I have a plan with 5,000 plus EEs in it.  The previous admin put it into Relius years ago, then took it out and did everything manually for the past few years.  I have been working for months getting it back into Relius.  Plan eligibility is 21/1 M.O.S./monthly entry dates. 

When I run the ADP test, Relius is not agreeing with my excludable EEs and I wonder if it's because the complete history is not in Relius.  Relius is excluding 300 plus people I think should be on the test. For example, one person has a date of hire of 5/15/2016. Date of term is 8/7/2017.  Did not work 1000 hours in 2016 or 2017.  Is that why Relius is excluding them?

But then, I have someone who hired on 5/16/2016, and worked 930 hours in 2016 and 1,000 plus 2017 and term'd  after July  2017 it's excluding them as well. 

Third example, someone hired on 5/16/2016 and worked 1000 hours in 2016 and 2017 and term'd after July 2017 and they are excluded.

I might be getting confused with this because it's such a huge plan. Not sure if I should just go with what Relius is spitting out or change 300 people to be on the test ...

Thanks!! 

To all that it applies. I am so graciously thankful for my mom. She may be in her 90s, but I have been so blessed, and so lucky I can still take care of her at home. well worth the time and effort.

God has been so good to me!

Quick question.

Is the choice to disaggregate otherwise excludable employees or to test nondiscrimination using full year compensation vs compensation earned upon entering the plan a settler function? Since these choices are not choices to select in the adoption agreement but rather granted for use in the basic plan document.

We recently had a discussion about when it is logical to suggest a cash balance plan instead of a traditional DB for a 1 person plan.  I presented two, off the top of my head, reasons why I thought it not in the client's best interests to go the cash balance route: the fact that cash balance plans have been individually designed plans (and hence both more expensive to maintain and providing less protection, on audit, than a volume submitter plan) and the fact that in the event of death the strong recommendation of document providers is to either submit a 5310 or (eventually) amend and restate under a volume submitter plan.  In any event, both of my objections will soon evaporate when CB Volume Submitter plans become available.

But I got to thinking and there are other reasons.  One of the arguments put forward in favor of the CB plan is that the client understands the CB plan better because, in general, the contribution equals or is close to the defined CB allocation.  In technical terms, each year's contribution consists largely of target normal cost and there is precious little based on the funding target.  But that pattern is notoriously unforgiving.  In fact, a traditional formula allows the consultant to design a funding pattern for the first few years of a plan that is based on the cushion under 404.  This subsequently allows for tremendous flexibility in funding in later years, which means no worries of minimum funding violations, while at the same time allowing for substantial maximum deductible contributions.  Can this pattern come to be in a CB plan?  Of course it can (although it is much more difficult to do so if the client has been told that focusing on the current year's formula means something).  But it obliterates the argument that the CB plan is more understandable because the annual contribution is closely related to the target normal cost.

As Larry so accurately pointed out, while a client might understand some of the concepts that impact a plan, unless the client is a pension professional, it falls on us to actually understand those concepts and to implement them in a way that allows the client to meet their goals, both short term and long term.

Another concept might help to explain my attraction to the traditional plan: the CB plan essentially overlays the CB requirements over the traditional plan's ruleset.  Stated another way, all the rules of the traditional plan (with the exception of 417(e) and a faster vesting schedule that has no impact on one person plans) remain in effect when the plan is a CB plan (415 limits, minimum funding, 404 funding, restrictions on distributions if the plan is not adequately funded, accrual rules under 411, etc.).  On the other hand, none of the CB rules are in effect when the plan is a traditional DB plan.  So, why would you want to worry about 2 sets of rules when you don't have to?

Here is an example.  When CB plans were in their infancy, the IRS allowed interest crediting rates that were eventually determined impermissible.  The IRS gave us leeway on how to transition from what ended up being described as impermissible rates to the newly defined permissible rates.  Why subject a plan sponsor to that kind of issue if you don't have to?     Think it can't happen again?  Yes, it can.  Of course, that same thing can happen to any plan design, but it is much less likely to come up with a traditional design than a cash balance design.  Again: the plan is subject to two rulesets (traditional AND CB) when it just doesn't need to be.

And yet, there is more.  A cash balance plan has to do additional work to convert hypothetical account balances to J&S annuity values when preparing relative value disclosures.  Those J&S annuity values, when based on traditional formulas, either automatically pop out (if they are expressed in the normal form) or are dead simple to convert. 

I'm pretty sure that this missive won't change anybody's opinion about the type of plan that's best for a one person plan.  But for me it is simple. If a traditional plan can be designed to meet the needs of a client then suggesting a CB plan unnecessarily subjects the client to rules that they wouldn't normally have to worry about and, at some level, exposes them to additional costs.

