A profit-sharing retirement plan has a last-day condition on who shares in an allocation of a discretionary contribution.  The employer is a partnership, and many of the employer’s workers are partners rather than employees.  For the last-day condition, the plan’s governing document refers only to whether the participant is “employed” on the last day.  The partnership keeps no records of a partner’s time worked.

How does one determine whether a partner was employed on the last day?

Was a partner “employed” on the last day of a year if she had not been deadmitted from the partnership (and had for the year earned income more than zero)?

What rules should I worry about?

If a 24 year old gets married are they still eligible for parent’s FSA? Even if they are no longer a tax dependent?

A health plan under ERISA is supposed to go into effect 01/01/18.  

The Plan Document isn't finalized or signed by the Plan until 07/15/18, yet it claims to be "retroactively" effective back to 01/01/18.

In the meantime, claims have been paid and denied based on a Plan Document that was never signed or distributed to Claimants until after it was signed.

Is this on the up and up or not?

If a Employer adopts a Prototype Plan sponsored by its Third Party Administrator, can the Plan continue to use the Prototype Plan in the event the relationship with the sponsoring TPA is terminated? 

The Prototype Document in question contains the following wording - 

"The employer may discontinue its participation in this Prototype Plan effective upon sixty (60) days written notice to the Prototype Plan Sponsor. In such event the Employer shall, prior to the effective date thereof, amend the Plan to eliminate any reference to this Prototype" 

Would switching the Plan's TPA likely trigger "discontinuance" in the Prototype Plan? 

Having a brain freeze ---- looking for confirmation or a directive to hit the books!

Controlled group with companies A, B and C. Client wants to adopt a safe harbor plan for A and B and not allow C to be a participating employer.

A has 7 HCE and 34 NHCE

B has 4 HCE and 17 NHCE

C has 7 HCE and 8 NHCE

Total is 18 HCE and 59 NHCE

A sponsors a plan and B signs participating employer agreement …. coverage is (51/59) / (11/18) = 141.45% coverage

Safe harbor is met with respect to A and B and we can forget about C as plan satisfies coverage so no ADP testing necessary.

Any 401(a)(4) testing for employer contributions would include the C employees with zeros, but probably fine since they have such a large number of HCE's.

Am I missing anything or misspeak somewhere?

A client has recently asked if they can require participants to enroll in their financial wellness program as a condition of receiving a hardship distribution from their retirement plan. It seems like a great idea to me, but I have no idea if it is allowed.

When you are calculating earnings, what are you using for the 'loss date'?

I've seen some people use just the pay date.  Others, 7 business days later.  Even others going all the way out until the 15th business day of the month following...

From VFCP:

Quote

The Loss Date for such contributions is the date on which each contribution reasonably could have been segregated from the employers general assets. In no event shall the Loss Date for such contributions be later than the applicable maximum time period described in 29 CFR 2510.3

So, what date are you using?

Rev. Rul. 2007-43 seems to me to provide some reasonable clarity for determining when a partial termination has occurred. You divide the number of "employer initiated" active participant terminations during the period in question (e.g., plan year) by the number of active participants you had at the beginning of the plan year, and, depending on how much the resulting percentage is over or under 20%, you determine whether you had a partial termination. 20% or over, you probably did, under 20%, you may not have, and other facts and circumstances can also be brought into the analysis if you're close. All this seems reasonable, to me, and as far as I can tell is rationally related to the case law.

But Rev. Rul. 2007-43 also seems to assume, as far as I can tell without any basis in regulations or case law, and possibly, in my opinion, contrary to the plain meaning of the statute (IRC sec. 411(d)(3)), to say that if you determine you had a partial termination, then everyone who terminated without full vesting during the period in question, including voluntary terminations, is deemed to have been "affected" by the partial termination and therefore is required to be fully vested.

Below is the relevant paragraph from Rev. Rul. 2077-43:

"If a partial termination occurs on account of turnover during an applicable period, all participating employees who had a severance from employment during the period must be fully vested in their accrued benefits, to the extent funded on that date, or in the amounts credited to their accounts."

