Hello,

My spouse and I have been covered under his previous employer's plan via COBRA since July of last year.  The plan renews in August of each year.  Last year we received no notification of any changes to the plan not coverage.  We did on 8/18 receive a notice of premium increase form the COBRA administrator, but were not able to get summary plan descriptions, etc. for several weeks.  We're going through the same thing now.  When must the administrator notify us of any changes including cost and/or changes to coverage, etc.?  What are the penalties for not complying, etc.?

Thank you!

Employer who has a SEP for himself hired an employee in 2016. Employee works throughout 2016, 2017 and 2018. Question is whether the employee is eligible for the SEP for 2018. I think yes, since they have worked 3 out of the last 5 years (3 of 3 here). I have someone telling me that they are not eligible until 2019.

Any opinions?  Thanks for any replies.

I have  a client that would like to change the hours required for a "year of service" for both eligibility and vesting from 1,000 hours to 750 hours.

For eligibility - I believe that, as of the effective date of this change, we will need to allow all employees to enter the plan if they have worked at least 750 hours in a year, even if it was a long time ago.

For vesting, do we need to adjust vesting based upon prior years of service during which an employee worked 750 hours (even if they were not in plan and/or did not work 1,000 hours)? 

I would think not.  I would prefer that the reduction in hours for a year of vesting service is applied on a prospective basis.

Thank you!

Adult child no longer lives with non-custodial parent.  Child is covered under non-custodial parent's health insurance as a dependent.  Insurer is mailing ALL health insurance documents/notices including health information to non-custodial parent.  (Non-custodial parent is opening the mail even though mail is addressed to adult child.)  Can the adult child require the health insurer send mailings to adult child?  Additionally, non-custodial parent is sharing the mailings with others....

We have a 401(k) plan with related participating employers.  One participating employer (the owner and his wife) is terminating its participation in the plan.  Is this a distributable event?  I think it is not as the plan did not terminate, one of the employers just terminated their participation in the plan. If it is not, a distributable event, are those account balances still included in the TH test? Any other TH considerations? I think  those employees would be included in the 410(b) test. 

What if it was a multiple employer plan?

I would appreciate any guidance/thoughts.

A cash balance plan is frozen 6/30 with an estimated distribution date of November 30.  The plan's interest credits were also frozen at 6/30.  Permissible?  Or should interest credits continue through the distribution date.

New client adopted MP and PS plans in 1999, moved the money a couple of times, and never restated them.  Surprisingly, everything else looks pretty much ok - he's actually been entering 5500 info online and filing directly.  Two participants in each plan - father and his daughter, who is term'd.

Any thoughts/experience with maybe merging the plans now and submitting a VCP filing as one plan?  Over $500K in each plan; $3000 fee per plan...

I noticed many life insurance companies fail to provide participant counts on their Schedule A letters. Sometimes there will be a note indicating that information is on file.  Also, some medical carriers will not report covered employee and cobra counts.  In our office, our approach is to obtain this info from either the broker or the plan sponsor themselves, but I've noticed some 5500 preparers will instead leave the item blank and check off "Yes" to failure to provide.

We've always felt it will make the 5500 stand out less if we can answer No, and it doesn't seem that after all these years of these questions that such carriers have adjusted their reporting. It doesn't seem like a big deal to go back to the Plan Sponsor. I'm curious what is done elsewhere.

Can a VCP filing be submitted anonymously to the IRS for any failure such as failures related to paying required minimum distributions timely and amending the plan document for compliance with EGTRRA?

