Does anyone have any experience with using Davis-Bacon / Prevailing Wage fringe amounts to fund cash balance plans for employees?

Here's the setup - Sponsor has about 100 employees, and probably 75% of them work Davis-Bacon jobs, and they get serious fringe amounts.  Like, amounts between 10k and 30k per year are not uncommon.  We use them in their 401(k) test, for instance, and the representative contribution rate for targeted QNEC purposes is a very nice 16%.

Anyway, the sponsor (or at least his CPA) was intrigued by the idea of a cash balance plan to get the owners (in their 50s) significant plan amounts.  (Actually their DC plan is standalone 401k except for the Davis-Bacon amounts.)

They don't even need all the D-B amounts in their ADP test, which would allow us to use still a bunch of them for 401(a)(4) testing between two plans.  (DC plan would have individual allocation rates, basically being the D-B amount.)

Could they steer some of those prevailing wage fringe amounts into a cash balance plan design?  Figure we'd give most staff people a 3% of pay contribution credit and a 5% interest credit each year.  For the majority of the folks, their fringe amounts would cover either or both of those additional accruals.  

Any issues preventing this?  Is it really different from funding a DC plan's allocations with the Davis-Bacon amounts?  I could imagine any particular labor regulatory board not being thrilled with funding their interest credit that way (although is that even necessarily true?), but I'm not sure I see much difference between putting $5,000 of Davis-Bacon money as a contribution credit into their DC account versus funding a cash balance contribution credit for them.

Am I missing something (obvious or not)?  Plus, the Davis-Bacon amounts are currently in the low twenties as a percentage of 404 payroll, so perhaps a CB plan alleviates some deductibility concern, too.  (And would be PBGC.)

Sponsor figures if he's got to contribute the 3% on top of what they're already going to get for their fringe, it's a dealbreaker, but if he can split the fringe between the two plans (required amount to CB, the rest as DC), he'd be more willing to proceed.

Thanks.

--bri

  If you are filing a final 5500 EZ return (because the plan was closed and the assets distributed), but this is also your first return (the assets never exceeded $250,000 so there was no need to file),  do you check both boxes for the first return (A (1)) and for the final return (A (3)) on part 1 of the 5500 ez?   Or do you check only one box, either the first return or the final return?     Thanks. 

I have a plan that is terminating that also requires employee contributions.  As we know, ee contributions are always 100% vested and upon plan termination all benefits are 100% vested.  The total benefit for the plan is 2% of average comp (which includes the ee contributions).

Assuming 5 year cliff vesting, I have a participant who terminated in 2008 with 2 years of service who had made employee contributions.  Upon plan termination in 2018, the employee contributions remained in the plan.  Do we have to restore the 2 years of service accrued benefit to pay out upon termination or do we assume that the nonvested portion was paid out since we have a BIS?

If a plan with an NRA of age 65 is amended to allow a fully vested participant to take at 62 in-service withdrawals of the participant's "full accrued benefit," according to informal guidance from the IRS, that could create an early retirement subsidy.  The reason is the participant would receive, at least under the terms of the plan,  the same pension without reduction for early commencement that the participant would receive at age 65.  Does this same analysis apply for the modern CB plans? 

I know the prior guidance used to say that the interest credits up to the NRA were part of the participant's "accrued benefit" (or interest credits up to distribution, if taken out earlier)  Some say that at any given time the "accrued benefit" of a CB plan is the hypothetical account balance at that time.   

I'm not sure how all this works together in a CB plan post-PPA.  My question is whether a plan amendment that allows participants at age 62 to take their vested hypothetical account balance in-service would create an early retirement subsidy.  

My ex husband and I were married for 17 years he worked at his job for 22 years and was still employed at time of death. Am I able to draw his 401k. He had 1 daughter and i am sure she was beneficiary over everything. Can someone please help me or give me information on where to start. I live in Florida. Am I eligible for his 401k he was never remarried.

Dave, has there been a change recently? The link I have used to access unread messages now returns a very difficult to read screen. 

