Not sure if anyone has come across this issue, but I have a client who is a professional at a professional service firm.  He serves as trustee to a trust and earns commission for his services as trustee.  By contract, he is required to turn over any commission earned to the professional service firm for which he works.  The trust will issue him a 1099-MISC and the commission is earned by him; however, due to being required to turn over the money, he doesn't get any benefit of the commission.  Does he have to pay taxes on the commissions and report it on his tax return, or can the tax somehow be picked up by his employer?  Does the assignment of income doctrine require that he report the income and pay the tax because he is the one that earned it?  

Employer exceeded the 25% limit for the employer contribution.

Does the 10% excise tax on the overage apply only if they have filed the corporate tax that includes the full deduction?

If the plan administrator pays for a benchmarking study, is that fee considered a settlor expense?  Or an administrative expense that can be paid out of plan assets?

I have a plan that includes two members of a controlled group, companies A & B.   They will be splitting the plan to avoid a 2019 audit, which they can do because they are very much two separate companies and two locations.  They will need to be tested together still because they are still a controlled group. 

The existing plan, covering employees of Company A, will continue to exist, but will be restated as of 8/1/2018 to edit a few details and remove the adopting employer.  There will be a new plan created for Company B and assets will transfer to the new plan. 

1) Am I correct in calling this a spin-off?

2) Does this new plan get to be #001 or is it now #002?  I would think #001 because it is the first plan for this particular EIN (of Company B) because Company B was merely an adopting employer of Company A's plan and, therefore, did not have their EIN reported on the Forms.

3) I read a thread that seemed to indicate that the new plan should be a continuation and restatement of the existing plan.  How can that be if the existing plan is continuing to exist.  Do you restate the existing plan and into two separate plans?

Thank you!

Kathryn

A Non-Electing QCCO (prospective client) needs a pre-approved 401(k) (not 403(b)) plan document.   So far I have not found one.   This is an existing plan using a 401(k) document and doing testing but not filing a 5500.  Their vendor holding the assets wants them on a document with an IRS Letter.   So 2 questions:

1. Anyone know of a Non-ERISA  (Non-Electing) Church or QCCO document for 401(k) with an IRS Letter?

2. Suggestions on what to do instead?  Have thought of freezing the 401(k) and starting a Non-Electing 403(b) for which I have a pre-approved document.  Cannot merge the 2 documents but the 401(k) does not file 5500's so might be the best we can do?

Thanks!

Hi to all and Happy Father's Day weekend to all the Dads!

We have a prospect who has a work force of non-owner, non-HCE employees.  In the profit sharing component of their potential 401(k) plan, they would like to favor a manager with a higher contribution than the other employees.  Our thinking at least initially is that since there are no HCEs and no Keys, they should be free to do this.  What are we forgetting to take into consideration?  We are so accustomed to thinking in terms of plans that have both HCEs and Keys as well as non-HCEs and non-Keys that we don't remember if there is anything to conform to when this is not the case.  There must be something - otherwise they might give the favored employee a contribution and nothing to those they don't like.....

Any thoughts will be appreciated!

CPA firm auditing a pension plan of 500 participants has found the goose who lays the golden egg - one participant's data was used in place of another, and they have determined this to be 'major' and necessary to include in their report, even though the effect on the valuation was about 0.75%.  We have identified that a staff editing the data made an inadvertent data error.  May I throw out there if anyone has provided an acceptable reason to the cpa's for such data errors?

Anyone else find this alarming?! Seriously? 

What if i'm a small plan sponsor and I've done my own lost earnings calc and deposited to the participant accounts, I've done an amount involved calc and filed and paid excise tax with the Form 5330. Seriously, the DOL is going to come after me for also not filing a VFCP?!

ARA article:

https://www.napa-net.org/news/technical-competence/regulatory-agencies/ebsa-threats-of-alternative-enforcement-actions-trigger-ara-response/

Letter from the DOL (see the last paragraph in particular):

https://www.napa-net.org/wp-content/uploads/letter-from-DOL-4.27.2018-002.pdf

ARA letter to DOL:

https://www.napa-net.org/wp-content/uploads/18.06.07DOLEnforcementFinal.pdf
 

Cash balance plan with formula something like 10% x YOP for HCES, .5% for NHCES.  Life insurance 100x projected benefit.  Plan names names for eligibility - covers 40% and is amended to add names when needed.

Tested on aggregated basis with PS/K that presumably covers everybody.

What are the issues?  BRF for the life insurance?  Anything else?

This is probably a dumb question. But how do In-Kind distributions work if the plan is invested in a group annuity? I'm assuming the In-Kind distribution rules do not apply to insurance products but I don't know where I can research this.

We have a plan that had an AFTAP of 76% for 2017, but we recently completed the calendar 2018 plan year actuarial valuation and the AFTAP is now over 80%.  That determination was made 6/11/18.

A participant making a claim for their benefit elected not to defer the election due to the prior restriction and decided to take the 50% lump sum and monthly payment for the balance.  The plan has a lump sum option and purchases annuities for monthly benefits. 