Does anyone besides me think that this may be baseless and lacking common sense? Am I missing something that makes Rev. Rul. 2007-43's conclusion regarding the definition of "affected participant" correct?

Much has been said and written about missing or unlocated participants.  But much less has been discussed about what some describe as recalcitrant participants—those who decline to deposit or negotiate the check that pays a distribution.

Imagine this situation.  A profit-sharing plan (with no 401(k) arrangement) permits a distribution after a participant has severed from employment and attained age 60.  The plan requires a distribution after a participant has severed from employment and attained normal retirement age.  After the participant severed from employment, about 40 mailings—including disclosure notices, revised summary plan descriptions, summary annual reports, and benefit statements—were sent to the participant’s address, and nothing came back as undelivered.  After this participant’s normal retirement age, the plan’s administrator mailed the participant a check for her required distribution.  The participant is not missing; rather, the administrator has solid proof that the distributee accepted delivery of the plan’s mailing.  After eight months, the payee has not deposited or negotiated the check.

What steps should the plan’s administrator take next?

What are the big recordkeepers doing with problems of this kind?

Alternate payee fails to inform plan administrator of remarriage, which was to terminate immediately upon her death, her remarriage, or the participant's death. She remarried in 2002. Her new husband died in 2005. She married him in secret,  across the Country as to not raise any flags. We accidentally found out she was married last year. We alerted the pension plans of the modified fraudulent and terminated QDRO. THE JUDGE TERMINATED THE SPOUSAL SUPPORT AS OF 6-5-2002. The plans are telling us good luck with our problem. After all, how would they know if she remarried. She had different lies to different people. She move d 6 times over the past 16 years and never once did she update her marital status. The one plan cut her off on May 1, 2018. The other is still paying her. We get nothing and she is cozy and well off due to her deceased husband's NFL and University PROFESSOR'S pension, along with his SSA. We did find out she changed her SSA over to his. He had a substantial career being he was 82 when they married.

OUR QUESTION

What are our possible remedies? The plans are not claiming liability. The Inspector General is also involved. Do we have her arrested for the abuse of an elder, blind and dementia suffering person? Can the plans recover her over-payment and return it to us? Is there insurance that protects either plan or the payee?

HELP!! THANKS

Good afternoon to all,

Our client, a P.A. we will call Company A, sponsors an active 401(k) plan.  Very soon (like in 2 weeks), Company B is buying Company A.  Company B, not currently our client, sponsors an active SIMPLE IRA plan.

Company A will continue to exist and pay salaries to its owners out of receivables through 12/31.  The staff of Company A will be paid by Company B from 08/15/2018 forward.  The owners of Company A will continue to make deferrals out of their salaries but the employees of A will no longer have any mechanism for making deferrals to A's plan.

Company A, in a perfect world, would have liked for Company B to assume sponsorship of Company A's existing 401(k) plan, open it up to all of Company B's employees, and move forward with as little disturbance as possible.  However, we are pretty sure that Company B can't have a SIMPLE IRA and assume sponsorship of a 401(k) plan in the same year.

Company A's next preference would be to have Company B take over the existing 401(k) plan as of January 1, 2019.  This leaves the employees of Company A without a way to make deferrals from 08/15 through 12/31 since they have no pay coming from Company A anymore after 08/15.  Is that permissible, to just suspend their ability to make deferrals and then have them be able to once again on January 1?  

Has a partial plan termination been triggered by the change of how the employees get paid as of 08/15/2018?  

If it matters, most of the employees of A will still be employed, by B, as of 08/15/2018, but not necessarily in the same jobs they had before.

It should be noted that at this moment we do not know (and neither does our client) whether this subject is addressed in the buyout agreement and we do not know the wishes of Company B. 

Any advice on the correct way to handle this will be greatly appreciated! Thanks in advance.

