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??

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?