I'm trying to figure out whether the 4975(g)(2) exception for 414(d) plans would apply to HSAs offered in connection with a health plan sponsored by a governmental employer.  Assume that the HSA arrangement is treated as employer-sponsored for ERISA purposes. Or -- does 414(d) refer only to 401(a) qualified plans?

Thanks for any thoughts.

Office manager has just voluntarily left her job.  I just completed testing calculations for 2017, and the employer was horrified at what office manager's pay was last year (why he didn't pay attention through the year is a different issue).  If her pay was incorrect, then her safe harbor match was also incorrect.  Assuming that it can be proven that she falsified payroll, can her safe harbor match contribution  be corrected?  The money has already been allocated to her account. 

Thanks in advance!

A client maintains a non-safe harbor 401(k) for non-union employees and contributes to an MEP for collective bargaining unit members. In 2015, one of the union members stopped paying dues, even though he remained covered by the collective bargaining unit. As a result, (1) the employer stopped MEP contributions, and (2) the erroneously allowed the ineligible employee to begin deferring and receiving match under the 401(k) plan. The employee has satisfied the matching contribution vesting requirements.

The plan has over 350 participants, and this is the only participant affected by the error. The participant has an account balance of around $12,000 and total plan assets are around $9M.

QUESTIONS:

Is this eligible for self-correction as an insignificant operational error? Can it be considered insignificant even if we have to issue corrected 1099s for 2015, 2016 AND 2017?

Are there any correction methods available in this case OTHER THAN returning contributions and issuing 1099-Rs?

Thanks in advance for your thoughts.

A dentist owns 100% of her PLLC; this company currently has a solo 401k Plan.

She also owns 50% of an LLC with two other people.  Neither of the other two people are related to the dentist. There are no employees in this LLC

The issue is that the LLC is going to purchase a Dental Clinic with employees.   Is this a controlled group, and would she now have to offer the 401k to the dental clinic employees?   The LLC will own 100% of it.

Is a 457f plan subject to any regulatory limits on compensation? For example a plan has a formula of 5% of annual compensation and executive earns $300,000 can we use the full compensation?

thanks!

Let's say it is June and we see that we missed a deferral election for 4 months.  
The missed deferral was $2,000.  The correction will be 25% or $500.

Will the $500 QNEC be counted in his 402(g) limit for 2018?

Calendar year DB plan. Plan termination date = 9/30/17.

The final due date for the 2017 MRC changes to 8.5 months from 9/30/17.

The 2017 5500 filing due date does not change, correct?  

I suspect the answer is "No" but employer has a SIMPLE IRA with 100% matching up to 3% of compensation and their match is deposited in a lump-sum after the year concludes.  They would prefer to not add matching dollars to one former employee's account.  The former employee was terminated for cause and has violated his non-compete. 

Is there any way for the employer to not add matching for this one former employee where hard feelings still persist? 

I have a calendar year plan with auto enrollment that missed auto enrolling certain new hires in 2016, 2017, 2018. The plan has 3 month eligibility for deferrals and  match. The auto enrollment % is 5%.

I have reviewed Rev. Proc 2015-28 and the IRS Fix It Guide and there are a couple of variations. I want to make sure all the facts are in order. For example the Fix Guide mentions fixing the failure promptly and also that in order for the reduced QNEC to apply, the employee cannot be terminated - if terminated then the 50% QNEC rule applies.

Here are my views and corrections on these missed deferrals and match based on this guidance:

1. 2016 failures - they did not get corrected by 10/15/17 (9 1/2 months after the end of the plan year in which the failure occurred) so the QNEC is 25% of the 5% missed deferrals to date(?), plus earnings, and 100% of the full 5% match.  The deferrals will get started by 3/9 the next payroll period, the notice will go out within the next week. The corrective contributions and earnings (through date of correction) will be calculated and posted as soon as possible. Did I miss anything?

2. 2017 failures  - as illustrated in the IRS Fix It Guide Example 2, no QNEC is due for the missed contributions during 2017. And for 2018, no QNEC is due for missed deferrals, since we are in the first 3 months. However the missed match is due plus earnings. The deferrals will now be started at 5% by 3/9 the next payroll period, and they will get a notice within the next week.

3. 2018 failures - no QNEC is due since we are in the first 3 months, but any missed match is due. The notice will go out and deferrals will start on the 3/9 payroll.

For any terminated employee, if a QNEC is due for missed deferrals is it 50%? What about for 2018 during the first 3  months, do we get a pass? Example 4 in the Fix It guide has illustration for a terminated employee - a 50% QNEC is due since none of the safe harbors apply.

Sorry for the lengthy fact pattern, hopefully it reads quickly!

Thank you for any help!

rp-15-28.pdf

401k-plan-fix-it-guide-eli.pdf

Client received IRS Notice CP-403, no 5500s were filed for 2015-2016 .  We had been after the client to send the information.