I have a major QDRO issue. In 2004 I was granted a divorce with a lump sum amount attached of 80k in both the Decree and QDRO going to the Alternate Payee. Only the participant (me) had a attorney at the time of divorce. The pension plan initially rejected the QDRO with the lump sum dollar amount, as I was not vested in a lump sum amount at the time of divorce. The amount should have been in a percentage, with the number of years married taken into consideration. It does not appear the attorney was familiar with the QDRO process, model language or rules. After numerous rejections, as the same QDRO was being presented to the pension plan administrator by the Alternate payee. Also, the attorney did not attempt to rectify the QDRO issue through numerous rejections. In Sep2017 the Alternate Payee hired an attorney and presented a QDRO with a new date of determination of 1/1/2014, which was after the date I turned 50 and now eligible for a lump-sum distribution. I have a new attorney who is familiar with QDRO's. The argument now is that the date of determination is changed from the date the decree was signed to match the dollar amount in the decree. Also, the Alternate Payee's approved QDRO does not state clearly the date in which interest will be accrued from, as it appears the judge may use the (2004) date the decree was signed to accrue interest, which would be contradictory and possibly illegal. I also have a approved QDRO with the correct percentage that was approved in 9/2017. However, the judge has stated that he will only consider the lump sum dollar amount in the decree that matches the QDRO. This is a attempt to take advantage of the pension plan by changing the date of determination and I'm not sure if the complicated process is legal. Also, should the original attorney be held liable for legal malpractice?

The other thread on creative ways to handle a top heavy plan reminded me of something I thought up a while back but never went forward with because I felt it was too aggressive. However I can not find any reason why it would be actually disallowed. I'm hoping someone here can poke a hole in this scheme and teach me something.

This is a 401(k) plan with a single 100% owner who is the only HCE and the only key and is over 50 years old. The only contributions for the plan year are deferrals, although discretionary matching and nonelective contributions are permitted in the document. The plan passes the ADP test for the current year. The plan is top-heavy for the current year. The HCE's deferral contributions are equal to $6,000. Can we do the following:

1. Shift 100% of the NHCEs' deferrals to the ACP test. The ACP test passes because there are no HCEs included in the test.
2. Recharacterize the HCE's $6,000 deferral as catch-up as it now exceeds the limit of the ADP test, when testing on only the un-shifted deferrals. Since all of the NHCE deferrals were shifted, the ADR for the NHCE in this test is 0% and therefore the ADP limit for the HCE is 0%.
3. There is no top heavy minimum for the current year, since the key did not have any contributions other than catch-up contributions, and catch-up contributions for the current year are not taken into account for purposes of section 416.

My thinking is that this falls apart on step 1, that you can not shift deferrals into the ACP test just for fun, that there has to be an actual failure of the ACP test first. Is that actually written somewhere, or just accepted practice?

Code 4980 says that the excise tax on a reversion is limited to 20% if AT LEAST 20% of the surplus is allocated to plan participants. But it further indicates that not more 40% of the allocation can go to non-actives. And that even if more than 20% is allocated, only 40% of 20% - 8% - can go to non-actives. So for instance if 50% of the surplus is allocated to plan participants, 42% must go to actives and only 8% can go to non-actives.

Am I reading this correctly?

I am having general trouble understanding the third criteria of FBRIC determination.

Quote

The contract requires all participant-initiated transactions to occur at contract value (without any conditions, limits, or restrictions).

The contract will say something like below:

Transfers from Fixed Account Plus. The Participant may transfer up to 20% of the Accumulation Value allocated to Fixed Account Plus during each Certificate Year.

Is that a limitation that would violate the criteria of fully benefit responsive investment contracts?

As an additional question, are there any good CPE's or just websites or videos with in depth explanation of the investment vehicles we see in these plans (GICs, PSAs, etc.)?

Today my skills as a magician are being questioned, as I have failed to pull a rabbit out of hat....

A referral partner has brought us a situation with a client of his who is not our client.  The party in question has a 401(k) plan that eliminated its Safe Harbor match in 2012 and has been subject to all testing ever since.  This employer is angry because he has been told that for the first time, his plan became Top Heavy for 2018 based on the 12/31/2017 results of the test.  He has been told that if he doesn't want to be obligated to make a Top Heavy contribution of any kind, then the Key employees cannot defer in 2018.  Deferrals count, and even if a Key only deferred 1% of pay, then the company would owe the non-Key participants 1% of pay as a TH minimum contribution.  Of course if any Key deferred 3% or more, then the company would have to make the standard 3% TH minimum contribution.

