A 401k plan has 15 active partcipants (8 have a balance) and 10 terminated with a balance. Of those 10 term, four are 0% vested. So for lines 5b and 5c, do I count the terms who have a balance but are 0% vested?

Would line 5b be 25 (15 + 10)  or 21 (15 + 6)? Would line 5c be  18 (8 + 10) or 14 (8 + 6)?

Any official link, code, or publication I can reference?

I have a client whose plan is top heavy.  They have a 15% owner who does not participate in the plan but has a large balance due to past participation.  They are trying to avoid top heavy status.  Is it permissible to exclude this key employee from the plan and disregard his account balance  (as a former key) from the top heavy calculation?  Thanks

Is there a general consensus on who is responsible for signing the Form 5500 when the trustees change after the end of the year? Would the new trustee sign the prior year's 5500, or does the previous trustee retain that responsibility? 

I am looking at information for "completing Form 5500 Schedule C     - I am trying to decide if I need to complete it.

There is Direct compensation paid of $110 to one service provider and $1333 paid to another.  That is all.

Since neither is over $5000 - does Schedule C need to be prepared?    Thanks.

When we took over this 401(k) plan, union employees were not excluded, but the plan sponsor wanted us to exclude them when we restated the plan document, so we did on a prospective basis.

What happens when a union employee goes non-union, and then switches back to union status?  Can he defer from that new union pay because he was grandfathered?  Or because he switched to an ineligible class after the amendment date, can he not defer any longer?  Thanks.

Hello,

Am filing 5500 and trying to see how to account for a profit share for 2017 that was made in Jan-2018. Since it was made in Jan-18, the Dec 31, 2017 balance does not account for this. My business tax did account for this in 2017 taxes.

So, question is - Should I add this amount to 2017 ending balance or should I account for in 2018? 

Thanks,

For employees returning from military leave, it's my understanding they have the option to make their employee contributions for time out under USERRA, but are not required to do so.  What about the employer's contribution?  Does it have to be made if the employee elects not to make his/her contribution? 

Hello,

While the issue does not come up exactly in the context of an ESOP, the administration of the Plan/Fund is similar enough to ask the question here.

Can a Plan Administrator reallocate the unvested shares of an employee who has currently left the employ of the company to other participants before a "forfeiture" event (i.e. 5-year break in service or distribution)? The idea is to keep the account "open" and accounted for, but have the shares reallocated. In the event the employee comes back before a forfeiture event, the shares would be reissued/contributed/reallocated to the returning employee.

The Volume Submitter Plan this fund is based off of states that the Plan Administrator will continue to hold the undistributed, non-vested portion of the account of a participant until a forfeiture event, so I believe that as the plan is written, the stock would need to remain in the account and not be reallocated. However, can the plan be amended to state that only the account will remain "on file" but allow for the stock to be redistributed?

On a similar note, can a plan be amended to shorten or do away with the 5-year break in service requirement (other than by allowing a distribution)?

I am pretty certain that one cannot because the ERISA Outline Book (2016) makes no mention of it;  because seems IRC Sec. 411 requires a 5 year period; and because of the issues of cost basis and the deduction of additional contributions (to make up for growth-or is growth even accounted for during the break in service period?), but my assigning attorney is pretty certain that the Plan can be amended to shorten the time before forfeiture.

Full Disclosure: I am a summer associate, but I intend to work in the Benefits practice and have found this forum helpful.

I would appreciate some guidance as to additional resources I can look at.

Thanks!

There are some articles floating around related to encouraging younger employees to participate in 401(k) Plans while paying down substantial student loan debt, by making an employer contribution (described as a match) to the 401k plan. This is to encourage retirement savings, when younger employees are too saddled with college loan debt to participate in the 401(k) Plan. These have been described variously as an employer contribution conditioned to student loan debt payment, as a flat dollar incentive, or percentage of pay.

This appears to be a very different employee benefit from employer provided student loan incentive benefits that "match" student debt payments, which (as far as I know) continue to be taxable to the employee with the student loan debt.

My client is interested in this  as incentive for attracting millenial employees, and encourage them to pay off debt sooner, so they can afford to make 401(k) contributions.  But there is little information out there on this topic. I do not think there is any mechanism to call this a match, if there are actual employee elective deferrals.  So I assume this would be incorporated into a plan as a "profit sharing" contribution. 

I suppose you could create allocation categories with one of them being "participants who are paying college debt", and providing a flat dollar allocation or % of pay allocation only to that group.....and  exclude HCEs (in the event there are any in that category). 

There are companies selling this as an administration service, but it appears that in order to utilize this "service", the participants have to refinance their student loans through the service provider. This gives rise to additional concerns.

Has anyone out there designed such a 401k plan provision?     

A non-electing church plan wishes to increase normal retirement age for most participants, effective for already accrued benefits. I know the plan is not subject to 411(d)6, so no cutback issue. Any other issues besides potentially upsetting participants? 

401(k) Plan with EACA provision

Plan has default percentage at 2%, with auto escalation of 1% up to 8%.  Auto escalation feature does not apply to HCEs (this special provision is written in the plan document).  The plan sponsor has used the 90 day permissible withdrawal provision (elected in the AA) afforded to EACA but NOT the 6 month extension to cure ADP/ACP failures.  All other requirements of EACA have been satisfied except for what is mentioned here.

Ultimately, the Plan Sponsor wants to have the ability to use the 6 month extension without auto escalating the HCES due to ADP testing issues.  With the uniformity requirement, I don't think that is possible because they exclude the HCEs from the auto escalator. BUT - then I started to wonder about the use of the 90 day permissible withdrawal feature (which the plan sponsor has used in the past) in a plan that may not be EACA at all (uniformity requirement). 

