A new client of mine worked many years for the FAA and was covered by FERS. Under the property settlement, the ex spouse receives 1/3 of the monthly benefit under the pension program and 1/2 of the thrift savings plan. Are two COAPs required or can both benefits be included in one COAP?  Thanks!

A CB/DC plan passes coverage using the ratio percentage test. For my 401(a)(4) testing, some rate groups are less than 70%, so for rate group testing I need the average benefits test to pass. Can the average benefits test pass on an equivalent contributions basis, while the  a4 rate group testing is being done on a benefits basis?  

Does anybody know if there is a problem taking a hardship for elective surgery aka cosmetic surgery.   We have a participant who wants a hardship withdrawal for surgery that is classified as cosmetic.  However, after hearing the facts - it really is more preventive.  They have submitted the surgeon's estimate as proof of the amount requested.  Thoughts/comments appreciated.

Thanks

I have a deceased participant, no designated beneficiary, and no spouse/child/parent.  We have been making RMD payments to the Estate for several years, and the participant’s brother is the executor (and plan trustee), so he gets the RMD checks and deposits to an estate account.  I should probably say this is for a qualified retirement plan, not an IRA.

The Plan is now terminating, so the financial advisor is looking to help him roll over the full balance , but is having trouble with what type of rollover account is acceptable (his own firm is questioning).  Most literature indicates that non-spousal beneficiaries may only roll to inherited IRA.  How does one establish an "inherited" IRA when no designated beneficiaries exist in the first place?

Thanks for any input!

How do you interpret the last day allocation condition? The IRS language states that you should be employed on the last day of the plan year, which I believe can be interpreted 2 different ways:

1) You should be employed as of the END of the last day.

2) You should be employed during any part of the last day.

So, if someone was terminated on 12/31/2017, do they receive a contribution that has such allocation condition. The software we use would not allocate a contribution to a participant terminated on 12/31. However, I have seen some responses on the forum that state that the participant would be entitled to the contribution. Is there any additional guidance on this from the IRS?

Can a participant rollover their entire balance to an IRA and then take their RMD from the IRA? 

  I told the participant they have to take their RMD and then roll over the rest and the participant is adamant that he is not taking a cash distribution from the retirement plan.  I had thought that the RMD must be taken first and the remaining could be rolled over to the IRA.   He even said he called the IRS and they told him he did not have to take the RMD from the Retirement plan.   Maybe I've been misinformed all these years?  

In a sane world, I would never ask this question, but..

This plan has been filing 5500-EZs for years.  This year, our firm has elected to change to filing the one-person version of the 5500-SF for better tracking, and I'm wondering if we should be checking the "first return/report" box on Line B because this is the first filing with EFAST as opposed to filing with the IRS all the previous years.  Any thoughts, experiences, anecdotes...?

Client had decided to terminate its Multiple Employer Plan which has been undergoing a DOL Audit for 2 years.  Reason for terminating is unrelated to the audit.  Is it advisable to proceed with termination during an open audit?  Any potential ugliness if proceeding before the audit is closed?

A plan excludes unions and has a last day of the plan year allocation requirement for profit sharing contributions.  An employee enters the plan, but later during the year changes job to a union position.

Can the plan require a participant to be an eligible employee on the last day of the year to be eligible for an allocation, or is that limited to employment on last day of the year?

A small DB plan covers husband and wife. They also have 3 long term employees that are covered under a profit sharing plan. They always pass 401(a)4 because they always make a 12% profit sharing contribution and there is adequate age difference.

The DB plan now has excess assets of about $100k over 415 maximums.

The document is a volume submitter with one of the actuarial equivalent selections as 417(e) assumptions. The plan has operated under more conservative assumptions. If the actuarial equivalent is amended to the 417(e) assumptions and then terminated and distributed next year, it is likely they will not have excess assets, especially if they take an in-service distribution of the bulk of the assets now.

I know this would likely be seen as discriminatory. However, they would be willing to make a 25% profit sharing contribution to employees this year. If the 401(a)4 test were then run on an accrued-to-date method they would easily pass. In running the test, we would convert the monthly benefits to the actuarial equivalent based on prior assumptions.

Any thoughts?

Thanks.

Small  (less than 100) 401(k) plan does not presently allow for loans - but would like to add them, subject to the hardship rules. 

they would like to restrict salary deferrals while a loan is being repaid. Meaning the participant cannot make deferrals until the loan is repaid in full. The thinking is that if the participant has extra cash available to make deferrals, then they should be using that extra cash towards the loan. 

i don't see anything on the face that would make this provision a problem - except a possible BRF issue. 

If loans are available only for hardship purposes, probably NHCE will be the primary users. If so, then the deferral restriction will primarily affect NHCE. HCE that do take a loan would likely have more means to repay it quicker. 

