We have a client who makes a ton of money - well over $1,000,000 each year.  He wants to put in more than the DC limit of $56,000.  He is an S Corp with a W-2.  I know very little about how DB plans work.  Could he possibly put an additional $225,000 into a DB plan.  What about a cash balance plan?  Would love some guidance on this.  Thanks!

We have a client that withheld deferrals on severance pay over the past several years.  The participants have all taken distributions from the plan and most rolled their funds to another qualified plan or IRA.  We are currently working on a VCP submission for the client for all other plan issues.  For this issue, I believe the correct method is to issue two corrected Form 1099-Rs for the year of the distribution: 1 for the ineligible deferral amount and 1 for the updated distribution amount eligible for rollover; and notify the participant of the issue and that the funds were not eligible for rollover. 

Any thoughts on other corrective methods to pose to the IRS since we are going through VCP anyway?  Suggest the participant will be taxed on the distribution anyway when the funds are distributed from the plan/IRA, so avoid double taxation and not issue the corrected 1099-R that may not prompt a "tax-free" distribution from the rollover IRA/qualified plan??

Any suggestions/insight with personal experience on this particular issue would be greatly appreciated!

We have client who missed paying an RMD for 2018 (seems to have been legitimate error since person normally handling this was out for illness).  Participant will take RMD now - my questions:

1. Form 5329 reports missed RMD.  This goes with his 1040?  If taxes already filed, does he amend 1040?  He will attach letter of explanation; does he pay 50% penalty with 5329 or not?
2. If 2018 RMD taken now (Jan, 2019), do we prepare 1099-R for 2018 or 2019?
3. Anything else I am missing?  Does the sponsor have to report this?

one of the terminating plan has a MPP and a profits sharing plan.  They want to terminate the MPP plan and participants have been given an option to move the balance into the profit sharing plan, however this option is only for Active participants and not Terminated participants, can terminated participants also rollover the balance into the profit sharing plan? will it become a successor plan? will they be able to terminate the MPP plan?

I have an owner who turned 70 1/2 in 2018 and also got a divorce in 2018.  The QDRO was not received in our office until 2019.  The QDRO has the division date for the accounts on 3/31/2018.  The alternate payee will be receiving 100% of the participants account balance.  The participant took his RMD for 2018 by December 31, 2018.  Does he need to take a 2019 RMD or his account balance zero on 12/31/2018 because the alternate payee is receiving 100% of his account balance?  The Alternate payee is not 70 1/2.

My thinking is that his account balance is zero and therefore he does not need to take and RMD in 2019.

Working through this - getting there, but still some basic questions.

For purposes of Cafeteria plan Contributions and Benefits (C&B) testing, let's say you have a plan that includes several types of benefits, one of them being health insurance. While the plan was amended to allow for owners to elect pre-tax salary deductions for health insurance, NONE of them have elected to do so.

So it appears that there are three potential tests. First, the "safe harbor for health plans" test under 1.125-7. It appears that this automatically passes, as no HC is paying premiums through the plan. Correct? And the fact that there are other benefits (FSA, dental, vision, whatever) doesn't affect this?

Second - the "availability standard" test. Since the plan has no "employer contributions" and all benefits are available on a nondiscriminatory basis, this passes. Question - does this often fail? Seems like most plan designs would typically pass with no trouble, but I have little experience in this, so I'm curious.

Third - the "utilization standard" - this is just mathematical testing, and will require salary data, etc...

Thanks in advance, and any observations are most welcome!

P.S. When there are HSA "catch-up" contributions, are these included in the testing? In the qualified plan arena, catch-up deferrals are excluded for 415, etc., but I don't know that there is any such dispensation in the 125 world?

OK, I am having one of those moments where I think I am going crazy.  I didn't know where to post this, so I selected this board. 

Section 1 taxes "taxable income."  Section 63 defines "taxable income" by reference to gross income in Section 61 minus deductions.  I know the deductions for AGI are not taxable, but I can't find that connection in the IRC.  Where does the definition of AGI in Section 62 fit into all this?  I know it is an above-the-line deduction, and I know this is very simple on the 1040, but where is the missing-link code section?  

Eligible charitable organization signed (without reading or counsel) a "good faith" 403b plan document in 2009 as mandated by IRS.

2009 document erroneously provided immediate eligibility for the ER match despite the plan having been operated since 1992 using a permissible 1 year eligibility requirement.

ER discovered the error when they recently received the vendor's preapproved 403b document which is to be retroactively effective to 2010.

Since the 2009 document was only to be an interim "best efforts" stopgap measure, can they simply correct the error retroactively in the new preapproved document or do they have an operational error that has to go through VCP?

Lots of interest in plans under the new Association Health Plan guidance, but some groups do not meet same line of business requirement under VEBA regulations.  Any thoughts or ideas on any way to receive favorable tax treatment and avoid K-1 when do not meet VEBA requirements?  

Firm acquires another practice location and recognizes prior service for purposes of plan eligibility and employer match allocations.  (The Plan has 1000 hour/last day rule for match.)

Plan uses acquistion date for other purposes in the Plan (i.e. vesting).  The hire date in the client's census records is the acquistion date.  Plan entry dates have been overridden for these folks so that the vesting will track properly. 

For purposes of the ADP/ACP testing the system is putting these participants in the otherwise excludable group due to the overridden hire dates.  I'm not sure they should be in the otherwise excludable group.

Should I override that as well and have them in with the nonexcludables?

Thoughts? 

Thank you in advance.

Looking at filing Form 8950 for a client - the instructions are revised January 2019 but on the IRS website the Form 8950 itself is has a revised date of November 2017.  Any ideas?

