What is the timing for adoption agreements for new plans to be executed? Must they be signed before the effective date of the plan? If a plan isn't adopted timely, do you need to file with the VCP? Would this be considered a nonamender failure?

Hello,

We are preparing the year end valuation for a small 3 life 401(k) Plan.  For 2017, one participant rolled their account to an IRA (direct rollover).  A 1099-R was never issued.

At this point, how should this be corrected.  Since this was a non-taxable event for the participant, would it be ok to let it go?

Thank you.

I have a business client who is getting grief from their bank requiring them to inject some capital into the business. Unfortunately, their money is tied up in long-term construction projects and cash is tight. The company has a SIMPLE IRA for two of the three owners to participate in. The other owner and the rest of their employees are in union plans and are subject to collective bargaining agreements. I know, they should have listened to me years ago and establish a 401(k) plan instead of the SIMPLE.

Will the following idea work???  Have the company establish a profit-sharing plan now that accepts rollovers and allows plan loans. Roll enough money into the PS plan from the SIMPLE and then have the two owners take loans sufficient to satisfy the bank's capital injection requirement. No contributions will be made to the PS plan for 2018 so as to not violate the exclusive plan requirement as it is my understanding this requirement is satisfied as long as no employee accrues a benefit under a QP in the same year as the SIMPLE IRA is maintained.

We can then implement 401(k) provisions as of 1/1/2019 and have them cease making SIMPLE IRA contributions in 2018 and roll the rest over to the 401(k) PS plan in 2019.

Any problems with this idea?

Thanks in advance.

Individual not eligible to participate in the plan allowed to participate for a number of years.  Failure discovered after individual's death.  Beneficiary paperwork for plan shows wife as 100% beneficiary.  Not sure what if there is a will or if wife is named as beneficiary.  Since the individual was not eligible to participate in the plan, we are thinking that the beneficiary provisions of the will (if there is one) or state law should control who gets the corrective distribution.  Thoughts?

Let's say that a company excludes one of its divisions entirely from the plan. Would that affect the Top Heavy test in any way? The software provider we are using considers excluded employees to not be participants and doesn't even count them in the Top Heavy test. However, that doesn't seem correct. Shouldn't these employees (and their year end balances) still be counted in the Top Heavy test?

Fact pattern:  Plan allows in-service withdrawals after age 59 1/2 from any (all) fully vested accouts. 

Active participant is over 59 1/2 with 401(k) , roth and match balances in her account.  Her roth contributions started in January of 2014 so she has not yet met the 5-year rule.  She has made ~$21,700 in roth contributions and the earnings on that are ~$8,178.  She would like to take $20,000 from her roth account only.  The participant basically wants to "net" $20k.

It is my understanding from reviewing the regs that there will be a prorata portion of the withdrawal that will be considered earnings and will be taxable to her because she has not met the 5-year rule. ( I came up with the "earnings ratio" and based on that it appears that ~$5,474 of her withdrawal will be taxable to her.)   I understand the 10% excise will not apply, however because she is over 59 1/2.

The plan is with a large 401(k) vendor and I'm checking with them to see how they would apply taxation as well as how they do the calculation. 

In the mean time, anyone agree or disagree with my thought process on the calculation?

"FYI" - Edited to add the following, which is from the IRS website:

What happens if I take a distribution from my designated Roth account before the end of the 5-taxable-year period?

If you take a distribution from your designated Roth account before the end of the 5-taxable-year period, it is a nonqualified distribution. You must include the earnings portion of the nonqualified distribution in gross income. However, the basis (or contributions) portion of the nonqualified distribution is not included in gross income. The basis portion of the distribution is determined by multiplying the amount of the nonqualified distribution by the ratio of designated Roth contributions to the total designated Roth account balance. For example, if a nonqualified distribution of $5,000 is made from your designated Roth account when the account consists of $9,400 of designated Roth contributions and $600 of earnings, the distribution consists of $4,700 of designated Roth contributions (that are not includible in your gross income) and $300 of earnings (that are includible in your gross income).

 Since I make designated Roth contributions from after-tax income, can I make tax-free withdrawals from my designated Roth account at any time?

No, the same restrictions on withdrawals that apply to pre-tax elective contributions also apply to designated Roth contributions. If your plan permits distributions from accounts because of hardship, you may choose to receive a hardship distribution from your designated Roth account. The hardship distribution will consist of a pro-rata share of earnings and basis and the earnings portion will be included in gross income unless you have had the designated Roth account for 5 years and are either disabled or over age 59 ½.

Employee was hired on 1/15/18. Employer laid off employee on 2/15/18. Employee was rehired on 5/7/18. Plan has 90 day service requirement to be eligible for the plan. Contributions can start on 1st day of the month following the month when 90 day service requirement is reached.

I've seen plenty of examples if the employee terminates/quits/is fired/etc. Is a layoff viewed in the same way? In most examples I see, it appears that time from 2/15/18 to 5/7/18 wouldn't even be considered a break in service. Is this correct? 

My thought is that as of 6/6/18, employee has completed 61 days of service (1/15-2/15 and 5/7-6/6). The time in between doesn't count and 29 days from now, on 7/7/18, the employee is eligible. Entering on the 1st day of the following month would mean employee is eligible to contribute and get employer match beginning on 8/1/18.

Can anyone confirm or correct me? Thank you!

Was interested in knowing which of the major recordkeepers actually file the 5558 for the plan sponsor?  Most will prepare and some will actually mail/file.  

If a member of an excluded class was allowed to participate in the plan, do you need to retroactively amend the plan to allow for their participation and then file through VCP or can you just amend as part of SCP?

