Participant has informed my client that they are over the 2018 402(g) limit because they did the maximum deferral at their other job.  Participant entered my client's plan as of 10/01/2018 and deferred a small amount.  The participant has requested this small amount of contributions be refunded as excess.   

As far as the 2018 ADP testing in my client's plan,  do I need to remove the deferrals for this person from the testing?

I know that I would have to remove them if the overage was all in my client's plan, but am unsure of the process when there was no excess, only the request of the participant.

Thanks in advance! 

Hi.  I am sorry if I am asking a question in the wrong place, but I have been trying to find info and can't seem to get it. You all seem extremely knowledgeable. My husband is in a construction union in NY. They have what I think is a VEBA.  I searched online on ProPublica and it says that it is defined as a Voluntary Employees Beneficiary Association with a NonProfit Tax code Designation of 501(c)(9). I think money is paid into the account by the employer. Reasons withdrawals are allowed are listed below.

I am wondering if the union member should be paying Federal and State income tax for all withdrawals, especially for medical withdrawals.  We have had to withdraw money for very sick and disabled children. The withdrawals were for things like coinsurance,  copays, special education schooling, speech therapy, etc.  Those withdrawals have been reported on a 1099-misc.  Is this correct?  Is there a way the union could have this set up so union members would not have to pay income tax on medical withdrawals? 

Thank you for your help.  This is not my area and I can't seem to find anyone at the union fund office who has a clue.

Withdrawals can be made for the following reasons:

1. DEATH OF PARTICIPANT (ATTACH CERTIFIED DEATH TRANSCRIPT)

2. UNEMPLOYMENT, DISABILITY OR COMPENSATION (PROOF OF PAYMENT FOR PERIOD CLAIMED)

3. HOSPITALIZATION, MEDICAL OR DENTAL BILLS NOT REIMBURSABLE (SUBMIT BILLS)

4. ADDITIONAL ASSISTANCE BENEFIT (PROOF OF ECONOMIC HARDSHIP - ATTACH STATEMENT)

5. SEVERANCE BENEFIT (SUBMIT PROOF YOU HAVE WITHDRAWN FROM THE INDUSTRY)

Company creates digital media for distriubtion on websites. Custoemrs pay a subscription to watch a tutorial on line regarding how to do a particular task.  Let's say for example it was cooking.

Does that sound like it would be a service business?

Employer is negotiating with a prospective new hire.  Is it possible to amend a prototype document to allow this individual to enter immediately so long as the individual is not or will not become an HCE?  It is a safe harbor 401k.

Unusual situation. Suppose safe harbor match, with a per payroll match. Deposit requirement for match on deferrals made in a given quarter is therefore by the last day of the following quarter.

Reasons don't matter, but payroll system is such that for most employees, the match is actually deposited per payroll. For other employees, system won't handle it, so deposit of their safe harbor match is proposed to be made monthly or quarterly. 

This seems to me to fall under the "other right or feature" category in 1.401(a)(4)-4(e)(3), and therefore subject to BRF testing. And so, as long as these employees represent less than the 50% safe harbor percentage, it would pass. Other opinions/thoughts?

We are planning to upgrade from Relius version 2018.1.0 to 2018.2.0 but we are facing some challenges with the GetPlanData call in Relius Connect. It is failing and we do not know why. It was working in 2018.1 but is not working in the 2018.2 test environment.  Has anyone else experienced this problem? If so, would you share details of the resolution?

Thanks in advance for your response!

A very small SH 401(k) plan has five eligible participants.  Two are deferring, one HCE and one NHCE.  Two other HCEs are not deferring, and one (now deceased) NHCE did not defer.

In 2018 the plan sponsor made the SH match every pay period (by choice - not required).  The NHCE who was deferring received a few dollars too much match as of the end of the year.  The extra amount equals 0.07% of the NHCE's annual compensation.

So there is what amounts to a miniscule profit sharing contribution made to one NHCE which causes the plan not to meet the exemption to the top heavy rules. 

What are the options for addressing this?

Thanks!

My client has three owners, and one of them who owns more than 5% has a son-in-law working there.  I don't think he (SIL) is attributed the  FIL"s ownership, but wasn't 100% sure.  The daughter is not an employee.  

Participant enrolled 2 employees early in 401k and plan is 3% non elective safe harbor.  Do they refund 401k or can they make 3% non elective safe harbor and keep 401k.  This is only employer contribution to plan.

Plan A and Plan B (profit sharing plans) are in a controlled group (ok, their respective employers are).  I am running rate group testing with cross-testing for both plans.

Plan A has an NRA of 62 and Plan B has an NRA of 65.  I can see in the regs (1.401(a)(4)-12) where the rule is that you use the latest NRA available (in this case 65) for testing, but the language of the reg seems to all speak in the context of one single plan.

Can somoene point me to the language that you would apply that definition in the way I have described when the testing is being performed at the controlled group level for 2 separate plans?

Small company with a 401(k)/PS plan as well as a pension plan. 

Pension plan is written as an offset so that 100% of the NHCE benefit is provided as PS in the defined contribution plan. The two owners (husband and wife) have their benefit in the DB. 

Would this plan be PBGC covered? It does not meet the small service professional exemption. 

Would the answer be different if it wasn't written as an offset, but as a stand alone plan that is tested with the profit sharing plan? Assuming 401(a)(26) passes of course. 