The benefit commencement date for this would be 6/1/18.  In this situation our procedure is to pay the lump sum portion, and pay the monthly benefit portion from the plan.  If/when plan comes out of restrictions, an annuity would be purchased for the benefit being paid from the plan.

The benefit is about to be processed, but has not yet been paid.  Would it be reasonable or even legal, to contact the employer (who is in very early stages of terminating the plan), explain the situation and ask if we could contact participant to ask again if they'd like to withdraw their current election so they could receive full lump sum?  Thanks

I have a client that has a 401(k) plan recordkept by us and a DB plan recordkept by another firm.  Most employees are eligible for both.  The compensation definition for all aspects of the 401(k) plan excludes commissions.  The employer has a few employees who earn commission only.  My general understanding is that if an employee has no eligible compensation for a plan, then they are excluded from the testing.  Further my understanding is that only folks who are benefitting form a particular money source are include in the 414(s) compensation ratio testing.  Therefore, in this case, if one of my commission only participants has only 100K in commissions, they would not be included in the 401(k) plan's testing (e.g. ADP/ACP, 401(a)(4)) because they are not benefitting.  Then, if they are not benefitting, then they should not be included in the 414(s) compensation ratio testing.  Is that correct?   

Part II - If they have a separate division that is include in the DB, but excluded from the definition of eligible employee for the 401(k) plan, then they should be obviously be included in the coverage testing for the 401(k), but not in the benefitting group and consequently, not included in the 414(s) compensation ratio testing for the 401(k) portion.  Does this sound correct as well? 

Thanks in advance. 

recently I was looking something up on the internet and the following appeared

but clicking on those links did nothing.

King Dave Baker indicated the following (after a big ARRRGGHHH)

I am finding that I can reach the intended target pages by doing some manual fiddling -- e.g. the first link below has a "t=4889" which means this link will work instead:

   https://benefitslink.com/boards/index.php?showtopic=4889

This is just a general "design" question

In the limited number of ESOP documents I've ever perused, they seem to generally provide for a 5-year distribution period for funds attributable to company stock. (longer for very large distributions) Several have also required a 5-year break in service prior to the payout even beginning.

Is the purpose of this to protect/cushion the employer/plan from big swings in stock prices -  so there isn't a major cash flow problem due to a high payout, or is it due to other considerations? I assume that if a sponsor CHOOSES to provide for immediate lump-sum, they could do that, even if potentially might be unwise/risky? Any thoughts on this in general?

Also got a question from a CPA on a plan we don't handle - if you have a 5 year payout on a person who has reached NRD, (assume it is over the $5,000 mark) and the person doesn't fill out the distribution paperwork for the first installment,  can the second installment be "forced" including the first missed installment? General question, as I don't have a document to look at anyway...

Thanks.

I am doing research on correcting excess deferrals for 457(b) plans. 

If you discover the excess deferral prior to the April 15th deadline and distribute accordingly, what is the corrective action? Does the employer have to issue a new W-2? Are there any other forms you need to submit? 

A participant has requested a hardship withdrawal to pay medical bills. They have old medical bills that are in collections at this time, and the date of service was back in 2015 and 2016. They even have a couple from the end of 2017, but nothing in the past 6 months. 

Is there a time limit on the medical bills, or is there a point in time where it changes from medical expenses to debt? 

What are the thoughts on approving this hardship?

A law office has two partners, and a new associate who is in his late 30s.  3 NHCE staff are in their 20s and 60s.  The new associate, who is a go-getter, got a lousy Profit Sharing contribution for 201, and was unable to benefit in the Cash Balance Plan.  He is unhappy with this outcome.

The partners want to keep him happy.  In terms of plan design, could we:

• Exclude the new associate from the CB plan (he isn't benefiting anyway).
• Amend the DC plan to exclude the partners, and change from a cross tested allocation to a design based safe harbor, such as an integrated allocation, so that the young associate can get a larger allocation in the DC plan.

If we were to do this, must we still combine the plans for 401(a)(4), or is the DC free from that requirement because it isn't subject to 401(a)(4), and the other HCEs aren't benefiting in that plan?

In other words, there is no crossover between the two plans where HCEs are concerned, so does this give us some wiggle room for the young associate?  

By the way, the associate is not Key.

Thanks!

Let's say a plan does not allow for in-service. Also, the plan document states that there is an exception for non-owners who are still employed (that they don't have to take an RMD until separated from service). I have two questions:

1) Can a non-owner (who is over 70 1/2) still elect to take an RMD even though he's not terminated? Meaning does that provision give an option for the non-owner to take an RMD or wait until terminated, OR is it a requirement to wait until terminated.

2) If the answer to Question 1 is "yes", can he stop the RMDs at any time after starting them or does he have to keep taking RMDs once he takes the first one?

Thanks.

Company X sponsors a calendar year-end safe harbor 401k. As of July 31, Company Z is buying Company X. More specifically, Z is buying the assets of X; it is an asset sale. X's employees will then go to work for Z.

If X terminates its 401k as of July 31, does it still get safe harbor protection for the final, short plan year? Normally, if safe harbor is discontinued during the year, then no safe harbor protection is given for that year. But if a company is purchased, then an exception is granted. Does this exception extend to an asset sale?