An employee of a sponsor of a 401(k) plan fraudulently caused deposits, in excess of what was deferred, to be made for the employee and several others in a 401(k) plan.  Now that this has been discovered, the question arises whether these additional contribution could be returned to the sponsor under ERISA §403(c)(2), mistake of fact.

This occurred in 2017 so we are within the one-year time constraint.  Thoughts?

Based on the CPI value released today (and using the values for Mar-Apr-May)

the rounded/actual limit at the moment should be:

A client with a controlled group of companies recently created a new company and transferred several plan participants to the new company. These employees were allowed to continue to participate, although the new company is not an adopting employer.

The document specifies that "an individual who becomes employed by the Employer in a transaction between the Employer and another entity that is a stock or asset acquisition, merger, or other similar transaction involving a change in the employer of the employees of the trade or business shall not become eligible to participate in the Plan until the Plan Sponsor specifically authorizes such participation."

We've been advised that this must either be corrected with a VCP filing, or by returning the ineligible contributions. I'm wondering why this couldn't be self-corrected with a retroactive amendment under the "Early inclusion of Otherwise Eligible Employee Failure" .

Meanwhile, the client continues to withhold deferrals and is not ready to make changes to the plan yet....

ER stock held in KSOP: Is NUA treatment available in 2018 if participant terminated employment in 2015 (at age 67) but received a small ADP testing refund in March, 2016 and no other distributions have been processed since? If participant wanted to elect NUA treatment, should he have elected to take a lump sum distribution of entire account in 2016 (the year of the small refund) since his 2015 separation from service was his triggering event or is NUA treatment an option available in 2018?

What do when a participant for whom a SEP contribution is due termed a long time ago and is not responding.

A plan decides upon a profit sharing contribution for 2017 that allocates a different dollar amount and percentage to each participant.  This complies with the cross-tested formula in the plan document and passes testing.  When preparing the notification from the employer to the Trustee (see Padilla memo), do we have to list each employee separately?  Can we refer to an attachment, which would be our allocation spreadsheet?

Alternatively, can we combine the 3% safe harbor and profit sharing when referencing the amount on the trustee notice?  This would make it much easier for this plan.  They basically were trying to allocate a set dollar amount to certain employees, but it is a combination of the 3% Safe Harbor and profit sharing, so the profit sharing is all over the board due to differences in compensation. 

We were asked to run a qualified plan proposal for a company in the farming industry. The business has 3 equal owners, and other than the owners all of the employees are classified as H2A employees. Apparently over the course of the year some of the H2A employees work more than 1000 hours. I was told they return "home" and many come back the following year to work again. Are H2A employees an excludable class of employees for coverage purposes, similar to non-resident aliens? 

In a rudimentary earning calculation, you take:

Closing balance (-) distributions/loans  (-) contributions (-) opening balance (=) earnings

Are fees that are deducted from the account figured into the earnings?  Or should I account for them like a distribution?

I would think I should try to treat them as a sort of distribution because there were shares actually sold.  Others just lump them into the final earnings.

Suppose employee X works 1/1 through 6/30 for employer A and defers the 402(g) limit in employer A's 401(k) plan, then goes to work for employer B and defers the 402(g) limit in employer B's 401(k) from 7/1 through 12/31 of same year. Assume employee X does not take steps to have any portion of the deferrals for the year from either plan distributed to him/her by the April 15 of the following year. If both deferral episodes were pre-tax, then the IRS aggregates the amounts from the W-2 data it gets from employers A and B with respect to employee X , includes the excess in employee X's gross income, and adjusts employee X's 1040. Because the amounts were allocated to employee X's pre-tax account in both employer A's and B's 401(k) plans, when they are later distributed (presumably, with earnings), it's reported as taxable on employee X's 1099-R's, so you have the archetypal double tax that you can only avoid by utilizing the process to have the excess deferrals distributed (notifying the plan(s) by April 15 of following year), which in this example employee X did not do.

But what if employee X had elected Roth elective deferrals for the amounts under both plans? The amounts are already reported in employee X's W-2's as gross income, so there should be no adjustment to his/her 1040. To the extent there is asymmetry in the treatment of pre-tax vs. Roth excess deferrals, seems like what the IRS would need to do is notify the employer that the excess Roth deferrals had been made and that those should be moved by the employer, as plan administrator, with earnings, out of the employee's Roth account and into his/her pre-tax account. But boy, that would be complicated and I have not seen anything explaining the requirement to do this. There is an example on page 19 of the current W-2 instructions that involves an excess Roth deferral under a plan of a single employer, but it doesn't touch the administrative issue that exists where the Roth elective deferrals occurred under plans of different employers.

IRC sec. 402A(d)(3) pretty clearly says that employee X is going to be taxable on the amounts attributable to the excess deferrals,  but how are the administrators of employer A's and B's plans going to know to report as taxable? Is employee X simply on his/her honor? (Both to do the right thing and to study tax law in the evenings so he/she will even understand this?)

Maybe there is a clear answer to this and I've just been out of the loop on the issue, but I am puzzled about it.

Thanks.

When considering controlled group or affiliated service group issues with respect to a US corporation, is it true that one cannot simply disregard a foreign business owned by that US corp? If that foreign entity employed US citizens?

Good morning, All!

When a plan has automatic cashout provisions, and checks are being issued for under $200, it is my understanding that there is no withholding, and participants do not have to fill out forms.  The plan's trust issues the checks and mails them to the last known address.  My question is this:  Does the participant have to receive anything besides a check?  A notice, letter of explanation, etc.?  As a courtesy we will draw up something or another, I am sure, but I wanted to know if there is a particular requirement or format or something we are supposed to follow.

