A financial advisor asked for help where an ERISA 403b plan is with one of the less-than-friendly 403b providers, and the plan sponsor is fed up with them.  However, the plan sponsor learned that most participants will get hit with a large back-end fee if they move their money at this point.

I suggested that we create a second set of accounts at a more friendly recordkeeper and call it all one plan under a new document (which I've done with plans on this provider before), but the financial advisor said that he has had better luck freezing the accounts where they are and creating a new 403b plan that allows transfers into it from the old plan (but not back the other way!).  All new contributions will only go to the new accounts, and the FA can monitor when the sales charges have dwindled down to zero or some other acceptable number and advise each participant individually as to when to move to the new accounts.  Eventually, when everyone moves over, they can terminate that plan.

I have to say, the idea of not having to fight with Ye Olde Unfriendly Recordkeeper for information is appealing, but this seems like it's too good to be true.  So we'd be leaving them with two plan documents (presumably that rk is going to help with the restatement of their plan, but I don't know that for sure), two 5500s, and each person getting two statements, and of course 2x the risk for an audit.  The current accounts do allow loans, which might make things a little harder.  What other pitfalls could there be in this arrangement?

Participant is telling me that they did not receive an ink/sealed version of the QDRO.  She emailed me a pdf that clearly says "ELECTRONICALLY FILED" at the top of the page.

What is a plan administrator to do?  Generally, the paper signed version with the court seal and everything is received, at least in my experience.  

Participant has a minor child with a disability that qualifies for SSI payments.  Participant has a small balance 401(k) that needs to be distributed so that resources are below the threshold.   Participant is only 35 so finding  a distributable event is difficult.  Has anyone had this situation?  The only potential distributable event that we have thought of so far is a hardship if their is a qualifying medical expense or perhaps amending the plan to facts and circumstances and qualifying this situation as a hardship irrespective of whether there is an event that would qualify under the safe harbor definition.

Thanks for any thoughts on this issue?  

How often do you see this combination - a non-ERISA deferral only 403(b), so no 5500's, and a non-IRS "prototype" SEP for the employer contributions, so no 5500's? Just curious.

I continue to read that Church plans are exempt under ERISA, just to clarify, does that change once the employer (the church) makes contributions?  I understand that churchs have the option of ERISA/NON-ERISA choices.

The instructions for form 5310 say to use the form for plans exempt under §401(a) and §403(a).  The form, however, makes no mention of 403(b) and further (in item 6) does not include 403(b) plans as a type of plan.  While the instructions mention §403(a), the form, itself does not--only referencing 401(a)

Note that this form was last revised in 2013, so the question of 403(b) plans could be reflected in a new form.  On the other hand, the IRS has upped its fee for filing a 5310,.  So why not review the form, itself?

The question is whether a terminating 403(b) plan should file form 5310 or is there another option for a determination letter upon termination?

Form 5500-SF for 2013 was prepared for a client and filed late by about 2 weeks.

Apparently client has received more than 1 Notice from IRS as he just emailed an IRS bill for $15,000.

What is recommended here?

Hi.  So this 403(b) plan as been around for decades, and is now starting to grow rapidly, taking on a lot of 10- and 15-hour per week employees.  The plan currently has the "20 hr/wk" exclusion for the employer contribution, but not for the deferrals.  Is there any reason why they couldn't add it for the deferrals going forward?  I can't think of any off the top of my head.  Thanks.

A ppt is out on a leave of absence (medical for cancer treatment) currently.  They have an outstanding loan and the repayments were suspended for the leave up to one year.  It has been two months into the leave.  The ppt wants to refinance for an additional amount on the loan.  They have applied for SS disability and will find out in two months, if they qualify.  The plan uses SS determination for the def of disability.  The client does have some documentation from her doctor that this is a permanent disability.  Although, the ppt has told them that she wants to come back to work and has not quit.

So, is there any reason not to allow the refi?  My concern was is this a bona fide loan for the refi.  If there is documentation from a doctor on permanent disability and she applied for it with SS, then will she ever make a repayment or have the ability to payoff the loan?  Of course, who is to say she cannot make a pre-payment via check before the one year suspension is up.  The loan program allows for a total repayment via check.   Otherwise, repayment is via payroll deduction.

Thoughts?

I have received an unusual question from an attorney related to a Defined Benefit Plan for a Self-employed individual: Does the sole-proprietor who establishes the plan have to reside and work in the United States? Not sure of the specifics behind this, but I would think you'd have to reside here, and the source of your self-employment income would have to be from business conducted in the US.

Thanks for any replies.

Participant must be employed on last day of plan year, or work 500 hours in year of termination to receive a match.

In 2017, one participant received a match, but term'd with 300 hours.

Is a retroactive corrective amendment to eliminate the allocation conditions for 2017 an appropriate correction?

The match is calculated and deposited each pay period, I'm thinking we should eliminate the allocation conditions altogether.

Plan has no HCEs.

Comments please?  Thank you!!

Can a small business employer with less than 20 employees, who offers group health insurance, sponsor a section 105 Health Reimbursement Plan to reimburse employees who opt out of the group offering and enroll in Medicare Part B, D and supplement?

• Background:

Client hired employee in January of 2017. Employee maxed out deferral with client (including catch up) in 401(k) plan for 2017. Employee also was paid the remaining portion of his 2016 compensation from former employer in 2017, and former employer withheld based on employee's 2016 deferral elections. Excess deferrals resulted. Correction will obviously not be done by April 15, 2018.

