I was thinking years ago there was a process that a Plan could do to eliminate the QJSA provisions (joint and survivor annuity) when the monies sources do not require it.  I searched over the weekend and came up blank.  Can someone help me with a cite?  Or am I dreaming.

thanks in advance

I suppose the maximum tax rate on the federal level for reversions to a corporation is now 71%.  Is that enough to re-think reversions?  

2018-7-22 the ESOP RMD Question

The client is a participant (employee) in a ESOP which holds 100% of the "employer securities" of the Plan Sponsor corporation (employer).

A. The client is almost 70 years of age, is currently employed and plans on continuing to work for the corporation until age 75 (W-2 income). The client-employee is presently inquiring regarding possible approaching RMD requirements and distributions.

1. We are informed that if the client-employee continues to be employed beyond age 70 1/2, then RMD distributions are not required until retirement.

2. We are also informed that if the client-employee is a "5% owner", then the exception deferring RMD distributions until retirement may not apply.

3. We are also informed that for purposes of determining the "5% owner" rule of the plan sponsor, the employer securities held by the ESOP are not used in determining the "5% owner".

QUESTION 1: Is this correct? And do you have any legal authority or citation on this issue?

B. Under the terms of the ESOP plan, the client-employee-participant can be offered a partial or lump-sum distribution of the employer securities (e.g. annually) which, if elected is distributed to the participant by the ESOP as employer securities under a "repurchase-buyback" provision required by the plan sponsor corporation who buys back the distributed shares resulting in the retirement income to the participant ( 1099-R).

QUESTION 2 : Can the client received both W-2 income and 1099-R distributions beyond age 70 1/2 as long as he is still employed?

Thank you

tdslaw@cox.net

Hello everyone,

I am so confused and could use some assistance.  I had a 401K balance of $58K but have an outstanding loan of 10K so the balance that shows up is now 48K.  I've been paying it back and all that. I took it out to pay high interest credit cards.  Anyway I have just resigned.  Now I know I will have it taxed as income and all that plus a 10% penalty.  My question is regarding the balance of the 401K.  It is 48K correct?  They won't reduce it by another 10K to "repay" the loan will they?  It seems like a silly question but I'm not good at this.

Thank you.  

Are there any restrictions on what types of investments can a money purchase plan invest in?  Can you loan money out of the plan if it's for investment purposes and not for extraordinary circumstances? 

Thanks

Scenario: The safe harbor notice went out at the correct time prior to 2017 (November 2016). The information in the safe harbor notice was correct within the notice EXCEPT the notice was to apply to 2017, but the notice stated that it "applies to the plan year beginning 1/1/2016." 

In all other ways, other than the Plan Year identification, the information was correct.

The questions are:

1) Can this be considered a typo/mistake of fact so that 2017 can be tested as a safe harbor plan?

2) Should this be self-corrected by providing all the participants who should have received the notice stating for plan year beginning 1/1/2017 with a corrective employer contribution? Most of the employees are already making elective deferrals.

Thank you,

congress introduced a few bipartisan bills that could have an impact on NDT- anyone had a look yet- specifically 

S3221 Retirement Felexibility act

this one specifically is designed to incentivize the using ACA and auto escalation and provide some flexibility on SH contributions - anyone have thoughts on this? i was curious as to the flexibility of SH contributions to satisfy testing- it appears to look similar to QACA - see below

EC. 2. ADDITIONAL NONDISCRIMINATION SAFE HARBOR FOR AUTOMATIC CONTRIBUTION ARRANGEMENTS.

(a) In General.—Subsection (k) of section 401 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

“(14) SPECIAL NONELECTIVE AND MATCHING CONTRIBUTION RULES FOR SMALL EMPLOYERS.—

“(A) IN GENERAL.—In the case of a cash or deferred arrangement maintained by an eligible employer (as defined in section 408(p)(2)(C)(i)), for purposes of paragraph (13), the arrangement shall be treated as meeting the requirements of subparagraph (D) thereof if under the arrangement, the total elective deferrals (as defined in section 402(g)(3)(A)) with respect to any employee do not exceed an amount equal to the applicable percentage of the limitation otherwise applicable under section 402(g).

