Can a VCP filing be submitted anonymously to the IRS for any failure such as failures related to paying required minimum distributions timely and amending the plan document for compliance with EGTRRA?

I have a major QDRO issue. In 2004 I was granted a divorce with a lump sum amount attached of 80k in both the Decree and QDRO going to the Alternate Payee. Only the participant (me) had a attorney at the time of divorce. The pension plan initially rejected the QDRO with the lump sum dollar amount, as I was not vested in a lump sum amount at the time of divorce. The amount should have been in a percentage, with the number of years married taken into consideration. It does not appear the attorney was familiar with the QDRO process, model language or rules. After numerous rejections, as the same QDRO was being presented to the pension plan administrator by the Alternate payee. Also, the attorney did not attempt to rectify the QDRO issue through numerous rejections. In Sep2017 the Alternate Payee hired an attorney and presented a QDRO with a new date of determination of 1/1/2014, which was after the date I turned 50 and now eligible for a lump-sum distribution. I have a new attorney who is familiar with QDRO's. The argument now is that the date of determination is changed from the date the decree was signed to match the dollar amount in the decree. Also, the Alternate Payee's approved QDRO does not state clearly the date in which interest will be accrued from, as it appears the judge may use the (2004) date the decree was signed to accrue interest, which would be contradictory and possibly illegal. I also have a approved QDRO with the correct percentage that was approved in 9/2017. However, the judge has stated that he will only consider the lump sum dollar amount in the decree that matches the QDRO. This is a attempt to take advantage of the pension plan by changing the date of determination and I'm not sure if the complicated process is legal. Also, should the original attorney be held liable for legal malpractice?

The other thread on creative ways to handle a top heavy plan reminded me of something I thought up a while back but never went forward with because I felt it was too aggressive. However I can not find any reason why it would be actually disallowed. I'm hoping someone here can poke a hole in this scheme and teach me something.

This is a 401(k) plan with a single 100% owner who is the only HCE and the only key and is over 50 years old. The only contributions for the plan year are deferrals, although discretionary matching and nonelective contributions are permitted in the document. The plan passes the ADP test for the current year. The plan is top-heavy for the current year. The HCE's deferral contributions are equal to $6,000. Can we do the following:

1. Shift 100% of the NHCEs' deferrals to the ACP test. The ACP test passes because there are no HCEs included in the test.
2. Recharacterize the HCE's $6,000 deferral as catch-up as it now exceeds the limit of the ADP test, when testing on only the un-shifted deferrals. Since all of the NHCE deferrals were shifted, the ADR for the NHCE in this test is 0% and therefore the ADP limit for the HCE is 0%.
3. There is no top heavy minimum for the current year, since the key did not have any contributions other than catch-up contributions, and catch-up contributions for the current year are not taken into account for purposes of section 416.

My thinking is that this falls apart on step 1, that you can not shift deferrals into the ACP test just for fun, that there has to be an actual failure of the ACP test first. Is that actually written somewhere, or just accepted practice?

Code 4980 says that the excise tax on a reversion is limited to 20% if AT LEAST 20% of the surplus is allocated to plan participants. But it further indicates that not more 40% of the allocation can go to non-actives. And that even if more than 20% is allocated, only 40% of 20% - 8% - can go to non-actives. So for instance if 50% of the surplus is allocated to plan participants, 42% must go to actives and only 8% can go to non-actives.

Am I reading this correctly?

I am having general trouble understanding the third criteria of FBRIC determination.

Quote

The contract requires all participant-initiated transactions to occur at contract value (without any conditions, limits, or restrictions).

The contract will say something like below:

Transfers from Fixed Account Plus. The Participant may transfer up to 20% of the Accumulation Value allocated to Fixed Account Plus during each Certificate Year.

Is that a limitation that would violate the criteria of fully benefit responsive investment contracts?

As an additional question, are there any good CPE's or just websites or videos with in depth explanation of the investment vehicles we see in these plans (GICs, PSAs, etc.)?

Today my skills as a magician are being questioned, as I have failed to pull a rabbit out of hat....

A referral partner has brought us a situation with a client of his who is not our client.  The party in question has a 401(k) plan that eliminated its Safe Harbor match in 2012 and has been subject to all testing ever since.  This employer is angry because he has been told that for the first time, his plan became Top Heavy for 2018 based on the 12/31/2017 results of the test.  He has been told that if he doesn't want to be obligated to make a Top Heavy contribution of any kind, then the Key employees cannot defer in 2018.  Deferrals count, and even if a Key only deferred 1% of pay, then the company would owe the non-Key participants 1% of pay as a TH minimum contribution.  Of course if any Key deferred 3% or more, then the company would have to make the standard 3% TH minimum contribution.

