Employee's 10% deferral election was not implemented for over a year.  SH nonelective plan.  I don't believe SH plans can use the reduction from 50% to 25% for the QNEC, can they?  The employee should get a 5% QNEC for the deferral, plus the 3% SHNEC, plus earnings, right?

A brand new DB plan is started 2-1-2018, plan year ends 1/31. It excludes years of service prior to 2-1-2018 for vesting purposes. Vesting is a 3-year elapsed-time cliff. One participant is also a 20% owner and they are 71 years old now.

The owner becomes fully vested on 1/31/2021.

The first RMD is the accrual on 12/31/2018, but it is not vested, so it gets added to the next year's RMD. The second RMD is the accrual on 12/31/2019 plus the prior unpaid (nonvested) RMD, but it is still not vested, so it gets added to the next years' RMD. The third RMD is the accrual on 12/31/2020 plus the prior amounts, but it is still not vested, so it gets added to the next year's RMD.

By 12/31/2021, the participant must take the distribution of their RMDs. They terminate in 2021 and elect a lump sum payment. The RMD for a full lump payment can be calculated using the "Account Balance" method (like a DC plan).

Can all of these RMD's be determined using the account balance method, or must the 3 prior year's RMDs be based on the DB annuity calculation method?

I have a traditional DB plan that is terminating.  Lump sum was only available at retirement age and now it is available to all for the plan term.  When we calculate the PVAB for anyone at ERD we base it on the benefit payable on ERD.  We are calculating the PVABs for the 6088 and have discovered that due to the current segment rates the PVAB of the NRD benefit is higher than the than the PVAB of the benefit at ERD.  Has anyone run into this?  The document really doesn't address it.  It makes a $130K difference in the termination distribution amounts.  How will the PBGC expect us to calculate it?

The definition of Compensation under the 401(k) Plan is W-2  compensation. Employer has a non-qualified deferred compensation plan. Participant receives a distribution from the non-qualified plan. Can the participant elect to defer a portion of the non-qualified plan distribution to the 401(k) Plan? Seems to me that the answer is "yes" because distributions from a non-qualified deferred compensation plan are included in W-2 compensation.

Thoughts???

Employer has a safe harbor match plan, top heavy not required.  If they added a profit sharing allocation, they'd be blown and have to provide a 3% NEC. 

Say they had a second plan with an exclusive group of HCE's and HCHE's that passes coverage testing on it's own.  The non-keys in that second plan get at least 3% for TH.

Top heavy rules indicate that each plan needs to satisfy TH, so is the SH match plan still ok?

We are a small employer with a SIMPLE IRA.  We are being acquired through a stock transaction by a larger company with a 401(k).  Can we continue to maintain the SIMPLE IRA as a frozen plan (no future funding) or are we required to terminate it by the end of the 2 year transition period?

If we terminate the SIMPLE IRA, what are the tax consequences?  

I have a similar issue to the one Carol had, except we have not yet made the distribution to the tax exempt entity.  This is a lump sum distribution to a tax-exempt entity.  Do we withhold at 10% under 3405 and not allow the entity to make an election (because under the statute only individuals can opt out of withholding)?    I could read 3405(e)(1)(B)(ii) very broadly to mean no withholding is required if it is reasonable to believe the distribution will not be subject to tax, but I don't think that is the better interpretation of that provision.  It just seems odd to withhold on a distribution to a tax-exempt entity.  Also, do I report the distribution on a 1099-R?  I feel comfortable saying a 1099-R is required, so the entity can report the income on its Form 990.    

Unbelievable.  I created a Lost interest calculator to mimic the DOL site, but that just has a lot more functionality.  So I have built in a way to validate the new interest rates that I enter. Welll, long story short I could not validate this quarter.  In the end I figured out that it was the DOL site that was wrong....

Take a look at the attached as proof.  The trick is to run an interest calc from 1/1/2018 until April 15th, and then 1/1/18 through March 31st.  Same result!!

Discussion in the office:

Key EEs have 75% of plan assets.  TH according to account balance test.

Plan has 3% SH to all.  Plan is deemed NOT to be TH by virtue of the SH rules.

What if we excluded all HCE, or only non-owner HCE from the 3% SH.  Do we still get the TH "pass" as there may be some HCE who are non-key and would otherwise get the TH contribution had the plan not been SH.

Say a self employed wants to make a profit sharing contribution. I don't see a problem with transferring the contribution from his personal IRA, AS LONG AS it is treated/reported as a taxable distribution to him, and not a non-taxable transfer/rollover. Any other opinions?

I'm sure this has been discussed before, but I couldn't find anything using the search function.

