In a plan with 500 hours required for the annual accrual, do you think it is reasonable to credit an accrual when there is no net earned income  ?  Likewise, is it reasonable to not credit an accrual on the basis of "no income, therefore not 500 hours?  Would you look at gross income before deciding on an answer?  Any IRS input on this question? 

Client wishes to terminate their prevailing wage only plan and allow immediate distributions to everyone (roll, cash, etc.) but amend their 401(k) to permit prevailing wage contributions going forward.  Any problems with this?

I was explaining the restatement process to a plan sponsor with an ERISA 403b plan, and the director said that he intends to terminate the plan at the end of 2017 anyway (there are only 5 participants, all employed, so assume payouts won't be a problem), so he won't need to restate onto the pre-approved document.

In 401k-land, plan documents have to be up-to-date as of the date of the plan termination.  How would that translate here?  Any thoughts?  Thanks.

We have a situation in which a corporation wants to have a plan for its employees, all of whom are physicians.  We ruled out a qualified plan, because there are a lot of nonphysicians who would be considered leased employees and/or part of an affiliated service group, so any plan for just the physicians would fail nondiscrimination testing.  However, we are now stuck on the question of whether they can have a nonqualified plan. 

The issue is that in order to be a top hat plan, a plan must be for a select group of management or highly compensated employees, and it seems unlikely that a group consisting of all employees could ever be "select."  And while the leased employees and affiliated service group are all treated as part of the same employer for Code purposes, there does not seem to be an analogous provision under ERISA.

Has anyone dealt with this situation?  Any brilliant thoughts on resolving it?

Company A and Company B are owned by the same individual and each have their own 401(k) plan (lets' call them Plan A and Plan B. Nondiscrimination testing has been done on a controlled group basis. It has come to light that the testing was not done correctly with respect to Plan A for the past several years - union and nonunion employees were not tested separately as required. Plan B has no union participants. The testing is in the process of being redone correctly.

What are the risks to Plan B in this situation?  If they fail to pass the tests now, when Plan A's union/nonunion employees are disaggregated correctly, is this a failure to pass for Plan B? I presume it would be, but what if the actions taken to get the plans to pass apply only to Plan A (i.e. Plan A makes QNECs)?  Since we're talking about prior plan years, does Plan B have to file with VCP since they failed the nondiscrimination testing and didn't correct within the designated time period? Even if the correction actions are to be taken by Plan A only?

Is it okay to not send the annual Safe Harbor Notice to non-employee participants? 

It seems non-employees don't need to receive it but we've always mailed it to everyone with a balance.  If there is a DOL audit we want to be sure to have sent out all of what was required.

Filing for excise tax refief for missed RMD (through VCP) and struggling to correcting answer this:

At least one affected participant is either an owner-employee (see IRC Section 410(c)(3)) or, if the plan sponsor is a corporation, a 10 percent owner of such corporation."

Plan sponsor is a partnership.  Some partners are professional corporations. 

Affected participant is the 100% owner of her P.C., which is less than a 10% partner of the partnership sponsoring the plan.   

For 401(a)(9), she is a 5% owner because Section 416 is cross referenced for that determination and those rules apply ownership test separately for members of the affiliated service group.

But it isn't clear to me whether the VCP form question is intended to refer to the partnership that sponsors the plan or would include owners of the P.C.s that are members of the affiliated service group (and related participating employers in the plan).  I'm not seeing an answer in either the form or the definition in 401(c)(3). 

There is no reference to 416 so I am inclined to apply the ownership test only at the partnership level.  

Can you offer any insights?

I'm terminating a plan for an employer/client.  It is subject to the QJS&A rules.  Two former employees have each about $6000 in benefits.  Neither will respond or send back an election for lump sum or direct rollover (with spousal consents).  Which financial companies are willing to deal with such small amounts for JS&As?  Any other ideas are welcome.  Thank you.

Does the special special Hurricane relief under Announcement 2017-13 apply only to people who have their primary residence in an area affected by the hurricane, or if someone owns a vacation home in an affected area would they be able to obtain a hardship or loan under the bill? 

A client set up a 401(k) in 2017 for her LLC which is taxed as a sole proprietor. She has 6 full-time employees and has set up the 401(k) so there will be no employer contributions, only employee contributions.

Two questions:

1) What date does she have to fund her "employee" portion for 2017? By December 31, 2017?

2) Because there will be no employer contributions to the plan,  the plan must be set up as a traditional 401(k).  That means she must have it tested to be sure it is not top heavy. Is that testing typically done on a projected basis so she does not overfund her contribution before December 31?

Took out a loan on 10/19/16 of 26,900

If I pay that off, will I be able to get a loan of the lesser of $50,000 or 50% the next day?  (assume 200k vested)

Is the 12 month restriction on when you take out the loan or when you repay?

Thanks!

 A law firm sponsors two plans,  one if for the Associate attorneys, deferral only, and the other is for the Partners and Staff, deferrals and a new comp profit sharing.   The plans have always passed coverage testing.    

Can the Partners and Staff plan add a non-elective safe harbor?  

Let me state at the outset that ERISA counsel will be involved. That having been said, curious as to thoughts on the following from those who deal with ESOPS.