The referral partner is looking to us for some kind of magic trick to allow the Keys to defer whatever they want to defer and somehow not owe a TH minimum contribution.  My crystal ball must be cloudy or something because there's nothing I can find to do about 2018.

For 2019, they should adopt Safe Harbor provisions again, whether it's the 3% SHNE or the basic SH match.  If they aren't willing to do that, then they just have to accept the fact that the Keys can't defer.

Am I missing something?  The referral partner has been told that a "creative solution" should be found.  I can think of all kinds of creativity for failed ADP/ACP tests, cross-tested formulas that don't work out, etc., but I don't know of a "creative" solution to Top Heavy!

Any ideas will be appreciated.  Thanks!

We all know you can't have a SIMPLE and 401(k) in the same plan year.   However it's possible to have a year-end receivable contribution for the SIMPLE that would be made after the PYE, which I believe is ok. 

But here's this situation:

Employees are paid bi-weekly.  The period covered is 12/16/2017 - 12/30/2017; check date 01/07/2018 (I'm aware that was a Sunday!)  Anyway - the payroll company report indicates "Week 1" and will report that as 2018 W-2 wages on a cash basis.  SIMPLE Withholdings were done.  Accountants just discovered this now.  (SIMPLE accounts have already transferred to the new 401(k) accounts for each person.) 

What's the fix here? 

A participant directed plan has a core fund line-up and a brokerage window.  There are times where certain funds invested in by the participants in the brokerage window are liquidated/merged and their money in those funds are moved to a replacement fund.  I understand that brokerage windows are not DIAs and therefore do not have the same notice requirements.  However, a description of the window needs to be provided in an annual 404(a)(5) notice.  Is there a requirement to disclose to participants in the brokerage window prior to the replacement similar to what is required of other replacement funds in the core line-up? 

Thank you!

I have a plan that currently allows profit sharing contributions to be taken from the plan after the assets have been allocated for 2 years and requires that they participate for at least 5 years. The client wants to take this distribution option away. I am not sure if this is considered a protected benefit of the plan. I have been researching this for awhile and still can't find anything to really confirm whether it is or not. I have read some conflicting information. Has anyone come across this before?

I had an auditor call and ask if taxable income for group term life benefits is included in the deferral calculation and if not, how is it excluded in the document? He was at a recent seminar and the presenter scared everyone with an example where someone was wronged by this and missed out on a very small match ($2.00ish) and it cost a fortune to resolve.

For this plan, we use 3401 compensation, no exclusions. We do include the fringe amount for the life insurance in the PS allocation. The client does not include in the deferral calculation. Their logic is that GTL income is not compensation paid to the participant, it is just taxed and not compensation included in the deferral calculation. For example, one person makes $50,000 and $30 in GTL annually. 10% deferral is $5000 not $5003.00. Does this make sense and does 3401 without exclusions support this?

Thanks for any input 

This kind of stuff used to happen eons ago when there were more pooled plans, but I haven't seen it in a long time.

Pooled account. Plan apparently didn't have a checking account. Check for (x) sent to the Trustee, for a distribution to a terminated participant.

Trustee deposited it into the EMPLOYER checking account and simultaneously wrote a check to the terminated participant for the appropriate amount, and submitted the 20% withholding to the IRS.

Yeah, it's a PT, but what is the penalty? There is zero loss or gain to any party involved, and no "amount involved" if one were to try to pay a 15% excise tax anyway. What do folks do with this on a practical level, rather than a theoretical level? Or is there an exemption for this that I'm missing?

I am curious how others set up and track these plans. Assume individual accounts.

So prevailing wage contributions are made to offset 3% SNHE contributions. All non PW EEs receive 3% SHNE from the employer. However, as I understand it, any PW contribution in excess of 3% of pay would be classified as discretionary profit sharing. 

Should I be attempting to set up two DB/PW buckets? Or is it allowable to re-source the money into SHNE / discretionary?

The reason I ask is because down the line, it may get tricky with determining amounts available for hardship or early in-svc withdrawals and the like.

Thanks

Is anyone aware of a cite that says the 5500 must continue to be filed until all assets are distributed?  I see it in the 5500 instructions, but I don't see it any the regs or any advisory opinion.  I did find a PLR, but I would like a DOL cite.   

My wife and I have a HDHP with my former employer and contribute to a family HSA. We are both on the same HDHP (not individual plans) and would like to max out our yearly HSA contribution. 