Only if there are offsetting advantages would it make sense to advocate for a CB plan.

I have a startup 401k effective 1/1/2018.  Def and safe harbor nonelective with an effective date of 6/1.  Definition of compensation is participation comp.  Does the safe harbor nonelective get calculated on compensation from 6/1 or full year for participants with an entry date of 1/1?

Are people applying the new rules regarding casualty losses that it has to be in a declared disaster area?

It seems bazaar and likely to be corrected soon.  In the meantim if someone's house burns down, are people telling that participant they are not eligible for a hardship? (assuming the fire was started by lightning strike in a regular storm).

Is it permissible to spin-off a portion of a safe harbor 401k plan to an identical safe harbor 401k plan for a calendar plan year after January 1st of the current year with an effective date of January 1st to avoid a plan audit for the 2018 plan year? Safe harbor mid-year amendment issues?

I have a situation where Husband owns 100% of one business and Wife owns 100% of an unrelated business.  Husband's business maintains a 401(k) plan for it's employees.

Wife is an employee of Husband's business.  They have a pre-nuptial agreement regarding the ownership of their own businesses, so there are no "direct" ownership issues.

We have told them the two businesses are related because they do not qualify for the exception under IRC 1563(e) because the Wife is an employee of Husband's company.  She is also a participant in the 401(k) plan her Husband's company maintains...probably the reason she's an employee in the first plan, but that is besides the point.  They have come back an said the conditions under 1563(e)(5)(B) are satisfied even though the Wife IS and employee of Husband's business since she "does not participate in the management" of the Husband's business.  Their interpretation is that the "and" underlined below means both conditions must be satisfied (employee and participate in management) for the condition to be considered not met.

1563(e)(5)(B) 

The individual is not a director or employee and does not participate in the management of such corporation at any time during such taxable year;

I do not see anything in the Code or Regulations that clarifies this point.  I have always interpreted this section to mean that if a spouse is an employee or director, the spousal attribution exception does not apply.  I would read the part about not participating in the management as a separate condition.  None of the articles I can find on the subject address the "management" language in 1563(e)(5)(B).

Seems contrary to the general intent of the rules around spousal attribution to say the spouse can be an employee and participate in the plan, but the spousal attribution rules can be ignored as long as the sponsor is willing to say the spouse doesn't participate in the management of the sponsor.

Anyone have thoughts on this?  Authority for either position? 

A participant owns 50% of the company and recently retired. The participant wants to take a full distribution.  Per the most recent annual report, the account balance is about 44% of the total plan assets.  I'm concerned that a full distribution from the pooled account might affect the rest of the participants’ account balances negatively. Any concerns or issues with allowing the distribution? Thanks in advance. 

Can an employer require employees to take a certain election through a 125 plan?  If it's a requirement, then isn't it not an election anymore?  The employer with the union and the CBA can create the cafeteria menu, but can they force an employee through the cafeteria line?

If the CBA states: " fringe benefit 1, fringe benefit 2, and fringe benefit 3 are the responsibility of the employee through the 125 plan".  Employer states, there will be a mandatory wage deduction for benefit 1,  because the union has "elected" option A on your behalf without any express authorization, doesn't this violate the principle of 125 plan choice?

Thank you in advance for your thoughts.

Are student trainees (18mos visas) and interns (12 mos visas) working in the US under a J-1 Visa (who are subject to Fed and State taxes but generally exempt from Medicare, Social Security and FUTA taxes; limited as to the work they can perform) considered "employees" for purposes of service credits and eligibility in a retirement plan?  As I understand it, the J-1 Visa opportunities are temporary and are permitted with the understanding the training will then be taken back and applied in their home nation, intended to be a cultural experience.

Client hired a J-1 Visa Student Intern/Trainee in May 2015. While "interning/training" with the Client, she applied for political asylum and was given a Employment Authorization Card late 2015/early 2016. She was then hired by the Client effective 2/6/2016. Each year she renews the Employment Authorization Card, continues working for the Client.

QUESTION, is her Date of Hire for Eligibility determination (and service crediting purposes for Vesting) May 2015 (date started interning/training under J-1 Visa) or Feb 2016 (bc now has Employment Authorization Card the Client was able to offer and she accepted Position as an employee)?

For what it is worth, 2016 and 2017 tax returns were filed as Resident Alien; 2015 was filed by her scholarship program and she does not know the basis of the filing.

Thank you!

