A consultant suggested the PPA effectively repealed IRS Notice 96-8, at least to the extent the notice said future interest credits are part of the benefits that are already accrued.  He says under the PPA the cash balance is the accrued benefit.  But if what he is suggesting is correct, could that mean you could reduce the interest credits on benefits that have already accrued?  That doesn't seem right.  Am I mixing apples and oranges here?  

ok - for you long time Relius users:

Prior to version 18 (I think) when the loan specs and info were separate on the "Data Entry" flag, you could model a loan for a participant and generate an amortization schedule without having to set up a loan.  This was helpful for participants who were looking for the different repays for different time periods.

I understand that the loan setup info has been moved to the participant census screens. 

Is there still a way to "model" a loan and generate an amortization without setting the loan up?

Thanks in advance!

I am looking for insight on when money has to be withheld for automatic enrollment plans.  For example:

Plan has:

Age 21 &  3 months of service for eligibility

Entry Date is first day of month following meeting requirements

If a person meets eligibility on 10/16, they can enter on 11/1.  Does the plan sponsor actually withhold the money on the 11/1 pay period if no election or opt-out has been chosen by participant?  Or do they wait to withhold until the Opt-out period has ended?  

the folks in Washington reduced the 2016 avg wage from

48664.73 to 48642.15. just $22 dollars but that was enough to change the TWB. previously the divide by 300 was 428.60 which rounded up to 429.

the calculation is as follows

I fear that I may be overthinking this issue but have not found this expressly discussed on the boards here and would appreciate some guidance from the experts.

Plan discovered that a few participants who had made elective deferrals for the year (including some that had also elected to make catch-up contributions given that their regular elective deferral elections would max out) were not implemented for the plan year.  The participants have now missed several months of deferrals and the employer plans to correct under EPCRS by making QNECs for missed elective deferrals and matching contributions and earnings per Revenue Procedure 2016-51.

Question is whether the missed catch-up contributions can also get corrected / included in the QNEC calculations.  (Here, there is no doubt that the individuals would have qualified for the catch-ups had their deferral elections been properly implemented yet, in actuality, they will now end up with actual elective deferrals not reaching the max for the year.)

I see that the EPCRS has a separate section / correction protocol for missed catch-ups under Appendix A .05(4); however, it appears to be limited to employees excluded from "catch-up contributions only."  The example provided shows that a participant was permitted to make their maximum regular elective deferral  but simply denied the ability to make a catch-up contribution.  Unfortunately, I do not see anywhere else in Rev. Proc. 2016-51 where somebody that was eligible for making maximum regular elective deferrals plus maximum catch-up contributions for the year gets corrected by having a QNEC made on the catch-up portion as well as the regular elective deferral amount.  Perhaps the potential for covering the missed catch-up is generally assumed but the narrow phrasing of the .05(4) section and careful limiting of the QNEC correction there to catch-up only mistakes leaves me thinking otherwise.  Also, when looking at the IRS presentation on Correction Methods for 401(k) Failures linked below (from 2012), page 28 notes:  "If an employee has been excluded from making any deferrals then ordinarily no additional correction with respect to catch-up contributions is required because the deemed elective deferral is below the threshold for being eligible to make a catch-up contribution."  

Just wondering if that should be read to basically mean you never make a QNEC correction for missed catch-up amounts unless they are the only missed deferral amounts?  (I'm all for eliminating windfalls for participants for inadvertent errors but that seems a bit much where you know somebody was on track to max out both regular and catch-up contributions.)

Thanks for any guidance you might provide.

www.irs.gov/file_source/pub/irs-tege/epcrs_401k_phoneforum_presentation.pdf

2017 is about 90% done.

Imagine a written plan provides that safe-harbor matching contributions are made on a payroll-by-payroll basis, and that “true-up” contributions will not be made.

The employer now would like to provide that matching contributions are recalculated (after a plan year ends) based on the ratio of elective deferrals to compensation for the plan year, and “true-up” contributions are made.

May the employer make this amendment effective for 2017?

Or must the employer apply the amendment only to 2018 and later years?

Which regulation and what reasoning allows or precludes the change for a year already begun?

Anyone know what the premiums are on this?  I just cant imagine they are affordable?

https://www.loaneraser.com/individuals/

I have a client who has just closed a U.S. DOL investigation for (very) late deposit of prevailing wage contributions.  They have now paid in all of the unpaid contributions and paid and allocated estimated interest based on a method approved by the DOL investigator, paid corrective distributions to former employees and they have received a closing letter. 