The referral partner is looking to us for some kind of magic trick to allow the Keys to defer whatever they want to defer and somehow not owe a TH minimum contribution.  My crystal ball must be cloudy or something because there's nothing I can find to do about 2018.

For 2019, they should adopt Safe Harbor provisions again, whether it's the 3% SHNE or the basic SH match.  If they aren't willing to do that, then they just have to accept the fact that the Keys can't defer.

Am I missing something?  The referral partner has been told that a "creative solution" should be found.  I can think of all kinds of creativity for failed ADP/ACP tests, cross-tested formulas that don't work out, etc., but I don't know of a "creative" solution to Top Heavy!

Any ideas will be appreciated.  Thanks!

We all know you can't have a SIMPLE and 401(k) in the same plan year.   However it's possible to have a year-end receivable contribution for the SIMPLE that would be made after the PYE, which I believe is ok. 

But here's this situation:

Employees are paid bi-weekly.  The period covered is 12/16/2017 - 12/30/2017; check date 01/07/2018 (I'm aware that was a Sunday!)  Anyway - the payroll company report indicates "Week 1" and will report that as 2018 W-2 wages on a cash basis.  SIMPLE Withholdings were done.  Accountants just discovered this now.  (SIMPLE accounts have already transferred to the new 401(k) accounts for each person.) 

What's the fix here? 

A participant directed plan has a core fund line-up and a brokerage window.  There are times where certain funds invested in by the participants in the brokerage window are liquidated/merged and their money in those funds are moved to a replacement fund.  I understand that brokerage windows are not DIAs and therefore do not have the same notice requirements.  However, a description of the window needs to be provided in an annual 404(a)(5) notice.  Is there a requirement to disclose to participants in the brokerage window prior to the replacement similar to what is required of other replacement funds in the core line-up? 

Thank you!

I have a plan that currently allows profit sharing contributions to be taken from the plan after the assets have been allocated for 2 years and requires that they participate for at least 5 years. The client wants to take this distribution option away. I am not sure if this is considered a protected benefit of the plan. I have been researching this for awhile and still can't find anything to really confirm whether it is or not. I have read some conflicting information. Has anyone come across this before?

I had an auditor call and ask if taxable income for group term life benefits is included in the deferral calculation and if not, how is it excluded in the document? He was at a recent seminar and the presenter scared everyone with an example where someone was wronged by this and missed out on a very small match ($2.00ish) and it cost a fortune to resolve.

For this plan, we use 3401 compensation, no exclusions. We do include the fringe amount for the life insurance in the PS allocation. The client does not include in the deferral calculation. Their logic is that GTL income is not compensation paid to the participant, it is just taxed and not compensation included in the deferral calculation. For example, one person makes $50,000 and $30 in GTL annually. 10% deferral is $5000 not $5003.00. Does this make sense and does 3401 without exclusions support this?

Thanks for any input 

This kind of stuff used to happen eons ago when there were more pooled plans, but I haven't seen it in a long time.

Pooled account. Plan apparently didn't have a checking account. Check for (x) sent to the Trustee, for a distribution to a terminated participant.

Trustee deposited it into the EMPLOYER checking account and simultaneously wrote a check to the terminated participant for the appropriate amount, and submitted the 20% withholding to the IRS.

Yeah, it's a PT, but what is the penalty? There is zero loss or gain to any party involved, and no "amount involved" if one were to try to pay a 15% excise tax anyway. What do folks do with this on a practical level, rather than a theoretical level? Or is there an exemption for this that I'm missing?

I am curious how others set up and track these plans. Assume individual accounts.

So prevailing wage contributions are made to offset 3% SNHE contributions. All non PW EEs receive 3% SHNE from the employer. However, as I understand it, any PW contribution in excess of 3% of pay would be classified as discretionary profit sharing. 

Should I be attempting to set up two DB/PW buckets? Or is it allowable to re-source the money into SHNE / discretionary?

The reason I ask is because down the line, it may get tricky with determining amounts available for hardship or early in-svc withdrawals and the like.

Thanks