New 401(k) established 10/1/17 with a 1/1/17 effective date.  Plan includes Safe Harbor 3% provisions as well as a discretionary ACP safe harbor contribution and a discretionary PSP contribution.  Of course, two owners were able to defer the maximum $24,000 before year-end.  The rest of the 6 staffers were able to accumulate about $2,000 each in deferrals before year end.  Is it too aggressive to allocate a stacked ACP safe harbor match limited to 4% of pay using full-year compensation?

Client allows ees to accrue up to 6 weeks of vacation, but then does not allow them to accrue any more.

They do not want to allow people to get any cash in there paycheck for the unused vacation time, but want people to be able to make an election to "close out" their accrued vacation in exchange for  a contribution to the Plan.

Since 401(k) is CASH or deferred, and they have no option of cash, my conclusion is that they cannot count it as 401k.  The only thing that gives me pause is I suppose they could just not work, and at that point would be getting the cash, but that does not seem to cut it.

Could thye have an employer contribution to accomplish this?  I don;t think there would be a good way to fit this into my plan document (standard prototype). Even though I have everyone in their group on this plan, something about this tells me that there should be more provisions around it.

Has anyone seen anything like this before?

Just met with a client.  There are 4 companies 100% owned by one individual and his spouse. So this is clearly a controlled group.  Since a Simple IRA can only be adopted by one employer (there is no way for a participating employer to sign on), I suppose the only answer here is for each of the 4 companies to set up their own Simple IRAs. 

I was told by an ERISA attorney at one time that a Simple plan is meant to be just that - simple.  and so there is no such thing as a second participating employer.  But separate Simples should work.  

We are a TPA firm and work with k plans.  I assume some of the record keepers will handle SImple IRAs such as American Funds RKD, Hancock, etc?

Comments?

Thanks

An employee is stating the recent legislation (Bipartison Budget Act of 2018) allows the participant to request a hardship for elementary and high school education expenses.  Am I correct that we are still waiting for IRS guidance on the Bipartison Budget Act of 2018, it's not effective until 2019, and plan amendments would need to be put in place to make the applicable changes?

Assuming the DB/DC combo plan has no any type of safe harbor contribution and the only contributions are employee deferrals and group based profit sharing.

It appears the client volume submitter plan doc. doesn't have any gateway language.

How do you handle the DB/DC combo plan gateway when the DC plan has 1,000 hours requirement if terminated before the end of the plan year?

We submitted a determination letter request for a defined benefit plan with a normal retirement age of considerably less than 62. 

The IRS is asking for statistical data to verify the NRA of less than 62 is acceptable for the industry standard. The plan is a one person plan for a professional athlete with endorsement deals. 

Can anyone point me to what kind of information and sources of information the IRS is willing to accept? 

Are there other threads that have already covered this question?

What are the consequences of blowing the 180-day Title IV deadline for distributing plan assets?  Facts are: one participant left, she's not lost, no extension of the deadline requested.  Civil penalties against plan sponsor/administrator?  Can the PBGC "undo" the termination in some fashion that will have adverse tax consequences to the other participants?    

So, Corporation A and B form a controlled group. "A" is the sponsor of a plan, and "B" is a Participating Employer.  For purposes of this question, let us assume that "A has an EIN of "1" and "B has an EIN of "2."

We just found out that someone purchased "A" several months ago, SUPPOSEDLY in an asset purchase. The information is a bit sketchy at this point, as the new owners of the assets of "A" will apparently keep the same business name, but change the EIN to another number. I don't know enough about corporate transactions to know if this is possible - in other words, can I purchase the assets of "A" and those "assets" include the right to continue doing business under the same name, but just under another (new) EIN?

If so, then it appears that "A" and "B" are now, in fact, still a controlled group, as "A" still exists under EIN #1 and the ownership technically hasn't really changed? And that the asset purchase/issue of new EIN now creates a new entity, "C" which must now choose either to adopt the assets and liabilities of the former "A" plan, or establish an entirely new plan?

I'm finding this very confusing when determining how to handle the plan issues. All of the employees of "A" are now part of "C" if in fact there is a new entity "C." Whether "C" will continue with a plan is unknown. But "B" wants to continue to sponsor the plan as is, with no involvement with "A" or "C." This works fine if there is no controlled group, as if there isn't, it is just a Multiple Employer Plan at this time, and can withdraw or spinoff or whatever under normal procedures.

I'd love to hear nay thoughts on this. Getting solid data from the client in this situation is like pulling hen's teeth, so I'd rather have a better understanding of the corporate issues before using the vise-grips. Thanks! 

Any reason why you can't have employees of the same entity in two different fully insured health plans? I don't see why not, but can't seem to find any authority on this either way.

Thanks.