A t/x client just acquired another tax exempt that appears to have 3 different 403(b) arrangements with 3 different vendors.  2 of these arrangements have 1-3 participants each and individual annuity contracts are involved.  The arrangements were frozen before 2004 and are non-ERISA plans.  It appears (although I am not certain of this) that plan documents were not required for these arrangements as of 12-31-09.  The question is how does the client terminate these arrangements since there is no plan to terminate?  If the annuity contracts are between the employees/former employees and the contract issuers does my client need to do anything with respect to these arrangements?  The contract issuers are saying that the employer needs to take no action - are the correct?

The last arrangement had employee contributions made to it after 2005 and involves custodial accounts.  There is no plan document (although there may be a custodial account application form) and I'm thinking a VCP is necessary to create a plan document retro to 2009.  Am I off base here?  The mutual fund company holding the custodial accounts doesn't maintain a pre-approved 403(b) plan and generally of no assistance.

Suppose a greater than 5% owner has been taking annual payments of his RMD on 4/1 of each year. His most recent "RMD annuity payment" from the plan was 4/1/2018.

Suppose the plan terminated 8/1/2018 and his benefit is distributed 9/15/2018. Is he required to take another RMD upon distribution even though his next installment is not until 4/1/2019?

Thanks.

We are trying to create a custom RMD report that will list Participant, SSN, DOB, DOT, 5% Owner (Y/N) and Account Balance.  I am using one of the 70 1/2 Detail reports and I've added the fields for DOT and 5% Owner. 

I've inserted a sub-report to pull in the ending account balance, HOWEVER, it is pulling in information that is not in Relius.  In my subtotal there are funds reporting a balance that have NO balance.  It is including the correct balance for the funds that do have a balance, but NO idea where the other numbers are coming from!!!

Is this possibly a database issue or a subreport linking issue?  I don't have to use the subreport if any has suggestions for getting my ending balance onto the report.  I am a novice (which is generous) but nothing I've tried is working - with or without the subreport. 

PLEASE HELP!! :)

Client elected to make a matching contribution for this current plan year.  The prior plan year, the client chose not to contribute a match. 

Plan uses prior year testing.  I believe that since the prior year match rate for NHCEs was 0%, all match received by HCEs this year needs to be returned due to a failed ACP test.  Do you agree?  Note that this is NOT the first year of the plan's existence, nor the first time that the client is contributing a match.

Employee A was hired on 12/19/2017 and terminated 1/3/2018.  He was subsequently rehired on 6/1/2018.

Plan requires 2 months of service for deferrals and 6 months of service for employer contributions with monthly entry dates.  No minimum age requirement.

Is Employee A eligible for plan on his rehire date of 6/1/18 for deferrals due to the service spanning rule?  And therefore eligible for PS as of 7/1/2018? 

We have a 401(k) Plan that defines Compensation as Section 3401 comp, excluding:

• 414(s) Safe Harbor Exclusions
• Differential Wage Payments
• Stock-related compensation
• Nonqualified deferred compensation payments

We currently have an "award" system, where employees can receive "points" from others for recognition of job well done.  They use the points to purchase items from a catalog.  My questions are:

1) Is this included in Compensation for the 401(k), or can it be excluded as a "fringe benefit"?

2) If it is included in Compensation, can we amend the plan to exclude it?

3) If we amend the plan, can that be done mid-year?  Do we need to send out notices?  Any nondiscrimination testing issues?

A good sized player in the 401k market sent this letter to my co-worker in July 2018.

Actual language.

"What is happening?  In an effort to add extra security to the handling of your private information, your quarterly statement will be available going forward in electronic format only.  Switching to electronic transmission of these statements allows us to become more digitally based and environmentally conscious with our paper usage, and provides quicker access to past statements.

What does this mean to you?  You will receive a notification to the email address saved in your profile whenever your new quarterly benefit statement is available online.  This notification will contain a link to the login page of your account.  Please note that if you were already receiving your statements online, there is no charge, and that electronic delivery does not automatically apply to any other plan information, which you have the right to receive in writing.  If you are interested in receiving other plan communications electronically, please follow the instructions found in the e-documents section of your account.  There, you can select all of your other paperless preferences.

What actions should you take?  We strongly encourage you to visit the plan's website at ...., where you can view, print, or download your current and past statements, utilize insightful reports and financial tools in addition to seeing your other important account information.  To ensure the statement notification goes to the correct address, please take a moment to log into your account and view the account summary to verify that your preferred email is saved to your profile.