Am I over thinking this? 

Thoughts?

Should this provision be allowed?

Fund-holder notified client he over-shot his $18 due to the fact the payroll company did not cut off his payments at $18 for the year.

They refuse to do the excess earnings calculations.

Is it out of the realm of possibility to use the VFCP Calculator for this purpose?

A document is written:

Normally a plan with 1 year of service and 21 is written:

You will be eligible to participate for purposes of salary deferrals when you have completed one (1) Year of Service and have attained age 21.

But for some reason recently it was written as:

You will be eligible to participate for purposes of salary deferrals when you have completed 1,000 Hours of Service within your first 12 month(s) of employment and have attained age 21.

The client is coming back to us saying he thought the eligible was 6 month, based on the above.  I can see his point.  You could interpret it as once I work 1000 hours(6 months for full time employee) I become eligible.  Doing this for years I know it's 1 year but could see his arguement.  Has anyone else seen it written this way?   

Do control group rules affect successor plan rules? I have a person who owned two businesses, only one with employees. This Company with employees  has been sold and all employees hired by the new company. The business owner/sales person is going to a 1099 consultant to the business. Can they establish a 401k plan under the other business they owned (or a new one they create)? Or should they just establish a SEP which I know is not a successor plan. 

Thanks

A potential cash balance plan client made the 2017 contribution in 2017. It has now been determined that this contribution is over the maximum allowed. We think the excess can be transferred to the client's profit sharing plan but can't find clear guidance on this.

I have a cafeteria plan that is on a calendar year basis.

The client's insurance policies are on a fiscal year basis (5/1-4/30).

I am aware of how to file Form 5500 with these policies.

The question was asked as to how to handle the "lock in" period.

The employees should be able to enroll and make changes for 5/1 open enrollment.

The cafeteria plan has a January to December term on their forms and would normally be "locked in" for this period unless they had a Change in Status.

What are your thoughts on this considering the two different periods?

I suggested changing the cafeteria plan year to match the insurance policy years to make it less confusing.

Thank You,

We were just notified by a brokerage firm that our client, sole shareholder of his PC apparently over contributed to the employee portion of the plan.

When reviewing the contribution history from 1/1/2017 - 12/31/2017, it would appear as though the balance of his elective contribution was for the prior year.

He is not eligible to make catch-ups.

I know that sole proprietors have until the due date of the business tax return including extension to contribute to the plan, including any employe contributions, but I do not think that applies to shareholders?

Looking for confirmation on this to make sure the ADP safe harbor is not violated subjecting plan to the ADP test - 401k plan has an enhanced safe harbor match of 100% up to 6% of compensation. Employer is considering adding a discretionary tiered match based on years of service, so that employees with 15 - 19 years will receive a 100% match up to 1% of pay, employees with 20+ years will receive a 100% match up to 2% of pay. The total match under both formulas for the employees in these higher tiers, for which there will be HCE's, would be 200% up to 1% and 300% up to the first 2%. I believe this creates a higher rate of match scenario and plan has to run ADP, ACP and BRF testing. Or, is it just a matter of running ACP and BRF on the discretionary tiered match?

Thanks for your comments!

Some 401(k) plans have many different types of distributions besides lump sum on termination of employment, e.g. hardship, non-hardship in-service after attainment of age 59-1/2, in-service at any age from rollover account, partial distributions after separation from employment, and RMDs. If the plan also has Roth elective deferrals and an in-plan Roth rollover feature, an employee's accounts for elective deferrals, nonelective, matching, and rollover may all contain both Roth and non-Roth accumulations. So when a distribution of less than 100% of any account is made, you have to determine the portion that is Roth, and the portion that is not Roth.

The 401(k) LRMs allow a plan to provide that distributions of excess contributions after failure of ADP test are made first from non-Roth amounts, but aside from that, I can find no guidance from IRS regarding what it thinks is permissible and have come to conclusion that it is up to the plan and that the plan can also let the participant decide in his/her distribution request form. E.g., plan document could permit a participant who qualifies for an age 59-1/2 non-hardship in-service distribution, who wants to receive $50k as distribution, and who has $100k of Roth and $100k of non-Roth spread over elective deferral, matching, and nonelective accounts to elect to take the entire $50k from the non-Roth. Also, plan could provide that RMDs always came first from non-Roth until non-Roth exhausted. Anyone else given this some thought or found guidance on the question that I am unaware of?

One major vendor has a distribution form that seems to permit what I describe in prior paragraph (i.e., employee choice), but I did not find a supporting provision in its volume submitter.

That a retirement plan required no spouse's consent for a distribution before the participant's death meant a surviving spouse gets no portion of a $2.7 million benefit.

The participant's claim was processed on a Friday; he died on Sunday.

Wengert Eighth Circuit.pdf