“(B) APPLICABLE PERCENTAGE.—For purposes of subparagraph (A), the applicable percentage with respect to an arrangement is—

“(i) 40 percent in the case of an arrangement which does not meet the requirements of paragraph (13)(D) and is not described in clause (ii) or (iii),

“(ii) 60 percent in the case of an arrangement which is not described in clause (iii) and which would meet the requirements of paragraph (13)(D) if—

“(I) ‘equal to at least’ were substituted for ‘equal to’ in clause (i)(I) thereof,

“(II) ‘2 percent of compensation, and such matching contributions meet the requirement of subsection (m)(11)(B)’ were substituted for ‘6 percent of compensation’ in clause (i)(I) thereof, and

“(III) ‘1 percent’ were substituted for ‘3 percent’ in clause (i)(II) thereof, and

“(iii) 80 percent in the case of an arrangement which would meet the requirements of paragraph (13)(D) if—

“(I) ‘equal to at least’ were substituted for ‘equal to’ in clause (i)(I) thereof,

A 401k plan has a safe harbor design using matching contributions.  The plan is not top heavy.  There are no profit sharing contributions but there are a small amount of forfeitures to be allocated to participants who work at least 1,000 hours and are employed at the end of the year.  New comparability (with each participant as a group) is normally used to allocate the forfeitures, however, doing the average benefit test and including the deferrals and match produce results much worse than if the forfeitures were allocated on a comp-to-comp basis.  If the forfeitures are allocated on a comp-to-comp basis, would the ABT still be needed to be done?  Can this type of allocation be considered nondiscriminatory?  

We have a Plan that allows for in-service distributions once a participant has achieved 10 years of service, at any age.  Plan contribution sources are 401(k), Employer non safe harbor contributions, and Participant Rollovers.

A participant who was under the age of 59-1/2 has received all of his employer and rollover monies and also some 401(k) monies which are restricted.  Under EPCRS the correction is to take reasonable steps to secure repayment of the excess amount.  We are assuming the participant does not have the capacity to return the funds.  In that case, as the over payment to the participant was a premature distribution the employer is not required to make up the difference.

It appears upon our initial review that a VCP filing will be necessary (and self correction not available).

I would be very much in appreciation if anyone has any comments or thoughts.

This has happened a few times in the past couple of years, so I was wondering if anyone else had the same experience...

Plan sponsors change their EINs for reasons.  When we complete the 5500-SF, we note on Line 4 that in the previous year, they used to be a different name and different EIN; presumably that is there to help EBSA track the filing when the EINs don't line up.  A year or so later, the plan sponsor gets a letter that a filing is missing.  When we finally speak to someone, they tell us that the old EIN needs to have a final 5500-SF filed showing the participant count going down to zero and the assets transferring to the plan under the new EIN.

"But it's the same plan."  Doesn't matter.  In their tracking, that EIN is still open and needs a filing until the participant count (and the asset values, but that's secondary, it seems) goes down to zero and a final filing is received.  We have been instructed to correct this issue by actual IRS agents by sending in amended filings showing this, even after they acknowledge that we have entered the information on Line 4 of the new EIN's filing that references the old EIN.

So we have started proactively filing final 5500s for plans where the EIN changes (and "first filings" under the new EINs) when we see this happening.  We've gotten no correspondence back on any yet, but there are so many questions... What about timing requirements?  What is an appropriate date to use as the transfer, and when does that mean the 5500 is due?  Whose crazy idea is this, and are they serious?  And so on.

Anyone else running into this?  When it happened once, I was willing to just go with what the agent told me to close the issue.  But when it got to several times, and now that our filings that continue the pattern seem to be going through OK, I'm wondering if this is some new directive that I missed.

Thanks.

Client needs assistance sorting out issues concerning an existing solo 401-k plan. 

Concerns: Proper original setup and on-going service. 

Can anyone help? 

Please provide your recommendation. 