• Issue:

  What is the correct course of action in this situation? Set forth below are my basic thoughts:

  Code § 402(g)(1)-(2) and Reg. Sec. 1.402(g)-1(e)(2) clarify that, unless timely distributed, excess deferrals are (1) included in participant’s taxable income for the year contributed, and (2) taxed a second time when the deferrals are ultimately distributed from the plan. The excessive deferrals involved in the Error were not timely corrected because the April 15 deadline had already passed. Accordingly, the Error’s excessive deferrals must be taxed for the 2017 year (i.e. the year contributed) and again when the excessive deferral is distributed from the plan. 

  If a corrective distribution is not made within the correction period discussed above, then excess deferral cannot be distributed until either (1) the distribution is otherwise permissible under the terms of the plan, or (2) the distribution is necessary to avoid plan disqualification under Code § 401(a)(30) (note: there is not a plan disqualification issue under Code § 401(a)(30) because the Error involves excessive deferrals between two unrelated plans and employers).[[1]]

  Reg. Sec. 1.402(g)-1(e)(8)(iii) allows for distributions of excess deferrals after the correction period to be distributed from 401(k) plan only when permitted under Code § 401(k)(2)(B). As discussed above, plan disqualification is not an issue; accordingly, I believe the error’s excessive deferral can only be distributed if permitted under the terms of the plan (i.e. termination, age 59 1/2, or other Code § 401(k)(2)(B) permissible times).  

  I could be wrong on this analysis and this is my first go tackling this kind of problem so please let me know if I'm not on track and thank you for your help!

• [Update]: So a little twist on this analysis; the plan document states that the plan will return any excess deferrals by April 15th of next year, which obviously did not occur. So now it appears as though we do have a plan disqualification issue. Trying to find out the correct course now with this thrown in .  

• ---

   

An ESOP sponsor is interested in closing down a long-term ESOP plan.  If the company borrows the funds to repurchase the shares from participants, is the interest on that corporate loan deductible?

How do you calculate an RMD from an individual account plan that has a non-calendar year plan year and uses pooled investments?  Assume the plan has an 09/30 plan year and gets a valuation only once year on 9/30.  The regs suggest you take the account balance as of 09/30.  Then you add contributions and forfeitures allocated from 10/1 to 12/31, and subtract distributions during that same period.  For pooled investments, it is as simple as taking the 9/30 account balance, adding the 401(k) contributions (and forfeitures, if any) from 10/1 to 12/31, subtracting any distributions, and that is the value that gets divided by the life expectancy?  What about the earnings from 10/1 to 12/31?  My read of the regs is they are not picked up until the following year. 

I realize this topic was discussed in the past,  but want to see if anything has changed.

Company A has a SIMPLE IRA
Company B has a 401(K)

May 1, 2018 Company B purchases (stock purchase) Company A.  Company B wants the employees of Company A to participant in the 401(k) Plan. The SIMPLE will remain in place ( "frozen") until it can be terminated.

My initial thought was Company A employees cannot defer into the 401(k) Plan until 1/1/2019.  Their contributions would continue to be made to the SIMPLE Plan for 2018.  Company B would make the employer contribution.

1. Does Company B have to continue the SIMPLE Plan - could they leave the plan alone ( no contributions) until it can be terminated?

2. Is there any way the employees of company A can defer into the 401k plan for 2018? Or are they out of luck?

thanks

Yesterday...

Income tax was due, I had to pay...
All the funds I tried to hide away...
I don't believe, I'll eat 'till May.

Suddenly...

I'm not sure that I am fiscally...
Ready for responsibility...
Oh yesterday, came suddenly.

Why, I

Owed so much, I don't know, I couldn't say
May be
Forms were wrong, how I long, for yesterday.

Yesterday...

Seemed like prison time was on its way...
Now I need a place to hide away...
While keeping IRS at bay.

Why, I

Owed so much, I don't know, I couldn't say
May be
Forms were wrong, how I long, for yesterday.

Yesterday...

Taxes due, I filed come what may...
Losing all deductions that's my way...
Of giving IRS my pay.

mm - mm - mm - mm - mm - mm - mm.

A participant contributed $15,000 Roth deferrals to plan A and $10,000 Roth deferrals to plan B. Participant is not catch up eligible and the plans are unrelated.

Participant informed the plan sponsor today of the excess. 

My understanding is that the excess cannot returned after after April 15. However, the bundled recordkeeper (one of the large ones) says they will refund the excess anytime. This does not not seem right to me based on other threads (like the one below) but I cannot find specific authority for this stance. Is it just based on distributable event rules? 

Since neither plan fails 401(a)(30) can they return the excess after April 15? Can anyone provide authority for this?

Thank you!!

Edit: I finally found this in the EOB after I posted this question.

1.d. Are corrective distributions allowed after the April 15^th deadline? The last sentence of IRC §402(g)(2)(A) provides that a distribution described in IRC §402(g)(2)(A)(ii) (i.e., one made by the April 15^th deadline) may be made notwithstanding any other provision of law. What if the distribution hasn't been made by then? Treas. Reg. §1.402(g)-1(e)(8)(iii) provides that distributions of excess deferrals after the correction period may be distributed from a 401(k) plan only when permitted under IRC §401(k)(2)(B). Thus, unless the 401(k) participant has satisfied a permissible distribution event under §401(k)(2)(B) (e.g., attainment of age 59½ or severance from employment), the excess deferrals could not be distributed. An exception is made if the excess deferrals also cause the plan to violate the section 401(a)(30) limit. See the EPCRS Program and the discussion in Part E of this Section XI.

For those who are interested.

https://www.napa-net.org/news/technical-competence/regulatory-agencies/irs-pressed-on-vcp-fee-changes-at-hill-hearing/?mqsc=E3950396