Safe harbor match formula is 100% on the 1st 3% and 50% on the next 2%

Match is calculated on a per pay basis

Participants elective withholding is 5%

Total Compensation is $286000

Retirement plan software matched participant 4% of each pay based on the match formula for a total of $11440 for the year

But isn't the max match permitted for this person $10800 which is 4% of $270000

Pretty sure I need to forfeit $640 of match since participant was matched on wages over $270k, but the per pay basis for allocating the match is throwing me off

Any thoughts on this would be welcome...  Thanks

Is there any requirement that participants are notified that their loans will be defaulted once they terminate? I have a large plan whose loans are administered by NW. We as a TPA have minimal involvement.  We used to send out default letters to their participants, but because NW now recordkeeps the loans we are not going to do that. Neither does NW.  NW will deem their loans for non-payment, but again, not send out a notice. Just wondering if a notice is a legal requirement.

Thanks.

Hi all,

CPA here working on a Form 5500 audit (new account for us).

The Plan is a defined contribution profit sharing plan that owns four life insurance policies with a total cash surrender value that comprises ~40% of plan assets. Are these contracts required to be reported on Form 5500 at cash value?

I am being told by the Plan's third party administrator that they have never been reported as Plan assets because Form 5500 Schedule H Part I it states: "Do not enter the value of that portion of an insurance contract which guarantees, during this plan year, to pay a specific dollar benefit at a future date.".

I am hoping to get some insight and/or pointed to some guidance as I am not too familiar with qualified plans that offer life insurance. I have had a few in the past where the value has been reported but the value was not significant to the plan, so it was never a sticking point with respect to our report.

Any help would be greatly appreciated!

A 401(k) plan received transferred assets from the plan sponsor's terminated DB plan. The 401(k) plan has standard provisions allowing the sponsor to allocate, but at least as fast as the seven-year requirement under section 4980.

The assets were put into a suspense account but were never allocated. Still within seven-year period but 401(k) plan is now terminating. 

VCP does not allow correction/relief specifically from 4980 reversion tax. 

Thoughts on whether to attempt VCP based on an "operational error" (i.e., failure to allocate as required by the plan) vs. allocating prior years now (plus plan termination allocation) and filing 5310?

We have a company that would like to have each year's PS contribution to be on a separate vesting schedule.  It would be a 4-yr cliff.  Assume no Top Heavy.

So, it would look something like this:

2019 contrib fully vests 2023

2020 contrib fully vests 2024

2021 contrib fully vests 2025, etc.

I don't think this is possible due to the minimum vesting standards.  For example, someone hired in 2019 has 4 years service in 2023, so the 2020 contribution would have to be 100% vested for that person in 2023, not 2024.

Is there any way around it?

Participant terminates in May 2018 with a $10,000 loan.  Participant has until the due date of their 2018 1040 to repay the loan to avoid the taxes under the new tax rules.

Question is, if that participant does NOT close his or her account, can they re-contribute the $10,000 to this plan if it is past the grace period?  Our plans typically do not allow former employees to execute rollovers, which I think technically this would be.

Thoughts?

Plan distributed the Safe Harbor Notice for 2019 in November 2018 indicating the Safe Harbor Match would be made.  The Employer loses a big customer on December 15th 2018 and on that date they call us to discontinue the Safe Harbor effective 1/1/2019.

Are there any timing restrictions considering the notice was already distributed? Could the plan have been amended on December 15, 2018 to eliminate the safe harbor for ALL of 2019? Or is there some form of a 30 day notice required?
 

Kevin C and Larry Star commented in this thread but it was more of an offshoot the original question.  I wanted a question dedicated just to this topic:

We are the TPA. Just discovered that for several years retired participants have received incorrect 1099Rs. Specifically, the 1099Rs have included non-taxable contributions in the amounts reported.

For some, the 1099Rs have been incorrect for at least 10 years.

There are at least two immediate concerns:

How far back is necessary for providing corrected 1099Rs for amended tax purposes?