We would like to offer lump sums to current retirees upon the termination of the DB plan.  The PBGC has no issue with it but IRS Notice 2015-59 indicates that the IRS is going to publish retroactive regs which will eliminate the option under 1.401(a)(9)-6, A-13 to offer lump sums to current annuitants in the event of plan termination.  I've seen various articles which seem to indicate that they don't anticipate the IRS eliminating the lump sum options on plan termination but the notice appears to indicate otherwise.  Anyone have any recent experience with the IRS on this? 

I have a cross tested 3% safe harbor plan.  The plan uses W-2 compensation and excludes post severance and post year end compensation.  There were a few employees who terminated 12/31/2016 but received their final W-2 in January 2017.  I know that they should receiver the 3% safe harbor non-elective for 2017  However, if the profit sharing allocation conditions are you must be employed on the last day of the plan year or work 1 hour of service in the plan year, would they be entitled to the gateway contribution?  Technically they did not work any hours in the current plan year even though they have wages and hours reported on the census. 

Does anyone have a worksheet showing how to discount contributions made back to the beginning of the plan year where there are missed quarterlies.  I know we need to add 5% penalty to the effective interest rate on payments that should have been made as of the quarterly due date to the end of the plan year.  My question is on Schedule SB line 19c, is it ok for the discounted contributions (with the effective interest rate and penalty rate where applicable) to  be less than the MRC as of the beginning of the plan year?

An alternate payee would like an application prepared so that they can start receiving their benefit. Plan Sponsor is ok with this as long as the alternate payee pays for the application to be prepared…is this allowed? Document does not provide much help. 

One of the owners in a business (not yet 59 1/2) has already gotten all the plan assets he can via hardship distributions.  Now he wants access to more, but was told that he can't due to the terms of the plan.  So, now he's decided to "terminate employment."  The plan is that he will eventually be rehired.  Of course, there's no way we can sanction this attempt to circumvent the plan provisions.  Where do I look for guidance on this?

Question: An individual cannot contribute to an HSA once they are enrolled in Medicare. However, if they enroll for Medicare on June 1, could they have contributed to an HSA for the first 5 months of the year in question? If yes, how much could they have contributed? Is the maximum prorated for the 5 month period?

Thanks for any replies.

A former employee/participant requested a rollover be made to their new plan at Great West.  They filled out the paperwork with the address/etc at GW.  However, when the former "platform" John Hancock issued the rollover check, they mailed it to the former employer.  They in turn immediately sent the check to the participant.  It was all done in a period of less than 3 weeks.  The former participant is now "up in arms" about the check not be sent directly to the rollover address.  She is hounding the former employer about it.  Someone told her that it should be spelled out in the SPD.  I thought that was an administrative call.  Any thoughts?

The proposed regulations for the affiliated service group rules exclude corporations, other than professional service corporations, from the definition of a first service organization.  I can find any guidance on whether a subchapter s-corporation is a corporation for this purpose.  Is anybody aware of any guidance or has anybody heard anything about this, perhaps informally from the IRS?  

What are the penalties of starting a Qualified Plan in a year when a SIMPLE IRA is in existence? I know you are not allowed to terminate a SIMPLE-IRA mind year but what if no one elects to make contributions to it?

In 2017 on advice of prior accountant, 2 employee shop, both 50% owners set up a SIMPLE IRA for 2017 and continued for 2018.

Contributions for 2017 were funded.

No contributions have yet been made for 2018 and the 2 owners will be the only eligible employees of the SIMPLE IRA in 2018. They are having a much better year than expected and their new accountant would like to do a 401(k) plan with PS component to maximize deduction.

If they establish a 401(k) with PS what is the affect on the following

1 - The existing SIMPLE IRAs that hold only the 2017 contributions?

2. The SIMPLE-IRA if no contributions are made for 2018?

3. The SIMPLE-IRA for 2018 if contributions are made for 2018?

4. The newly formed 401(k) Profit sharing plan?

I know you are not supposed to have a SIMPLE-IRA and Qualified Plan in the same year but if the penalty is remove the $0 of 2018 contributions along with  the $0 of earnings, is there really a penalty for having both?