with the plan sponsor.  All of these employees were hired by another company and now the 2 companies are asking if the plans can be merged.  

the language in the document doesn't specify that a merger may only take place as a result of an acquisition.  What about the participants that terminated?  If we are allowed to merge, do they have to be offered an opportunity to take distributions since their terminations occurred before any merger?

Thank you 

Detail:  Traditional 401(k) plan that's been in effect since 2006.  For the first year, the plan was filed using the correct EIN.  The following year (and each year since) the plan was filed using an incorrect EIN (off by one number).  They even received a delinquent filing notice from the IRS back in 2007 due to the incorrect EIN situation.

What would be the correction here?  Would the plan need to:

1)  Amend all 5500s back to 2007?  If yes, how would the 2017 filing be handled?  Would they need to indicate a "change" in Q. 4 on the Form 5500, indicating a change in the name and/or EIN of the plan sponsor?  (4 If the name and/or EIN of the plan sponsor or the plan name has changed since the last return/report filed for this plan, enter the plan sponsor’s name, EIN, the plan name and the plan number from the last return/report:)

2)  Just indicate the "change" in Q. 4 and move forward, not amending any past filings?

3)  Any reason to use DFVCP in this situation?

Any other thoughts/suggestions would be greatly appreciated!!

Profit sharing only plan (cross test), sole prop with 3 participants all receiving contribution of $11,000k (their total comp is $220,000). Owner's Schedule C line 31 is $265,000 before employee contribution. I come up with 1/2 se tax $11,287, so net comp of $242,712 before owner contribution reduction.

Could the owner do a maximum $54k or is the maximum around $48,540? I seem to be getting the 25% deductible limit of participating compensation and owners 20% deductible limit which goes on their personal 1040 crossed up right now. Thanks in advance.

403(b) plan amended, effective 7/1/2018, to add involuntary cash-out provision of distributions of amounts between $1,000 and $5,000, to be rolled over over to an IRA.  Would this provision only apply to participants that terminate on or after 7/1/2018, or could it also apply to participants that terminated prior to 7/1/2018?

The Plan Sponsor called me about making a distribution for a deceased participant.  Her boyfriend, who is listed on her DOB as the primary beneficiary, has been arrested and charged with her murder.  He is in custody awaiting his trial.  The deceased participant's family is asking about getting a distribution to help with funeral expenses.   .  I do know there are secondary beneficiaries, but I don't know who they are at this point.  Common sense would tell me that no distribution should be made until the boyfriend is either proven guilty or non-guilty.   If guilty, surely he would forfeit his right to the funds??  However,  I am not a lawyer, so would love to hear from any of you who have dealt with a similar situation.  

We have applied for QSLOB status.  Unfortunately, we were unable to pass the gateway test with respect to matching contributions.  Our service provider told us that we can make corrective contributions to Non-HCEs to make us pass the test.  We have been told the corrective contributions need to be made by October 15.  I know October 15 is the date the QSLOB filing is due, but I can't find any support that corrective contributions to pass the QSLOB gateway test have to be made by October 15.  Does anyone know where that date comes from?

I was thinking years ago there was a process that a Plan could do to eliminate the QJSA provisions (joint and survivor annuity) when the monies sources do not require it.  I searched over the weekend and came up blank.  Can someone help me with a cite?  Or am I dreaming.

thanks in advance

I suppose the maximum tax rate on the federal level for reversions to a corporation is now 71%.  Is that enough to re-think reversions?  

2018-7-22 the ESOP RMD Question

The client is a participant (employee) in a ESOP which holds 100% of the "employer securities" of the Plan Sponsor corporation (employer).

A. The client is almost 70 years of age, is currently employed and plans on continuing to work for the corporation until age 75 (W-2 income). The client-employee is presently inquiring regarding possible approaching RMD requirements and distributions.

1. We are informed that if the client-employee continues to be employed beyond age 70 1/2, then RMD distributions are not required until retirement.

2. We are also informed that if the client-employee is a "5% owner", then the exception deferring RMD distributions until retirement may not apply.

3. We are also informed that for purposes of determining the "5% owner" rule of the plan sponsor, the employer securities held by the ESOP are not used in determining the "5% owner".

QUESTION 1: Is this correct? And do you have any legal authority or citation on this issue?