Question -

1. Does the exclusion of HCEs from the auto escalation feature prevent the arrangement from being considered an EACA and therefore no 90 day w/d provision allowed? 

2. Would excluding the HCEs from the automatic enrollment provision altogether allow the plan to be an EACA with use of 90 day w/d provision and 6 month extension on ADP/ACP? My thought here is that the HCES would no longer be considered a "covered employee" and there no issue with uniformity requirement.

Any guidance you can provide here would be greatly appreciated.

E

Hello everyone,

A client has an existing SIMPLE 401(k) plan and wants to switch to a traditional 401(k) plan. My understanding is that because a traditional 401(k) is considered to be a successor plan (a.k.a. alternative defined contribution plan) under 401(k)(10)(A), the deferrals from the SIMPLE 401(k) cannot be distributed when switching to a traditional 401(k). I appreciate your input. Thank you.

Christopher Wilson 

Any and all advice appreciated!

My mother's husband of almost 12yrs recently died. He had a 401k worth approx $400k. He was always telling my mom that if he ever died, she would be rich. I assume this means that he truly believed his 401k retirement would go to her.

Mom received a call this morning advising her that when her husband set up this 401k account in the early 90s that he listed his oldest daughter as beneficiary, and that my mom would receive nothing.

It's my belief that he assumed the 401k would automatically go to my mother when he died, since they were married.

My mother is trying to get a meeting with an attorney to start seeing about fighting this...but in everyone's opinion, does she stand any chance?

A plan sponsor provides pet insurance to it's employees as a benefit.  The employer pays the premiums and the employees are taxed on them.  Their plan excludes "Fringe Benefits" from the definition of plan compensation.  Does anyone know if this "income" should be excluded form plan comp or included in plan comp? 

I'm sure this has been beaten to death here. But say a plan transfers from service provider A to service provider B. What is best practice for the effective date of restatement to new document on the transfer to Provider B? Is it the day blackout lifts? Is it the day cash transfers from service provider A to service provider B?

The participant has terminated her employment with the company.  The company l maintains a 401k Plan and she has a balance....  However, they just terminated a cash balance plan apparently, and she wants to roll her cash balance money into the 401k Plan.   As I said, she is terminated.  Her balance is less than $5000 in the 401k and can be rolled over to an IRA without her consent I believe.  She wants to move her cash balance money into the 401k - which would put it over $5000.    Her goal is to leave it all in the 401k Plan.  I have no idea why.  

My opinion, and would love some feedback:  Since she is terminated, she cannot roll any money into the plan.    Even though the plans are with the same company - they are separately  treated for distribution purposes.  She needs to open an IRA and roll her 401k into it.  Thoughts??  Can she co-mingle the cash balance money with her 401k money in a rollover IRA without issue?

Thanks!  

I don't know how many times I have mentioned to different clients (mostly doctors) that they can not make employer contributions during the year and wait until 9/15 of the following year to make employer contributions for the NHCE participants.

Need cite, please.

Adult child is disabled (since birth) and lives with me.  I am not, and have never been covered, under the health insurance contract of child's father.  We've been divorced for over 20 years.  Over one year ago employer provided me with an Overage Dependent Due to Disability form.  It has to be completed by child's physician.  The physician did complete the form;  I then sent it onto my ex-spouse for his completion.  There is also a section for the employee, i.e. the father, to complete.  It asks for financial information - is child claimed as a dependent on his tax returns and what percentage of support does the father pay.  Father provides NO support and does not claim this child as a dependent. 

Employer has again sent me the form and has advised me I must sign the form, not the father and  that financial information can be waived.  Previously,  father sent in unsigned form without providing this information.  Insurer responded that approval to continue coverage was denied due to missing information.

Has anyone ever had a situation like this?  I don't understand why the insurer doesn't want the information from the employee.  It's been 18 months since the first form was sent to the insurer.

I did not initiate this latest request for approval of an overage dependent.  Ex-spouse received mail from the insurer regarding hospitalization of this adult child.

Relius Users,

We recently processed a hardship for an employee.  The employee wanted to use the available Roth basis as the amount for the hardship.  No problem on the processing of the transaction. 

The slight trouble comes in with taxation.  The Roth dollars have been in the plan for 5 years, but the employee is not 59 1/2, so the distribution is not Qualified, so taxes would be applicable.  With that, my understanding is that there is a proration between the basis and the total value of Roth.  In this instance, let's say basis is 75% of total value.  So we did a manual calculation of taxes for the 1099. 

I really expected the transaction to give a taxable amount calculation because a "regular" cash distribution will calculate the taxes on the Roth piece if the distribution is not qualified.  So I called Relius and put in an incident to see what they say.  Relius says the "Hardship distribution template is set to use Contributions Only, which will not include earnings".  Makes sense, but not for a Roth Hardship that isn't qualified.

Am I missing something?  Did we do something wrong in regards to the taxation?

In regards to the Roth recovered basis.  The transaction used the full amount of the basis, which I would expect, it's just weird because you don't expect taxes on the basis, but then again the distribution wasn't qualified.

Let me know your questions or thoughts.

Thanks

Looking for comments on this so-called "strategy".  Plan participant has an account balance of $200,000 which consists of $20,000 after-tax contributions and $180,000 of pre-tax contributions plus interest earned.  Participant requests a loan of $10,000 from the $20,000 after-tax portion.  Participant receives the $10,000 and begins to payback the loan via payroll deduction.  A month later, participant cancels the loan and plan administrator pays off the loan using the participant's pre-tax contributions. Two months later, the participant again requests a loan of $10,000 from after-tax funds, begins to payback loan, cancels loan, and plan administrator pays off the loan using pre-tax funds.  Ultimately, the participant was able to remove the $20,000 after-tax by itself.  1099-Rs will not be issued.   Any thoughts on this?