What is the EPCRS VCP-correction method which would be acceptable to return after-tax credits to the affected participants? (I’ve scrutinized EPCRS but can’t locate the applicable section)

With thanks,

A governmental non-ERISA 403(b) plan, with discretionary matching and nonelective contributions, wishes to make the following changes:                                                                                                                                                       1. Compensation is now defined a W-2 Wages with no exclusions.  Plan sponsor now wishes to exclude following from definition of compensation applicable to all contribution types:                                                                      a. All amounts deferred or excluded from taxable compensation under Code Section 125, 132(f)(4),                           402(g)(3), 402(h)(1)(B), 403(b), or 457(b)                                                                                                                                b. Deemed Section 125 compensation                                                                                                                                      c. Bonuses                                                                                                                                                                                      d. Overtime                                                                                                                                                                                      e. Commissions                                                                                                                                                                              f. Differential Pay                                                                                                                                                                            g. Safe Harbor Fringe Benefits                                                                                                                                                    h, All Post-Severance Compensation

2.  Plan currently allows participants to take distributions in the form of lump-sum, partial lump-sum, and installment payments.  Plan sponsor now wants to eliminate partial lump-sum and installment forms of distribution.

3.  Plan has a 6-year graded vesting schedule and provides 100% vesting if participant severs employment on account of disability.  Plan sponsor now wants to eliminate 100% vesting upon disability.

I am concerned that these changes would result in a cutback of benefits under 411(d)(6),

What do you think?

Just curious about something. Situation is this:

A non-profit has an ERISA 403(b) plan. They came to us a couple of years ago - plan was a mess. Document out of compliance, no 5500 forms EVER filed, ACP testing was never done, etc., etc. - huge clean-up VCP project, and 5500 forms (audited) filed under DFVCP, etc., etc.

They just got notified that they are going to have the plan audited by the DOL. I'm curious as to whether this is purely random, or if the DFVCP filing triggered this audit - not that it matters. Any thoughts on this?

Wishing all BenefitsLink Folks a very happy and healthy new year!  I have learned so much over the past 15+ years or so from actively participating and also just lurking from time to time. 

I have a question regarding participant fee disclosures and corporate fund actions (i.e., actions taken by the fund issuer to rename, merge, or otherwise change one or more of their funds).  Historically, when the action affects the investment information provided in the notice, we have produced an updated fee disclosure and sent it to the plan sponsor with instructions to distribute to participants.  Corporate actions happen almost weekly, and some of our clients have complained about having to distribute updated fee disclosures multiple times throughout the year. 

Some advisors/service providers I’ve talked to have stated that it’s “not technically required” to provide an updated fee disclosure or other notification of a corporate fund action, but I can't seem to find any supporting guidance or analysis that excuses the plan sponsor from having to notify participants when the investment information in the disclosure changes due to a corporate action.

Can anyone point me to guidance or analysis on this issue and/or would you be willing to share the approach you take to assist plan sponsors with notifying participants of a corporate fund action that affects their plan? 

Thanks and Happy New Year!

What is the actual deadline for funding their deferrals for 2018?  Is it 12/31 or the due date of the tax return.  They have only partially funded their deferrals throughout the year?  Thanks!

Hi all. I've recently become aware of the apparent limitations re: maintenance of a 5305-SEP while also having a Solo 401(k). I will try to spare you the unnecessary details and just hit the relevant points...

I have a small side business that is all but inactive at this point. I used to use a SEP-IRA for retirement savings related to this endeavor, but moved things to a Solo 401(k) in 2010. The SEP did, however, remain open (albeit empty) at that point. I made one additional contribution to the 401(k) after setting it up in 2010 but it has otherwise been essentially idle, just sitting there holding the existing funds.

In the intervening years, not having been aware of the restriction related to 5305 SEP-IRAs while maintaining a qualified plan, I made a handful of small-ish employer contributions to the SEP on my behalf. Don't ask why I did it this way, convenience or naïveté I guess.... Regardless, this was done during a time when there was no actual activity with the 401(k); again, I just made that one contribution after setting it up in 2010 and then left it alone.

So... Here we are.

Please note that I have no concerns about over-contributions or anything like that. The SEP contriibutions were safely below any relevant limits, and I never even contributed to both in the same year. Nonetheless, I have just discovered that these SEP contributions may not have been technically allowable, and am trying to figure out what (if anything) to do.

To complicate matters a bit further, I have since converted those (formerly deductible) SEP contributions to my Roth IRA. Thus, I actually wound up paying taxes on them, but the money is no longer in the SEP to "undo" if I wanted to somehow pursue that course of action.

