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.

Say a parent company with two operating  subsidiaries sponsors a nonqualified plan in which balances pay out upon the first to occur of death, disability, severance, or change in control. There are participants employed by the parent company directly in addition to the two subs. The plan's change in control definition is sale of 50% or more of parent's stock or parent's assets. On a FMV basis, Sub 1 accounts for 70% of parent company's assets; Sub 2 accounts for the other 30%. Parent company sells Sub 1 and triggers a change in control for parent company employees. Parent company will continue running Sub 2 and will continue to employ the same parent-company employees. 

Has anyone seen a scenario like this where the plan balances are paid out because of the change in control, but the plan is not otherwise terminated? So, assuming no amendments to the plan before the change in control, the existing balances would be forced out, then the parent-company employees could start deferring again? Technically it's just a permissible payment trigger that causes the distribution of prior balances, so I see no reason why the plan couldn't continue.

Thoughts?

Account treats two companies as totally separate entities.

The companies in addition to sharing the same 6 digit SIC code and both essentially are in the carting/waste removal business.

1 co owned 50/50 by husband and wife

Co 2 owned 50/50 by their two sons, over 21 years of age. The two sons, in addition, work for co 1.

In addition, there is one shared employee.

We have been treating the plans as a controlled group/ASG and combining the two for (a)(4) as both plans are New comparability PSPs. 

CPA does not agree.

Is there a specific example in the regs I can show this guy?

Hello, 

I have a question about DB plans that offer a Retroactive Annuity Starting Date. When calculating the make-up payment, is the basis for the amount of the payment the Normal Form of Payment under the plan or the actual form of payment chosen by the participant?  It seems like the actual form of payment chosen by the participant, but I wanted to see if anyone had any thoughts.  Thanks.

There is a participant in a DC plan who adamantly refuses to have neither an employee nor an employer account.  This may have to do with religious reasons against interest bearing accounts. The plan is not top heavy, but it is a 3% SHNEC.

He did not sign a waiver prior to becoming eligible in the plan.

Has anyone encountered this?  How did you resolve it?

We were toying with an amendment:  All employees hired in November 2015 are ineligible to participate in the plan.  He is the only EE hired in that time-frame.

Client got a CP 220 notice stating the IRS made changes to their return and owes $2200+.  Of course no changes are specified or the reason for the penalty.  (It reads like a scam.)  I saw an earlier thread on this and realize it's probably for a "late" filing...but this was a 2011 return, filed Oct 15, 2012.  We didn't handle the plan at the time, so don't have proof of filing the extension and doubt we can get it, but I think we can beat the rap; just looking for the fastest way to do so - does(n't) the statute of limitations cover this? 

(It's very hard not to begin any correspondence with "Are you f-ing kidding me?")

I should be able to find this jut by searching, but the search feature seems to have changed and I'm not finding anything.

Employer sponsors safe harbor 401(k) plan.  Employer is closing its doors.  They are not being acquired, simply going out of business.  Since there isn't a merger/acquisition I don't see nay 410(b)(6) help.   There isn't a business hardship; the owners are simply retiring.  I think if they terminate mid year they have to meet top heavy and are subject to ADP testing.

Am I missing anything? 

Thank you for any guidance.

Recently the IRS has flagged one of our plans for this issue on audit. they want to take it into CAP and claim its a qualification issue. the only issue i see is that participants would need to be vested. if there is only one participant what is the real legal issue that could force the plan into CAP. seems a little harsh. anyone have any experience with this issue?

edit: noticed some earlier threads where they quote the IRS manual saying other than vesting there is no practical consequence though that section seems to have disappeared from the manual. 

Say a sole prop dies - has a small 401(k) plan - all assets distributed to beneficiary. Assume plan doc is up to date, and final 5500 form properly filed, and 1099 to beneficiary issued.

Does the executor of the estate itself have any specific duties with regard to filing anything further with regards to this plan/distribution - forms, paperwork, etc.?

There's a cash balance plan with the annual benefit going to the owners (HCE's) in the plan that is above their 415 limits. If their benefit is limited, the thought  is to have the plan buy each of them an annuity with a X% surrender charge.  This would make the taxable distribution effectively identical to the 415 limit.  The annuity would be transferred to them for conversion to an IRA after IRS approval was received.  We would offer this identical distribution to the other participants.

Any thoughts on this? 

Does anyone know what the relevant comparison is for applying the 5% rule to the merger of defined benefit plans in the current year?  Under the regulations, a merger has a "material effect" if it results or is projected to result in an increase or decrease of at least 5% in the value of assets or liabilities form the valuation date of the notice year.  I expect that most mergers would increase 5% of the value of both the assets and liabilities, and therefore require an explanation.  But where the plan's funding level is not changed before and after the merger (for example, the merger is between two similarly funded plans), is an explanation still required? 

Company A is owned 50/50 by John and Jim, who are unrelated to each other.  It is a manufacturing firm and John and Jim are also the primary salesmen for the company, they also generate sales thru a couple of independent manufacturers reps who are paid strictly on commission.  Company A employs about 50 people.

Suppose John and Jim decide to set up a separate company B to be another manufacturers rep.  Company B will be owned 100% by John, so it is not a CG with company B.  The only two employees of Company B are John and Jim.  Company A pays  Company B, which then pays John and Jim and generous commission for the sales they generate.  

Company A and B are both incorporated.  John and Jim manage company A and continue to draw a salary from A for their employment there. A, as a manufacturer, is clearly not a service organization.  Company B is in sales, not typically considered a service org and clearly not a professional corp.   So no A-Org ASG is possible.  No B-Org ASG without a service org.  Principal business of B is sales, not management of A, so no management services ASG.

John and Jim set up a cash balance plan in company B that covers the two of them.

Seems too easy, but absent some required aggregation of A and B, it seems to work.  What am I missing?