I expected that these late contributions would also be an operational defect that would require a VCP filing, and my client is prepared to do this.  My biggest concern had been whether the (DOL-approved) method of allocating interest would be acceptable to the IRS.  But, I am now wondering if there is in fact any operational defect, because I cannot find any plan provision that specifies when these contributions have to be made.  The plan has a schedule to the Adoption Agreement that lists the prevailing wage fringe benefit portion to be paid for each covered hour. The plan provision for Time of Payment of Employer's Contribution states:

"Unless otherwise provided by contract or law, the Employer may make its contribution to the Plan for a particular Plan Year at such time as the Employer, in its sole discretion, determines."

I don't think the "unless otherwise provided..." language incorporates the statute or contractual language by reference.  There is also plenty of typical plan language about when annual addition are credited, and when contributions must be made to be deductible for a plan year, or to be taken into account for testing, but those aren't really the issue here. 

State law does in fact require the contributions to be made quarterly, and there clearly has been a violation of this law.  

If the plan document doesn't have a deadline for the contribution, is there an operational defect when contributions are made later than the statutory or contractual deadline?    I had assumed the answer was yes.  But after parsing all the plan language relating to employer contributions, I am now thinking that the answer is no.  And that would mean there is no operational failure that could be corrected under VCP.   

Agree or disagree?  

Participant dies at age 81.  Was not Key or HCE.  Spouse had already died.  3 Adult Children, who are named as Contingent Beneficiaries.  Primary Beneficiary is named as Living Trust establish with the Participant's name.  Since Living Trusts are something I have zero experience with any suggestions, comments or advice on how to process this death benefit will be greatly appreciated.  Thanks!

The regulations give mathematical certainty as to what constitutes an acceptable "range."

However, there is that annoying caveat that says as long as the allocation/accrual rates of the HCE's within the range cannot generally be significantly higher than the allocation/accrual rates of the NHCE's within the range.

I've always found this troubling. What is "significantly higher" (especially since the range is limited anyway) - is there any guidance on this? Thanks.

Editing typo...

On a client who terminates and switches TPA, I am  curious as to how many TPAs are charging a deconversion fee or a fee to send copies of prior documents to new TPA.

Husband died in 2016 at age 76. Made RMD  in 2016 after death;  Wife stayed in 401K plan but just had name changed  from husband to wife (Age 72 at time of husbands death.)   Thought the transfer in wifes name would allow wife to continue to use the Uniform Life Table since wife was only beneficiary.   Principal Group handles the Plan and they are insisting that wife must take it using Single Life Expectancy.   I have been trying to get someone to listen to me that the Uniform Life Table should be used.    It appears that once the first RMD has been made as a “beneficiary” vs. surviving spouse, the wife will be stuck with the single life expectancy which is undesirable in this situation.  It appears that wife has no choice in 2017 RMD.    If the 401K is rolled over to an IRA, what table will be used in the IRA and can the IRA be treated as “wifes own”?  Please help….I am not a professional…just a fan of the website.   

A participant is requesting a hardship distribution for funeral costs for a sister. The sister did not live with the participant and was not claimed as a dependent on the participant's tax return.

What does the plan sponsor have to do to verify if the participant's sister is a dependent?

Thanks!

We have a doctor client who shares employees with other doctors.  The 6 doctors operate under different tax entities.  One doctor pays all the employees through his payroll for convenience.  Their accountant charges the other 5 doctors their share of wages.  The accountant tracks hours worked for each physician and allocates compensation accordingly.  Some employees work for all and some only for one doctor or several doctors.  So at the end of the year we get a census showing hours/wages for each physician and a total.

I understand the very old regulations for shared employees are still in place which say you look at the total hours for all employers in determining the 1000 hours threshold and then allocate the employer contribution only on the wages paid applicable to a particular physician's business.

My concern of course is - would the IRS support their own regs in this case?  The good thing is that only 1 of 6 physicians even has a plan so in looking at the group as a whole, coverage likely would pass.  I believe the group has a common marketing name and phone number.  I don't know how they bill insurance - I hope and fully expect that to be filed under each of their separate business EINS.

Thoughts? And thank you in advance.

Tom

Some recordkeepers and third-party administrators offer to provide services for a 401(k) plan not merely as a contract service provider but also by expressly accepting responsibility as an appointed fiduciary for a specified set of plan-administrator (not investment-manager) functions.  Business jargon seems to use "3(16)" as a label for this kind of service.

If a plan sponsor wants to engage this service, is there a meaningful choice of providers?