If you have any questions or concerns, or would like a paper copy of your quarterly statements, do not hesitate to contact one of your plan's Customer Care Representatives at .....

FAB 2006-03A"

Electronic format only?  Anyone else doing electronic format only?  I'm aware of participants being able to request electronic format only, but a full plan level change to it?  It's like a negative election quarterly statement if you wanted paper.  FAB 2006-03A mentions that paper statements can be requested for fee of charge.  This provider is still offering paper, you just going to have to work to get it.

I'm surprised, and yet, not surprised by this action.  Figured we would end up there anyway.

Any thoughts on this?

Needing information regarding employees that are allowed to advance on their earnings.  What to do when the employee has over advanced and will be negative or "in the hole."  This is problematic within the Transportation Industry.  At this time, do you suggest that the employer should honor the elected deferral or take whatever earnings are available to cover that advance debt?  We have a qualified Plan that allows both pre and post tax deferral.  This trips me up every week!

The way I read the regs and all the guidance, including the IRS publications, and even Natalie Choate's book (which is wonderful, but I could not find where it addresses these questions), if a beneficiary rolls over the Roth 401(k) of a deceased participant to an inherited Roth IRA, and at death the participant did not meet the five-year rule, the following are the tax results. 

1.  The rollover is not taxable.  

2.  A new five-year holding period starts for the beneficiary's inherited IRA. 

3.  We don't worry about 59 1/2 because the distribution was on account of death.  

4.  The only way the beneficiary can avoid taxation on the earnings is to meet the 5-year holding rule.  If the 5-year RMD rule applies to the inherited Roth IRA, then all earnings will be taxed, including pre-rollover and post-rollover.  

I read a website that suggested a non-spouse beneficiary cannot roll over a 401(k) Roth that is not a qualified distribution, but I don't think that is correct.

Finally, if the beneficiary rolls over a Roth 401(k) that is qualified (because the participant had the Roth 401(k) for five years), the post-rollover earnings are still subject to a new 5-year holding period.  

This is all very confusing and the guidance is not clear.   Does anyone have thoughts on this?  

is a fund change notice to participants required when the share class is being changed due to action by the fund board of directors. expenses will be lower.  

I have a client who got a substantial package from them analyzing their plan unrequested. Has anyone seen this before? Is this just marketing?

Just to be clear, I'm not suggesting there was anything inappropriate about it. My client was just surprised by the sheer size of it and it's customization to their plan (which appears to have been done based on 5500 data).

I am a 401k TPA.  I have a client asking about setting up a cafeteria plan for medical expense and dependent care reimbursement.  Do the employee contributions have to be in a segregated account and payments made from it?

thanks!

Perhaps this has been discussed here but how would one go about determining whether an entity is a governmental instrumentality or agency? 

For example, lets say several counties joined together to create a nonprofit authority to oversee solid waste removal or establish a nonprofit rural transit authority. What should one look at to determine whether either of these authorities could sponsor a 401(k) or would be stuck using a governmental 401(a) only plan?

I thought the whole idea of inherited IRAs for non-spousal beneficiaries was the participant's beneficiary could roll the money over, e.g., from a 401(k) plan, to an inherited IRA.  Then, instead of being forced to receive the distribution from the plan under the plan's terms, the beneficiary could stretch out the payments under the Inherited IRA under the more friendly provisions allowed under the RMD rules, as opposed to the plan's rules.  For example, if the plan requires an immediate lump sum distribution on the participant's death, the non-spousal beneficiary could roll the money to an inherited IRA and take the money over the life expectancy of the beneficiary.  

Now that I re-read Notice 2007-7, Q&A-19, it seems the inherited IRA is required to follow the RMD rules that were in the plan from which the distribution was made.  Is that correct?  Thus, for example, if the plan requires the distribution to be made under the five-year rule, and doesn't allow for payments over the beneficiary's life expectancy, the inherited IRA must follow the 5-year rule.  Is that correct?

I am dealing with a Roth 401(k), but I don't think there is a difference between a pre-tax 401(k) or ROTH for this purpose.  The Roth 401(k) is subject to the RMDs and a Roth IRA is subject to RMDs at the participant's death.