B. Under the terms of the ESOP plan, the client-employee-participant can be offered a partial or lump-sum distribution of the employer securities (e.g. annually) which, if elected is distributed to the participant by the ESOP as employer securities under a "repurchase-buyback" provision required by the plan sponsor corporation who buys back the distributed shares resulting in the retirement income to the participant ( 1099-R).

QUESTION 2 : Can the client received both W-2 income and 1099-R distributions beyond age 70 1/2 as long as he is still employed?

Thank you

tdslaw@cox.net

Hello everyone,

I am so confused and could use some assistance.  I had a 401K balance of $58K but have an outstanding loan of 10K so the balance that shows up is now 48K.  I've been paying it back and all that. I took it out to pay high interest credit cards.  Anyway I have just resigned.  Now I know I will have it taxed as income and all that plus a 10% penalty.  My question is regarding the balance of the 401K.  It is 48K correct?  They won't reduce it by another 10K to "repay" the loan will they?  It seems like a silly question but I'm not good at this.

Thank you.  

Are there any restrictions on what types of investments can a money purchase plan invest in?  Can you loan money out of the plan if it's for investment purposes and not for extraordinary circumstances? 

Thanks

Scenario: The safe harbor notice went out at the correct time prior to 2017 (November 2016). The information in the safe harbor notice was correct within the notice EXCEPT the notice was to apply to 2017, but the notice stated that it "applies to the plan year beginning 1/1/2016." 

In all other ways, other than the Plan Year identification, the information was correct.

The questions are:

1) Can this be considered a typo/mistake of fact so that 2017 can be tested as a safe harbor plan?

2) Should this be self-corrected by providing all the participants who should have received the notice stating for plan year beginning 1/1/2017 with a corrective employer contribution? Most of the employees are already making elective deferrals.

Thank you,

congress introduced a few bipartisan bills that could have an impact on NDT- anyone had a look yet- specifically 

S3221 Retirement Felexibility act

this one specifically is designed to incentivize the using ACA and auto escalation and provide some flexibility on SH contributions - anyone have thoughts on this? i was curious as to the flexibility of SH contributions to satisfy testing- it appears to look similar to QACA - see below

EC. 2. ADDITIONAL NONDISCRIMINATION SAFE HARBOR FOR AUTOMATIC CONTRIBUTION ARRANGEMENTS.

(a) In General.—Subsection (k) of section 401 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

“(14) SPECIAL NONELECTIVE AND MATCHING CONTRIBUTION RULES FOR SMALL EMPLOYERS.—

“(A) IN GENERAL.—In the case of a cash or deferred arrangement maintained by an eligible employer (as defined in section 408(p)(2)(C)(i)), for purposes of paragraph (13), the arrangement shall be treated as meeting the requirements of subparagraph (D) thereof if under the arrangement, the total elective deferrals (as defined in section 402(g)(3)(A)) with respect to any employee do not exceed an amount equal to the applicable percentage of the limitation otherwise applicable under section 402(g).

“(B) APPLICABLE PERCENTAGE.—For purposes of subparagraph (A), the applicable percentage with respect to an arrangement is—

“(i) 40 percent in the case of an arrangement which does not meet the requirements of paragraph (13)(D) and is not described in clause (ii) or (iii),

“(ii) 60 percent in the case of an arrangement which is not described in clause (iii) and which would meet the requirements of paragraph (13)(D) if—

“(I) ‘equal to at least’ were substituted for ‘equal to’ in clause (i)(I) thereof,

“(II) ‘2 percent of compensation, and such matching contributions meet the requirement of subsection (m)(11)(B)’ were substituted for ‘6 percent of compensation’ in clause (i)(I) thereof, and

“(III) ‘1 percent’ were substituted for ‘3 percent’ in clause (i)(II) thereof, and

“(iii) 80 percent in the case of an arrangement which would meet the requirements of paragraph (13)(D) if—

“(I) ‘equal to at least’ were substituted for ‘equal to’ in clause (i)(I) thereof,

A 401k plan has a safe harbor design using matching contributions.  The plan is not top heavy.  There are no profit sharing contributions but there are a small amount of forfeitures to be allocated to participants who work at least 1,000 hours and are employed at the end of the year.  New comparability (with each participant as a group) is normally used to allocate the forfeitures, however, doing the average benefit test and including the deferrals and match produce results much worse than if the forfeitures were allocated on a comp-to-comp basis.  If the forfeitures are allocated on a comp-to-comp basis, would the ABT still be needed to be done?  Can this type of allocation be considered nondiscriminatory?