So, you have a C-corp that is partially owned (about 24%) by an ESOP (no outstanding loan). The owners have an idea that they want to sell their remaining stock to the ESOP, which will own 100% now, and a new unrelated buyer will then purchase 100% of the corporation from the ESOP. Apparently they envision this being sort of one immediate transaction such that the ESOP will not need to borrow any funds to purchase their stock. They are also, by the way, current participants in the ESOP.

First, is such a transaction possible/reasonable? I'd typically expect that the ESOP would actually have to borrow the funds, then pay off the lender as soon as the shares are sold to the new buyer and the ESOP is now all cash. But maybe what they envision is a common transaction - sort of "circular" for lack of a better term?

Also, even assuming such a transaction is otherwise viable, how the heck could you ALLOCATE that much money? It doesn't seem reasonable that this could all be simply classified as "gain."

Also, (not being an ESOP expert, by any stretch!) I have a faint memory that IF a Section 1042 "rollover" is contemplated, that the selling shareholders (who are also participants) cannot receive any allocation attributable to the employer securities that were just sold to the ESOP? That this would be "double dipping" - and that therefore all such sale proceeds could only be allocated to OTHER participants?

Any other special pitfalls, or thoughts about this?

Former partner (or employee for that matter) in a firm now is an independent consultant for the same organization and receives a 1099.  He wants to start a DB plan and deduct away his 1099 income.  Can he consider the prior firm a predecessor employer and use that compensation in his 3-year average?  In describing imputed comp, 414(s) says "prior employer comp for an employer...maintaining the plan"  So this is obviously a reg that is addressing a more traditional migration of employment from one company to another.  I think my client needs to start fresh like a new sole prop but I'm hanging this out there for any creative ideas.

My title kind of asks my question:  If we have a cross-tested safe harbor plan (3% SH).  We want the owner to receive 15% of pay total ER contribution (3% SH + 12% PS) and everyone else to receive 5% (3% SH + 2% PS).  Does the PS portion of the contribution have to be 100% vested?  

Thanks

When QNECs are used in the ADP test, I understand that they have to pass 401(a)(4) general testing both alone, and combined with profit sharing (and apparently 410(b) is tested only with them combined).

If you have QNECs allocated that exceed the amount used in the ADP test, do those amounts need to then be carved out and combined with profit sharing for separate 401(a)(4) test (that excludes ADP-tested contributions)? For example, for a Prevailing Wage plan with the P-W contributions classified as QNECs, the amounts exceeding the 10% "disproportionate amount" P-W limit (or the amount needed to make the ADP test pass, if less)? This would be the preferable option, as we are allocating profit sharing to maximize HCEs, so need allocations to NHCEs in the test.

(Assume the plan is using current-year ADP testing, and document seem to have no language addressing this situation, other than P-W contributions up to 10% "can be" used in the ADP test.)

It seems pretty obvious that you would test the "excess" P-W QNECs combined with profit sharing, but this is a rather unusual situation and I'd like to confirm.

Thanks.

New cliuent for us where we discovered that there are 3 versions of a 2015 5500 that were filed, none as amended.  They all have different ackID's and are all listed.  Anyone know how to delete those?  

That 2015 filing needed to be amended, and I'm considering amending all 3 filings that are out there.  Long story short, the previous provider included auditor information other than the financial statements that I would prefer to pull off the DOL's site.

Another wonderful one-participant 401k situation, only this time aided and abetted by a CPA.

An S-Corp individual's CPA advised them to make a $10K employer contribution in January (like an IRA). This was on anticipated net business income (excluding wages and payroll taxes) of $40K. I don't know where the CPA expected the $10K for the employer contribution to come from.

When it became apparent that there would only be $30K in net business income, the CPA advised the individual to pay himself another $10K in wages. I have a hunch that there was no actual payroll just the filing of the appropriate Form 940/941 and their payments.

I believe if the individual properly loaned the $20K to the S-Corp. This would provide the $20K in basis to actually deduct the loss on the individuals Form 1040. Although, I have a hunch based on the overall fact pattern that similar to payroll situation, the $10K in employer contributions were not routed through the S-Corp's accounts and came from personal funds.

So back to the original question, would it be proper to make the entire year's employer contributions, before any compensation that contribution was based on, had been received.

What corrective action would/could be taken at this point in time. What would be the consequences, except for a well deserved smack upside the head of the CPA.

I am not an expert in the controlled group world and would appreciate any input on whether this scenario falls under a brother /sister controlled group

Company A - sole proprietor - Dave 100%

Company B - S-Corp  - Dave an employee - Dad owns 100%

Company C - Dave owns 15%, Dad owns 50% and various family members own 35%

None of the companies are related or have any business relations with each other.

As the family attribution rules apply, I am not sure if Company A & B would be considered a controlled group.

Thanks

To take advantage of the Net Unrealized Appreciation (NUA) tax rules for shares distributed from an ESOP, the IRS requires a Lump Sum distribution from all of the employer's qualified plans of the same type (that is, all pension plans, all profit-sharing plans, or all stock bonus plans).

If the employer has a 401k plan and a separate ESOP,  do employees have to take a Lump Sum distribution of both the 401k and the ESOP to take advantage of the NUA?

I've read different opinions on this.