Insurance company trying to sell  a 162f plan to a client.  From what I can tell, the company can pay premiums on a whole life life insurance policy for an executive.  The premiums paid are taxable to the executive and the executive owns the policy personally.

Why is this different than giving the executive a bonus and having the executive go out and buy a life insurance policy on his or her own?

I presume there is something to it because the IRS gave this it's own section of the Internal Revenue Code.  But if I put on my cynical hat (which is handy at all times!) perhaps the insurance lobby requested this change so they could market it as a "162(f) plan" which just sounds like it must have some tax favored status.

a law firm has two 401(k) Plans,  plan 1 is for the Partners and Staff,  Plan 2 is for the Associate Attorneys.  

Plan 1 has deferrals and Profit Sharing (NEw Comp)

Plan 2 has deferrals only.  

There are HCE'S in both plans, and the plans have always passed coverage 

They would like to add a 2% match to Plan 2.     As long as it will pass coverage, is this allowable?   

Hello everyone. If a participant needs and obtains spousal consent for an in-service distribution, does that spousal consent remain in effect for subsequent distributions? If so, for how long does the spousal consent remain in effect if they want to take a second distribution after the first distribution?

Hello.  We are TPA for a plan that utilizes an auto-enrollment feature in the plan.  Client realized that he missed enrolling a handful of employees in 2017.  The client did not contact us to determine the best way to handle this situation.  They enrolled each employee approximately 3 months late.  Client did not know that by not providing a notice to the participants within 45 days of starting the deferrals, that client is now subject to QNECs for these participants. 

1.  Have we interpreted the ruling correctly that the client is now subject to making required QNECs for the affected participants?

2.  How are the participants reported on the ADP Test?  Do we include the QNEC contribution in the testing?

Please advise.  Thanks.

I am so glad I finally found this forum! Let me start with my case background. I have a QDRO from a divorce dating back from 1992. I am the AP. I am from Tennessee. I had forgotten about it until recently discovering the certified letter in my files from X10 in Oak Ridge confirming that I had the QDRO in place. I immediately contacted them as it was incorrect in last name and address and so I updated it. Several months went by and they sent me some plan materials but nothing of real value. I contacted them again recently and asked for better information and they got back to me and stated I did not have a QDRO so I sent them a copy of their certified letter to me. Last week I got a letter in the mail that stated that pursuant to 414(p) of the IRS code, I was eligible to commence my portion of the pension beneft due my ex husband. And it was payable for my lifetime. They then asked for proof of age, some tax withholding and direct deposit paperwork. so they could get me on the monthly payroll cycle ASAP.  But then I had some questions for them. I asked if I die, does my benefit continue to a beneficiary? No they said. And if he dies, does it continue to me? Yes they said. But then the lady I am in contact with said that they had just located the QDRO documentation and they are checking with their Administrative Committee on past payments and how to proceed with that. She will keep me posted on further developments but wanted to get me into pay status as soon as possible since it may take a while to determine the past payments.

So, my questions are, will I somehow be getting past payments of monthly benefits that I should have gotten as a result of the company losing the QDRO and not attaching it to my ex's benefit before it was distributed? And where will that money come from if it is determined that I am entitled to it? He, I am sure is retired as he is on disability and has been for quite some time. I am unsure of his date of when he left the company as we do not communicate at all (really bad divorce). I did ask the lady I am in contact with in Benefits for the date of when I was eligible to start my benefits but she did not answer that question in my last email.

Also, should I get a copy of my QDRO with all this going on? I can't seem to find a copy in my paperwork.

I would appreciate any advice in this matter.

I know that in-service withdrawals are a protected benefit, but what about limitations on such withdrawals?  For example, if the participant is only allowed 2 withdrawals per Plan Year.  Would this also be considered a protected benefit? Or would this be an administrative election?

We have a partial plan termination of a pooled profit sharing plan where 69 our of 76 participants have balances under $5,000.  13 of them have less than $200.  Our office uses a popular distribution company that charges $35 per person to prepare a distribution and they do the 1099-R at the end of the year.   We also charge a fee on a sliding scale for processing distributions, although for balances under $200, we usually do not charge.  In this case, we may need to charge something if we have to invest a lot of time in hunting missing people.  That issue aside, for 8 of the 13 people, there isn't even enough money to pay the processor's $35 fee.  My question is this:  are these little balances considered "de minimis" amounts and can they simply be forfeited?  Or must the employer pay the $35 per person so the distribution company can cut a check for as little as $4.26 up to $179.02?

Any advice based upon what you and your firm do in such circumstances will be greatly appreciated. Thank you!

I have always used the Up-84 mortality table when doing cross testing on a New Comp Plan.  My plan is failing the average benefits test slightly (69.89%)  I noticed in the administrative system that I use, there is a table called 2017 417 (e) (3).    If I use that table the Average Benefits test will pass at 70.20%.    The plan document does not state which table to use, so, Is it ok to use this table when running the test?   

Suppose the  record keeper received employee deferral  contribution through wire after the trade for the week was completed.

And the record keeper waited the next trade to deposit the deferral contribution in to each employee deferral accounts.

How should it be treated the days elapsed between employee deferral contribution received and deposited in to each employee deferral account for VFCP application and lost earnings purposes?

Client has a calendar year SH NE 401(k) plan. PS allocation conditions are 1,000 hours and last day.  The client wants to amend the plan retroactively to 1/1/17 to remove the last day requirement since operationally that is what happened.  Can we use an 11(g) amendment to accomplish this?  If not, is there any other way to accomplish this?

Can a nursing home 403(b) plan permit participants to make 15-year service catch-up contributions? I don't think they would be considered a home health service agency or health and welfare service agency. Could it be considered a hospital?