We have an Employee who has properly opted out of a 4019k) plan.

I know he is counted as includable and not benefiting for coverage.

But how do I count him for 5500 purposes?  Is he a participant for 5a-b?  What about 5d(1) and (2)?

Plan year runs from 7/1 to 6/30.

During calendar year 2017 a 44 year old participant deferred $18,000 pre-tax 401(k) plus $4,500 Roth 401(k) (total = $22,500, see breakdown below).  The famous payroll company neglected to report the Roth deferrals in box 12 of the W-2 (AA) so this was not caught until after 4/15.

Between 1/1/2017 - 6/30/2017: $5,200 pre-tax 401(k) plus $3,900 Roth 401(k) (total = $9,100)

Between 7/1/2017 - 12/31/2017: $12,800 pre-tax 401(k) plus $600 Roth 401(k) (total = $13,400)

Are we permitted to distribute the $4,500 in excess deferrals from Roth?  Is it relevant that all but $600 in Roth deferrals were made during the prior fiscal year (6/30/2017)?

Thanks for any input.

A plan was frozen 2017 with no accruals that year. Doing a 401a26 test under average accruals to date as of 1/1/2017 it passes for 2017. The plan is formally terminated in 2018 and paid out. Does the plan have to pass 401a26 for 2018?

In the event a defined contribution or 403(b) plan terminates in 2018 and all assets are distributed by 12/1/2018, a final 5500 will be due 7 months following the date of complete distribution of assets so by 7/31/19. However, will an SAR need to be distributed in connection with this final 2018 5500? The DOL regulations state the SAR is furnished to each participant, but as of 7/31/19 there will not be any participants so can I assume an SAR does not have to be distributed?

Thanks! 

a) Obligation to furnish. Except as otherwise provided in paragraph (g) of this section, the administrator of any employee benefit plan shall furnish annually to each participant of such plan and to each beneficiary receiving benefits under such plan (other than beneficiaries under a welfare plan) a summary annual report conforming to the requirements of this section. Such furnishing of the summary annual report shall take place in accordance with the requirements of §2520.104b-1 of this part.

I have a DC plan that terminated in May 2017 and all participants have been distributed by 12/31/2017 except for one account.  We had a sample QDRO provided to us, but the ex-wife of the participant refuses to sign the QDRO.  What can the plan do at this point?  The employer does not want to keep paying for filings indefinitely.

Is there anything that can be done?

Hello, I was wondering if anyone knew of any SEC guidance concerning whether filings such as the Form 11-K could be paid with plan assets.

There is some scant DOL guidance on the issue of paying for expenses that benefit the employer from plan assets, but none that specifically mention SEC filings. 

We processed a QDRO that asked that the Alternate Payee receive 50% of the account, as of 1/1/2018, including earnings from 1/1/2018 through the date of division.  The QDRO was processed and the Alternate Payee too her portion as a lump sum distribution.

Now the parties are saying Alternate Payee's portion should not have included earnings.  The QDRO clearly said to include earnings, and all parties and their attorneys signed it, so there was no error on our part.  But now the parties want to reverse part of the distribution to the Alternate Payee (i.e. they want the AP to return the earnings amount to the Participant's plan account).

If the AP had left her portion in a qualified retirement plan, I'd just have the parties execute a new QDRO to transfer the earnings portion from the AP back to the Participant.  But, since the AP took the money as cash, this is not an option.  Is there any way to reverse the QDRO to get the money back into the Participant's account?

Thank you!

Suppose that you have a plan with 100 participants. All of the participants were hired and became participants on the effective date of the plan. Let's assume 6 year graded vesting. Two years into the plan, everyone is 20% vested. Early in the 3rd year, the employer fires 25 employees for dishonesty. 

Questions:

1) assuming the plan population has stayed at 100, is this a partial year termination? In determining the ratio, since these terminations are employer initiated, it would seem like we would have 25 on top and 100 on the bottom. 

2) If it is a partial termination, must the plan vest the 25 dishonest former employees 100% in their accrued benefits? If yes, it certainly doesn't seem fair.