Thanks in advance for your ideas.

My understanding is that TPA fees can be paid from participant accounts on a pro-rata basis.  In some cases, this is done on an ongoing basis in the form of a monthly, quarterly or annual deductions.  In other cases, we (as a TPA) will deduct a one-time fee to apply toward annual admin costs and then resume our billing directly to the plan sponsor on an ongoing basis.  If we are charging the participant accounts on an ongoing basis, we will include a specific dollar amount or basis points on a 404a-5 fee disclosure notice.  If not, our fee disclosure will simply say that a plan sponsor may pay the TPA admin fees or it may be charged to their account.

1) When deducting from an account, must the fee disclosure notice reference a specific dollar amount or is okay to simply state that TPA fees may be deducted? 

2) If we must specify, it is okay to be in the form of basis points rather than a dollar amount? 

3) Is this required even if the payment from the plan accounts is just a one-time payment and will not be ongoing, keeping in mind that the participants will see the fee on quarterly statements?  I ask because I have just done a few of these and did not provide an updated 404a-5 notice to reflect this one-time payment.  I cannot imagine having to do this every time an employer wants to pay from the plan.

Thanks!

Hello - our divorce settlement has language on need for a Qdro. The marriage was only about three years and the sum of money is relatively small ( less then 25k) and it is simply in regard to a 401k nothing else. We paid $2k for the Qdro to get done but for a variety of reasons we find ourselves 5 years later with a difficult record garnering issues to complete the Qdro.  Can my ex and I, as mutual agreeable parties, ask for the Qdro to me removed if we can agree upon a lump sum. My ex is getting married and that is the reasons both figure we should do something to just finalize it. Qdro attorney says it is not the easy for all usual reasons why we should have just taken care of this originally (jobs have changed, plans are different, loans, etc) we live in PA. Hoping we can just go to Master and ask for a lump some? Thoughts?

Napa-Net Article

ARA comments

Nevin E. Adams, JD 6/8/18 

A regional office of the Employee Benefit Security Administration has been threatening enforcement actions against plan sponsors who correct the late deposit of participant contributions or loan repayments without making a formal submission under the DOL’s Voluntary Fiduciary Correction Program (VFCP).

The EBSA letter, signed by Chris Davis, Associate Regional Director of the agency’s Chicago Regional Office, threatens “alternative enforcement measures” if the plan sponsor does not file a VFCP application within 60 days of receiving the letter. The letter is apparently being sent to plan sponsors who, on Form 5500, reported the late deposit of participant contributions and/or loan repayments and correction outside of VFCP.

In response, the American Retirement Association (ARA) has filed formal comments with Mable Capolongo, Director of EBSA’s Office of Enforcement, objecting to the threatening language in the letter. Noting that, “In effect, the letter is telling plan sponsors the DOL may open a full blown investigation unless a VFCP application is filed right away,” the ARA letter points out that the “inappropriate” threats are “clearly intended to scare plan sponsors into participating in what is supposed to be a voluntary program,” and “contradictory to the DOL’s own longstanding guidance with regard to VFCP.” The ARA notes that the language “flies in the face of the President’s efforts to reduce regulatory burdens and should cease immediately.”

Commenting that, “Plan sponsors should not be threatened with the heavy hand of a government investigation simply because they choose not to use a voluntary government program,” the ARA letter requests that the DOL immediately cease threatening that “alternative enforcement measures” may be taken against plan sponsors who self-correct late deposit violations outside of VFCP, and recommends that to reduce regulatory burdens, the DOL add a self-correction component to VFCP as soon as possible.

The latter “ask” refers to numerous comment letters from the ARA recommending the addition of a self-correction component to VFCP. “We have regularly brought this subject up in meetings with the DOL and we are disappointed nothing has moved forward over the last nine years,” the ARA reminds, noting that adding a self-correction component is directly in line with the President’s directive to reduce regulatory costs and burdens.

IS anyone using DocuSign to get clients to "manually" sign the Form 5500?  Using Docusign is MUCH easier then the whole credential process, and people are getting more familiar with signing documents this way.

Has anyone ever asked the DOL if this is acceptable?

Plan assets at BOY are 1,855,000.  If the client has a bond with inflation guard, should I be reporting $185,500 coverage on 10(c)?

A plan allows dollar deferral amounts, ie. $50, $40, etc. What should occur if the employee does not make enough in their paycheck to cover the deferral amount? 

The plan sponsor has be netting them down to $0 in this occasion in the past. 

Plan sponsor realized that elective deferrals are not being withheld from terminated employees' last paycheck during 2017. We have confirmed this is inconsistent with the terms of the plan document and I am looking for input on the appropriate correction method under ECPRS. 

Can this be considered an Employee Elective Deferral Failure that does not exceed 3 months under Appendix A Section .05(9)(a) allowing for a QNEC of only missed matching contributions?  Section .05(9)(a) provides 3 conditions that must be met, including that correct deferrals begin for an affected employee no later than 3 months after the failure occurred. Here, deferrals ceased due to employee's termination, so there is no opportunity for correct deferrals to begin. But the failure occurred for less than a 3 month period for each affected employee (one paycheck), which I think is the spirit of  Section .05(9)(a).  Any thoughts?

We recently help complete VFCP Application for a sponsor.  The amount of the excise tax was about $30 an where it has been under $100 we always give it to the plan participants versus IRS.  We still complete the Form 5330 but do not file it.

The contact at San Francisco EBSA is telling Sponsor to File Form 5330?

Thoughts??