Thanks in advance.

Good Morning -

I am wondering what the correction is for a 401(k) plan that is inadvertently set-up with a 20 basis point annual asset charge for TPA fees paid out of the Plan when it should have been only 10 basis points.  The error occurred over one year ago and was recently discovered by the TPA firm.  Some of the participants who were overcharged were paid out of the plan already.  My initial thought is to self-correct by reimbursing the participant accounts on a nondiscriminatory basis plus missed earnings.  I appreciate the insights.  

I apologize if this seems like a basic question, but since I'm far from expert in these cafeteria plans, I frequently question myself.

I've run across a block of plans, where eligibility for the cafeteria plan is identical to the eligibility for the health plans. There has been no eligibility testing on the cafeteria plans, because the TPA says that since eligibility is the same for all participants, they automatically pass.

I would not have said this was true, depending upon the eligibility requirements for the health insurance. For example, first plan I looked at (which raised this question) provides that anyone working less than 30 hours per week is not eligible for the health insurance. Consequently, they are not eligible for the cafeteria plan.

Well, all 4 HCE/Keys are naturally eligible for the health insurance, but many employees are <30 hours per week and therefore ineligible. Isn't this a potential problem? Or am I missing something obvious?

Now, I understand that they might very possibly pass if testing is done, but it doesn't seem like it is automatic.

Thanks!

I know bizarre question....

A company is in the final stages of restating and merging a traditional NQDC plan and a SERP into a Phantom Stock Plan and is intending to roll the benefits accrued under the NQDC and SERP into the Phantom Stock Plan. I'm coming in at the end to review documents...

The SERP promises to pay a certain benefit amount to participants upon certain future events (i.e. normal retirement, disability). Company wants to effectively "rollover" benefits accrued to date under the SERP into the Phantom Stock Plan, keeping the same distribution terms for 409A compliance. Going forward, no new benefits would be accrued under the terms of the SERP. Participants would be eligible to receive phantom stock going forward. The "rollover" balance from the SERP could grow based on the phantom stock value (but not be reduced). There is no acceleration of the timing of payments of benefits accrued to date. 

My questions are:

1. Is this really a termination of the SERP, and if so does that preclude the adoption of the Phantom Stock Plan (even though there is no acceleration of payment under the SERP)?

2. If not, are the new benefits yet to be accrued under the Phantom Stock Plan bound by the prior SERP distribution provisions? I initially thought not, but am now wondering if the Phantom Stock granted in the future would be considered a replacement for the full normal retirement benefits previously promised under the SERP? 

Any and all thoughts would be appreciated. Thanks!

Facts: Employee (participant) has a QDRO designating that his ex-wife receive ALL of his benefits under the 401(k) Plan. 

Employee is now requesting documentation from the Plan that his ex-wife stated receiving benefits under the Plan. The Plan Administrator does not wish to provide this information to employee.

Question: In denying the employee's request, is Plan Administrator obligated to provide the standard ERISA claims procedure rights (appeal process, etc)? In essence, is an employee who no longer has any benefits under the Plan as a result of a QDRO still deemed a Plan Participant? And if so, must he/she receive notice of ERISA rights to appeal?

Your insights are greatly appreciated. Thank you!

It remains unclear how much effort a single-employer individual-account retirement plan’s administrator must put into finding another address for a participant if the administrator receives information suggesting that the participant no longer is at the address the participant furnished (and perhaps neglected to update).  Administrators have expressed concerns that some EBSA examiners suggest unreasonable efforts.

Some of the tension results because not all of an employer/administrator’s cost is visible as an expense.

Of those service providers that offer § 3(16) services, do any of them offer the service of finding better addresses on “missing” participants?

Does that service have a distinct fee, or is it embedded in an overall fee?

If there is a distinct fee, is it charged against the account of the to-be-located participant?

We're taking over a plan with several loans outstanding, and the plan sponsor has never known that they could pass loan admin fees to participants (if properly disclosed), so they are now interested in doing so.  If I tell the investment product to take loan maintenance fees from participants, they will do so from all participants with loans - they can't exclude certain loans.  Is there any issue with starting to charge the annual fee to the existing loans once they've gotten a disclosure notice that this will start happening?

A profit sharing plan accepts rollovers on behalf of employees who haven't met the plan's eligibility requirements.  I would image such employees would technically be considered participants and included in the participant count for Form 5500 purposes.  Would you include them in the annual testing before they meet the eligibility requirements?

We have a client who sponsors both an ESOP and a 401k plan.  ESOP owns 100% of company.

Client is looking to split the 401k plan into 2 separate plans - one a safe harbor plan and one a tested plan.  We know that we will have to run the ABT for the plans as the coverage test will not pass the 70% threshold.

Right now the ESOP and the 401k plan use different definitions of compensation.  It seems that the same definition of compensation must be used to run the ABT.  Can the plans still apply 2 different definitions of compensation for allocation  purposes and just use the same definition for testing purposes?  Or do both documents need to specify the same definition of compensation?  The ESOP currently excluded commissions in excess of $150,000 (and yes, there are a handful of employees for whom this exclusion does apply.)

S-corp is paying a dividend payment to the ESOP. As I understand it, this can be used towards the repayment of the exempt loan. According to IRC 4975(f)(7), this isn't a prohibited transaction.

Agree? If so, another question - for tax purposes, they S-corp is apparently considering this dividend as 2018. But, it is being contributed to the ESOP within a few days. Is this considered an ESOP contribution for 2018, or 2019, or can they choose either?

Thanks!