Now that the client receives an IRS Notice, he finally sends a spreadsheet with the employee and employer contributions for each year.

Upon review, we determined the safe harbor match was calculated incorrectly for 2015-2016-2017.

I know there is a 12 month period after the end of the plan year to make the safe harbor contribution, but what are the ramifications if the corrected contributions are made after the 12 month period?

When general testing for nondiscrimination, must you use the same measurement period (current year versus accrued to date) for your rate group determination and for the average benefits percentage? That is, can I determine accrual rates for rate groups on an accrued to date basis but calculate my average benefits percentage on a current accrual basis, because I don't have the DC balances, only current year contributions - or do I need to get balances and use same basis?

We are taking over a client from {redacted}.  Their plan document indicated that for purposes of elective deferrals, compensation shall not include bonuses.  When we asked the client for bonus data for 2017, they responded that they have never excluded bonus from comp.  I do not see a 414s test in what little we got from {redacted}.  I don't know the details of who got bonuses, and the plan has 1 HCE (one of the owners, the other two owners don't "work" there/receive no comp).  How would the plan sponsor go back and correct prior years thru the self correction process?

context

2 separate entities created a 501(c)(3) Joint operating company (JOC)- essentially a virtual merger with no transfer of assets-  there are no employees of the JOC - any expenses for the JOC are invoiced to the separate entities.  The separate entities share no common ownership.  the companies want to set up 1 plan and  align their other benefit programs, create efficiencies in management, finance, etc. 

Company A -  church 403b

Company B church 401(k)

My question is- Could the JOC sponsor a plan where the 2 separate entities are adopting employers? could the assets be merged into this plan? (i know the DoT hasn't ruled on the compliance requirements for church 401k/403b mergers resulting from PATH act, expected sometime this year) 

I think it is safer to keep both plans separate and align the plan design previsions across both plans. I would imagine that the JOC could be set up as a PEO and sponsor a plan but i think for simplicity keeping both plans separate is probably the most appropriate path - if anyone has any guidance on this issue or has worked with it in the past, that would be helpful - can provide more information as requested. 

I have a plan that during 2017 had 2 partners. One partner retired midyear.  The plan then went from being an LLC to a PC. The remaining partner received a Schedule K1 and a W2 for 2017. Not sure if I should combine the 2 for the SH calculation, or just use his W2.  The retired partner is just getting a K1.

Thanks in advance!

Corporation A sponsors a 401(k) Plan. Corporation B sponsors a SIMPLE-IRA. Corporation A is purchasing Corporation B in a STOCK sale, not an asset sale. Question is, can the employees of Corporation B participate immediately in Corporation A's 401(k) plan?

I don't think so. While there is the IRC 410(b)(6)(c) transition period and the 408(p)(10) period available for continuing to run the plans separately, since this is a stock sale rather than an asset sale, the corporation still exists, and the SIMPLE can't be terminated mid-year.

If it were an asset sale, then no problems.

Any other thoughts/opinions?

For anyone who cares, yesterday the IRS announced a revised (downward) HSA contribution limit of $6,850 (a $50 reduction from previously announced limit) for participants with family coverage. Participants with self-only coverage are not affected.

https://www.irs.gov/pub/irs-irbs/irb18-10.pdf

I have a 401(k) Plan that uses base compensation of "wages, tips, and other compensation as reported on W-2".      Bonuses are included for deferral calculations.   Bonuses are excluded for match contribution calculation.      Plan document says to use 414(s) compensation for ADP/ACP testing, but doesn't define 414(s).      Do I use the total base OR total base less bonus for ADP/ACP?    

 A 401(k) plan provides for 100% vesting upon becoming "disabled,' defined as, "a physical or mental condition that makes him unable to engage in any substantial gainful activity and that can be expected to result in death or has lasted or can be expected to last for at least a twelve-month period or results in death." A determination of disability is currently made by the plan administrator. The plan sponsor desires to amend the plan to change the definition of disabled to mean a disability as determined by the Social Security Administration. Would this amendment to the definition of "disabled" under the plan constitute a change to the vesting schedule under Section 411(a)(10) that would require an election to be offered to those participants with 3 years of service? As a side note, the Social Security definition of disability seems to align with the current definition of disability in the plan, so arguably this plan amendment would affect only the party making the determination.

Can anyone provide guidance on if corrective distributions should be reported on the Summary Annual Report?  If so, do you include them with the distribution amount or should the amount be reported some other way?

Let's say an owner who is over 50 deferred $25,000 in 2017. So, the $1,000 is excess deferral and will be refunded by April 15 of 2018. Would the excess $1,000 be counted in the 415 limit? So, if the owner wanted to max out with a Profit Sharing contribution, would he be able to put in $36,000 or $35,000 in 2017?

Thanks.