One option would be to just do nothing and let this mistake fade into ancient history. This would have been the default course of action if I hadn't stumbled across the info alerting me to the potential problem. In this case, I probably would've gone through life none the wiser. Barring an audit in the near future (knock on wood) this issue would probably have been lost in the sands of time.

The other option would be to (somehow) fix it. The problem is, I'm really not sure how to undo this, or if it's even worth pursuing.

Fingers crossed that I will relay my question in a coherent manner.  SHORT QUERY: I didn't contribute more than is allowed to my solo 401K for 2017, but I (somewhat accidentally) contributed way more than necessary and took our AGI too low. Can I correct that?

Long background story: I am 56 and had $84K of self-employment (sole proprietor) income in 2017 and established a solo 401K for myself ONLY on 12/28/17.  My husband has an S-Corp and I seldom know where his numbers will come in. In 2016 we paid a lot of tax because his income was surprisingly (to me) high in 2016. Thinking it would be the same in 2017, I contributed $3300 to my HSA, $13000 total in to IRAs for both of us, $24,000 EE to my new solo 401K and $15,500 ER to the solo 401K.  At the 11th hour of completing our 2017 taxes in September 2018, it became apparent that our AGI was going to be below 0 (!) after a big, unexpected (to me) loss came through from his business to our personal return.  For Affordable Care Act /Advanced Premium Tax Credits reasons we REALLY needed our AGI to be at least $13K higher than it was about to come out .

I had already wired the  2 separate (EE/ER) amounts in to my large brokerage plan provider, but I reduced line 28 on our tax return from $39,500 to $26,500. The brokerage's retirement accounts department had told me I could just send them a correction memo (which I did) and designate $13,000 of what I had sent in to be for 2018 rather than 2017.  Now that I read a lot of the great information on here, though, I can see that they shouldn't have told me this. I have evidence of the memo I sent them and when, but when I sign in to my account, they still have only the entries for $24,000 EE and $15,500 ER (i.e., they ignored the memo they breezily told me to send them).  

What recourse do I have? Our accountant just retired and the lovely person who has taken his place is hard for me to communicate with (couldn't reach him that last week due to holidays). Is there any way to legitimately recategorize/ recharacterize/ reclassify (not sure which is the right term) $13,000 of my solo 401K contributions from 2017?  If not, how about those darned IRA contributions I made? 

I thank you in advance for any feedback or insight as I hang my head in embarrassment. I realize my spouse and I need to improve our communication and that I am a poster child for the pitfalls of DIY solo 401K plans, big breezy brokerage house plans, etc. :/

Per the ESOP plan at my former employer, I’m to receive 3 annual payments of what’s listed on the stock certificate.  The first payment was almost 4 months late and several hundred to an attorney to get him moving.   The second payment will be past due as of January 2.   Do I need to get the attorney again, or can I rattle his cage some other way? 

We filed an 8955-SSA for 2010 reporting 1 participant that was paid out (code D).  We were just notified by the Participant that he was informed by SSA that he had benefits due him.  Debating whether we should send a letter to SSA with a copy of the return previously filed or add said participant to the next SSA.  Has anyone run into this before and/or what are your thoughts?

We have a plan that was terminated 12/31/2017. IRS considers a plan terminated if all assets are distributed within 12 months of the termination date. 

There are two participants who could not be located and the client directed 100% of each participant account payable to an eligible rollover institution that accepts and establishes IRA rollovers for missing participants.

The checks were prepared last week and mailed to client, payable to the financial instution.  If the checks are mailed ASAP to the rollover institution, is the plan closed since the money came out of the plan; or is the plan considered when the rollover institution establishes the IRA accounts?

Medical practice sponsors 401(k) plan. A nurse practitioner terminated employment in early December, and has not worked for the plan sponsor since termination.  However, the NP will receive commissions on collections through the end of December.  What is the impact on the retirement plan if the NP receives a paycheck (with employment taxes withheld) as of 12/31 even though the last day worked was several weeks prior to that?

Thanks!

An employee has submitted paperwork to show he has experienced a divorce as a Qualifying Event.  However, he didn't submit a divorce decree, but, rather, other documents such as a Partial Mediated Settlement Agreement.  Is this sufficient?  Even if it is, is it OK for me to require an actual divorce decree instead?