Or is the number that offer this service so few that an employer faces little choice?

Assume a NQDC participant works in a state with income taxes and retires to a tax-free state.  She has two accounts within her deferred comp plan: a 10-year account, paying her $100k per year beginning in the year after retirement.  The second account is a lump-sum account, paying out $50k in the year after retirement.  She'll receive all the payments while residing in the no-tax state. 

My question...is there state income tax liability on the $50k lump sum from the source state?  

Instead of a lump sum, what if she had a 5-year installment of $50k per year.  Would that be treated separately from the 10-year payment stream as well?

Asked differently, is the 10-year rule interpreted to mean only specific accounts with at least a 10-year stream (or longer) within an employer's NQDC plan are taxed at the retirement state's income tax rate?  Or, is the rule interpreted more broadly.  Meaning as long as a combination of accounts within an employers' NQDC plan payout for 10 years or more, then all the payments are exempt from source state income taxation?

Is there any guidance on how to administer a plan amendment that changes the method for crediting service from equivalencies to actual hours, or do we just give all employees the greater of the two?

I apologize, I don't have as much familiarity with DB plans as I do with DC plans, so if there is another thread that answers my questions, or website, or reference material somewhere, please point me in that direction. 

Plan Information

Traditional DB plan, does not allow distribution prior to NRA, nor does it appear to allow for single lump sums( don't ask me why, its a convoluted individually designed document, I had nothing to do with it, it came to me that way). 

Normal benefit is regular single life, with 50% JS for married participants. 

Plan has several participants that need RMD - they can't locate them, or in some instances the participants won't respond. 

I suspect for some of the participants, if they received their RMD check in the mail, they would just cash it. 

The question is - the plan does not know the participant's marital status - on what basis do they calculate the annuity, and thus the RMD amount? 

And before you tell me to check the document, it appears to be silent. As I said it is individually drafted and not a typical one at that. 

We are getting less than clear answers from the actuaries and financial institution. 

The actuary isn't willing to calculate any sort of RMD without knowing marital status and Date of birth. 

The financial institution isn't willing to process any sort of RMD without participant consent, which I think is actually a separate issue that we are addressing, but certainly doesn't help matters. 

If it was a 401(k) plan and I didn't know the spouse date of birth (or even if there was one) I would just calculate and have the plan payout based solely on the participant's DOB. But the actuary doesn't want to calculate the RMD based on a single life annuity without actually knowing, so I'm a bit at a loss. 

Surely someone else has figured out a way to handle this? 

The plan excludes partners from participation. One associate was promoted to partnership on Oct 1. The plan provides for a discretionary profit sharing contribution to all eligible participants who complete 1,000 hours during the year and are employed on the last day of the year.

Can we allocate a PS contribution to the associate based on his earnings from Jan 1 through Sept 30 or is it the participant excluded because he is a partner as of December  31?

Unfortunately the plan document is silent with respect to how to deal with EE's who are participants and then become part of an excluded class (it is in individually designed plan).

Not really a 409A question per se but was not sure where else to post.  Have a client that is interested in providing an executive with an old-fashioned walk-away right upon a change in control.  They might approach that as a very broad / watered-down "Good Reason" trigger but I think the current desire is to just give the executive a straight unilateral choice of quitting and getting existing severance benefit if he quits within two months of a change in control.

Obviously that wouldn't fit within a good "good reason" definition and so wouldn't seem to qualify for an involuntary separation exemption from 409A but I think they are willing to provide for a lump sum payment within 2 1/2 months of the CIC so arguably we could exempt it from 409A (or arrange for it to comply with 409A schedule if exercised).

I see these so rarely these days though that I'm questioning other aspects here.  For example, is there any constructive receipt concern if the executive elects not to leave following a CIC--e.g., that the IRS could argue that he should be deemed in receipt of the severance amount because he could have elected to receive it.  (We would draft so that the right vests upon a CIC but would be forfeited if he didn't exercise and separate from service within 2 months.)  I don't recall constructive receipt issues being a real concern when these provisions used to be more common but wanted to check.  Also, along the same lines, I'm assuming this would operate the same way for 409A purposes as an executive having a valid good reason trigger or right and not exercising it--i.e., 409A doesn't seem to have a problem if a service provided passes up a good reason right.

On a related note, how does 280G generally deal with these sorts of provisions, particularly in a private company cleansing votes?  Presumably the benefit would need to be factored into the potential parachute payments subject to shareholder approval since it could be exercised simply upon the CIC?

Any thoughts would be appreciated.  Thanks