I will be on Medicare effective August 1, 2018 when I turn 65 but my wife will remain on the HDHP, since she is 63.

At the end of July, 2018, I anticipate to contribute $4500 to my HSA. My wife does not have an individual HSA. I would like her to open her own HSA in 2018 but I'm not sure how much she can contribute since I will have contributed $4500 this year before going on Medicare.

My wife will also be on the HDHP all of 2019 if this info helps.

Does anyone know how to calculate the maximum HSA contribution given the above information?  I don't see a similar scenario as above in IRS Publ 969. 

Thank you for your help.

Rick S

The client sponsoring the 401k Plan is a partnership.  Throughout the year, the partners deferred on their draw and calculated the 3% safe harbor calculations.   They put in the maximum of $24,000 (both over age 50) ....However, when  I received their K-1s - box 14a only had $24,000 as  self employment earnings and there is Section 179 deduction of $2035.   So I see a problem.... Am I wrong in using box 14a  (Schedule K-1, Form 1065)....They had draws of 192,000 and $108,000 so their 3% was calculated by their payroll dept. based on the draws.... Any insights or comments on how to fix this would be welcome......

Opinions needed, please - A plan is recordkept at a large, well-known financial services firm. The firm offers a budgeting tool that is accessible on their website and participants can sign up for it on their own, outside the plan, for a fee. The contract is between the participant and the vendor for the tool.

The tool is not offered within the Plan and the company has no involvement with the tool. Does the company have any fiduciary responsibility around the tool, simply because it is available on the recordkeeper's website where participants access their account? 

My wife has a 457(F) plan with a hospital in which her employer contributes $3,000 per quarter or $12,000 per year.

However, each $3000 quarterly contribution is taxed (Federal, FICA, etc) -- it shows up as a separate paycheck with applicable tax deductions -- and the remaining amount (around $2000) is then deposited into a deferred account that grows tax free until it is distributed at a later date based on SRF conditions.  As we understand, the SRF conditions are staying employed with the hospital for 3 years or meeting a retirement age of 65. 

Her HR Benefits department has stated that their 457(F) plan is unique in that it taxes the $3,000 quarterly contribution upfront.

She will be leaving her job and will not meet the SRF conditions so she will loose all of the contributions that are in this deferred account.

Since the $3,000 quarterly contributions are in her paycheck, taxes deducted, and eventually her W2 as income, should these contributions be deducted by her employer from her income and her W2 adjusted since she will forfeit these contributions?

Any thoughts or guidance is much appreciated.

Thank you,

Rick S

We are the TPA and we calculate the match for the client on a per pay basis.

Their pay period ending date was 5/22 but the pay date was 5/29. The next pay period ending date is 6/5 with a pay date of 6/12.

A participant met match eligibility on 5/24 and they are immediate entry. The client is thinking the person should not get a match until the 6/12 pay date because the pay on 5/29 is for time worked prior to her entry date.

Our system processes based on the pay date and as 5/29 is the first pay after her effective eligibility date, we are thinking the participant is ok to get match.

Any thoughts on if we should use the pay period end date versus the actual pay date?

Thanks!

The discussions of us taking over this ERISA 403b plan were going well, until they mentioned that they "purge" their employee records every couple of years.  They are currently with a low-cost (and low-service, but you didn't need me to say that part, did you?) recordkeeper that never questioned any lack of data or plugged data, and there was no TPA (the plan sponsor did their own employer calculation and their auditor did the 5500).

After they revived me, I started ticking off all the potential problems: RMDs, no ability to deal with missing/lost participants, proper coding of 1099-Rs, etc.

It's one thing if it's a smaller plan and you can get your hands around all the participants - maybe they know that there is no one who is 70 years old, and maybe they can track down all the terminated employees with balances.  But it's a different story when it's maybe 100 or 125 people in this situation, and the whole HR department is new in the past 6 months.

I've asked them to take a second look around for information, but let's say they really don't have dates of birth for those who separated from service more than three or four years ago.  Possibly a bunch of the addresses are no longer valid and no one has followed up on them... or are "c/o the plan sponsor".  On a scale of "very" to "run away". how screwed are they?  There's no easy fix to this sort of stuff that I can see.

Any suggestions on how to get this plan back on the straight and narrow without it costing a fortune are appreciated, thanks.

I have 4 companies - A, B, C, and D.  A, B, and C are a controlled group, and C and D are a controlled group.  A and C are not a controlled group and they do not qualify to be an affiliated service group.  Who do I test together?  My thinking was I test A, B, and C together, AND then test C and D together, but that could be redundant for C, so maybe I'm missing something?