One of my 401k Profit Sharing Plans terminated as of 2/1/2018.  There is a terminated participant with a large balance who refuses to send his distribution paperwork back despite numerous follow-ups.  Technically, the plan has 1 year to liquidate their assets, but they want to wrap this up.  I can't cash him out and the plan doesn't have an auto rollover option. His balance is too big for that anyway. Anyone else have this issues and how did you deal with it?  Thanks!

This is a follow up to my last post.  Can we change the distribution schedule for terminated participants?  Our SPD provides that any changes to the Distribution Policy apply to distributions occurring after the amendment, even if your employment terminated before the amendment to the policy.  Is this ok?  What about for participants in pay status?

For example, I terminate (not retirement, death, or disability) and the Policy says I get 5 annual installments beginning at the end of the year following my termination.  I receive two installments.  The Policy is changed to 5 annual installments beginning at the end of the 5th year following my termination.

How does the new policy apply to me?  Since I have already received 2 installments, do I then just get 3 installments beginning on the last day of the 5th year?  Or do I get 3 installments two years following the last day (i.e. I'm treated as having received the first two, so I just get the last 3)?  Or can we not change the payment schedule for people in pay status once the first installment has been paid?

I feel like I should know this answer, but I'm not coming up with it.

Participant terminates employment at age 69 and rolls her balance to an IRA before the end of the year. After the first of the year, the employer deposits a discretionary contribution to the account. Participant will be 70 1/2 in the year of the deposit. I know her RMD must be the first money out, but with a zero balance at the end of the prior year, I don't remember how to calculate it.

Plan sponsor discovers in 2018 they did not start payments on a loan from June, 2017.

They would have considered VCP, but with the fee going from $300 to $3000, they are going to treat the loan as a deemed distribution.

The loan plus accrued earnings remains outstanding, but is the employer permitted to force the participant to begin making payments, or is that strictly voluntary on the part of the participant?

If repayments are to start, is there any reason to reamortize to keep the loan within the original 5 year payback, or can the original loan payments be started without adjustment, since the loan is already defaulted?

Thanks.

There are a lot of facts involved here, so please bear with me.

We took over this client in 2016, when they had directed trustee XYZ Bank.  The Plan is a DB plan.

Back in 2014, the ABC Bank was the directed trustee.  ABC was an affiliate of mega-vendor DEF.  

In 2014 the client moved from Mega-vendor to local TPA and changed the trustee to XYZ Bank.

In 2017 client terminated the plan, distributed all assets, issued 1099-Rs, filed a final 5500, etc.: they closed out the plan.  

Now it is 2018 and we have learned that back in 2014 somebody dropped the ball and left about $900 at ABC Bank.  Nobody seemed to notice it until now.  That $900 belongs to about 12 different participants.  

We are cleaning everything up now.  My question is whether we need a Schedule SB for the 2018 Form 5500.  

I know very little about subchapter T cooperatives, but perceive them not to be tax exempt entities, and therefore not subject to 457(f)? Do you agree/disagree? I appreciate any feedback.

We have some employees that are already terminated and being paid over a five year schedule.  Once payments have begun, is it too late to change the payment schedule.  In other words, if we have a participant being paid over a five year schedule, can we change payment timing to delay payments until retirement / diversification?

What about non-terminated employees?  If our current policy calls for payments over 5 years, can we change the policy to change payment timing to be at retirement / diversification, or do we have to stick with the policy that was in place when they accrued their benefits?

Employer paid two employees their Profit-Sharing distributions from company account.  Any fix?

I have a nonprofit client with a 403(b) plan and all employees are eligible.   The client is anticipating that its participant count will be over 100 at the next plan year end (we have informed them about the 120 count rule for the plan's first year at the large plan status).  They have a logical organizational structure reason for splitting this plan into two  smaller plans.   Our firm has done this many times for 401(k) plans but this is the first situation which has presented itself in 403(b).  Has anyone done this for a 403(b)?  Any comments?

Thanks!

I've got a small plan (<10 participants in self-directed brokerage accounts) that was paid out in 2016, and we filed a final 5500 for it in 2016.  Just got a statement for January 2018 that there was a fee refund of $2K to the doctor (and him only), so the account was reopened by the brokerage firm and then immediately paid out to him with withholding.  Great!  Brokerage firm also remitted withholding and will prepare the 1099-R.

Our initial thought is that since it was a plan account, it still is a plan account and therefore this transaction is a transaction in the plan.  So it needs to be reported on a 5500... probably an EZ, since there's only one participant in the plan for 2018.  But then we just skip 2017 altogether?

Any thoughts or ideas are appreciated, thanks.