I have a client that acquired a company with a SIMPLE and we are now outside of the transition period and the SIMPLE was not terminated.  There is no other 401(k) plan in place yet, but the client wants to start a 401(k) plan as they were not a part of the SIMPLE.  

For 2019, could the employees (only 4) of the acquiring employer just begin contributing to the SIMPLE IRA?

Alternatively, since we are in January, very few contributions have been made so far to the SIMPLE IRA.  Should I suggest the client go through VCP and claim an Employer Eligibility Failure for 2019 and state that all contributions cease the day after the NEW qualified plan is signed into place? 

Is that it?  Will the IRS just approve this or will the January contributions be subject to repercussions as a result of the SIMPLE becoming disqualified?

Any other suggestions greatly appreciated!

Plan sponsor has an existing ERISA plan document for its self-insured medial and RX drug plan. Plan sponsor endorses multiple fully-insured ancillary benefits (LTD, STD, AD&D, etc.) and never adopted a wrap document for such benefits. 

It has come to our attention that plan sponsor had been filing one Form 5500 for its "welfare program" (combining self-insured plan with fully-insured benefits) without a plan document properly "bundling" all benefits. 

As I see it, Plan sponsor has the following options:

1. Maintain 1 plan: Adopt a mega wrap document that bundles both the existing self-insured medical plan with the fully-insured ancillary benefits 

2. Maintain 2 Separate Plans: Wrap the fully-insured ancillary benefits under one mega wrap document and maintain the existing self-insured medical plan as a separate document. 

3. Amending the existing plan document for the self-insured medical plan to include the fully-insured ancillary benefits. 

My gut tells me to go with option #2 (thereby maintaining two separate plans...the existing self-insured medical plan document and a wrap for the fully-insured benefits) as I feel there could be complications with bundling an existing ERISA plan document with ancillary benefits under one plan. 

Any pros/cons to either of these approaches? Thank you! 

We have a small segment of our new comp plans that insist on making profit sharing deposits during the year even though they are cross-tested and even though we have told them repeatedly in writing that this is a Bad Idea and a Royal Pain.  Mostly, they give a small percentage (~1.5%) to each staff employee with each payroll to approximate the gateway minimum and none to the owners, so we figure that even if questioned, it could be shown that the deposit is non discriminatory.  Or they give the 3% safe harbor to each staff employee with each payroll but don't for the owners (though that's usually only for sole props and partnerships, which makes sense).

Today, someone here had the idea to ask if the receivable deposit, if tested on it's own, would be discretionary in favor of the HCEs.  Sure, if you look at all the information for the entire year it passes testing, but if you look at that one after-the-end-of-the-year deposit, it's almost all for the HCEs and would fail miserably.

Looking at this on the "receivable" is something I had never considered before.  Is this an even bigger issue than I realized?

Client started with 401k in 1986 (001), then merged into ADP MEP (filed 5500 on ADP EIN) then now wants to spinoff to 401k.  Is spinoff document 001 because they started with 001 prior to merger or 002? does predecessor service or prior year service apply in this case?  Is original effective date 1986 or 2019? 

One of our clients received a call from the "DOL" to the effect of claiming that their plan is "not recognized" by the DOL because they're not in compliance with 408(b)(2), and they'll call back in a week to confirm they've taken appropriate actions. The client says it sounded like a robot.

It seems obvious this is some sort of scam (like the IRS, the DOL would only initiate contact by mail, and they have no way of knowing if a plan complies with 408(b)(2) unless they audit it). If they call again, we're asking our client to request a return phone # and agent ID # to call them back with.

Has anyone else experienced this, or have any insight?

Another client recently received a letter from an advisory firm trying to scare them into hiring them for a "free" 408(b)(2) compliance review.  

Thanks.

Have an  antique integrated DB plan of .75% of average comp +.50% of average comp > $10,000, max 35 years.

Sponsor wants to increase benefits by not more than 10% while keeping it simple and maintaining safe harbor status.

Thinking about amending the plan to add to the existing formula effective 1/1/2019 2% of average comp x Years of service prior to 1/1/2019 limited to 5 years.

This provision seems to violate the 133% rule.  Or is it ok because it is due to an amendment and would be ok for every year of service starting 1/1/2019?

If not ok, any other ideas (within the objective of a safe harbor formula)?

Does anyone have any idea of the percentage of plans that have 3(38) vs 3(21)?

Thanks!

Has anyone ever heard of a DB plan not having trustees? I'm being told only 401k and 401a plans require trustees.  Is that true? and if so, what is the authority for this?  Thanks

Plan facts:

3%SH to all

discretionary PS to all

3 HCES, 3NHCEs, young owner, mixed age staff

each participant is in own allocation rate for PS

Can the employer "cherry pick" a particular participant - who happens to be youngest and new ppt mid-year w lowest eligible pay - such that his own RG passes (a)(4)? The remaining NHCEs will receive at least GW minimum. Doing this passes all (a)(4) testing, 410b easily.  My hesitation is because of perceived bottom up allocation... would it be better to "cherry pick" an existing but younger ppt who earns $100k (obviously more expensive to do so)?

FYI, the other 2 HCEs are receiving the 3% SH plus 1% PS, their indiv RGs pass easily.

Thank you.