Hi all. A new client has a 1 participant MP Plan since 1999 but has treated it like a PS Plan.  The MP Plan Adoption Agreement is marked 25% of pay, but he has always varied contributions and skipped years sometimes making no contribution.  He self-administered and thought he was doing things correctly.  There's a signed PS Plan Adoption Agreement in his filed but it's marked "not used" which I know matters not.  I think whoever was advising him screwed up and got things backwards.

He has never had any employees.

Then I discovered a section of the Adoption Agreement  which says:

Benefit Adjustments(Optional)

_X_ Notwithstanding the above, $0.00 is the minimum contribution for any

Participant. (If Forfeitures are reallocated, any such reallocation shall be in addition to this amount.)

____Notwithstanding the above,$________ is the maximum allocation (including the allocation of any Forfeitures) for any Participant.

Any ideas on what should be done now?  Or if anything should be done about the past?

Thanks,

RayJ

An employee was a nonresident alien receiving non-US source income for a few years.  He comes to the United States, and is no longer a statutory exclusion for plan purposes.

Does his service during the period prior to his change from a statutory exclusion to an eligible employee class count toward determining his plan entry date and determining his vesting service?

Thanks!

I have a client that wants to excluded commission only sales people from benefiting.  The plan passes coverage as some of these sales guys are HCE's.   The plan also passes the average benefits tests and the rate group tests.  The only test that is failing is the gateway test.   My question is do we need to benefit the lower income sales people at 5% to meet our gateway requirements?

This is the 72(t)(2)(A)(v) exception. Any reason this wouldn't apply to a loan offset distribution (not a prior deemed distribution) upon termination of employment? I don't see any basis for saying this wouldn't apply, but we have a State tax department giving someone a hard time, so I thought I'd see if I'm missing something...

Thanks.

I am working with a plan that defines plan compensation as 3401(a) compensation. The plan covers a couple of Puerto Rican residents/participants. Their compensation is reported to Hacienda. Does this compensation constitute 3401(a) compensation? We're trying to do some clean-up and want to determine if we have an issue on the U.S. side.

Thanks to any who can help!

Dog

We have an engineering client who operates a SARSEP -- a type of plan with which I am not very familiar.  The SARSEP requires a new employee to satisfy the 3/5 rule for eligibility.  This is not attractive new prospective employees with years of experience.  Two questions:

1) Can an employer amend the SARSEP to allow earlier eligibility and, if so, do the eligibility requirements have to be the same for all non-excludible employees?

2) Is there any sort of industry standard for eligibility under a SARSEP?

Thank you!

I'm hoping has input on what would happen procedurally here.

Employer distributes W-2s to employees on time. Employees file their individual tax returns, accurately reflecting information on W-2 provided to them, with no problems. (Several hundred employees; not just one or two.) Several years later, IRS sends penalty notice to employer saying SSA/IRS have no W-2s on file for the tax year. Employer insists they were submitted to SSA. Payroll tax reporting was filed and withholding was remitted to IRS during the year in question.

My question is this: When the employees file their personal returns showing W-2 wages, but the IRS has no record of that W-2, would that alone generate a letter/error indicating that the IRS's information doesn't match what the employee reported?

Hi

I have a client who is located in Rhode Island, they are subject to the mandatory State Disability Insurance (SDI).

My question: Is SDI included in Box 5 ( Medicare wages and tips) of the W-2  or is it excluded from the amount. The RI-SDI is separately listed  on the Form W-2 in Box 14, leaving me with this question when calculating Gross Compensation for the 401(k) Plan.

Any help is appreciated.

-Silver

Employer sent employee’s last 2017 Simple IRA contribution to financial institution but it was never received. The book keeper realized it (2 months later), but was told by the financial institution that they could not accept the employee’s payment for 2017 any longer. The book keeper called the IRS but could not find anyone to answer how to fix this issue. The IRS Simple IRA fix it guide states to “Make corrective contributions for each employee equal to the missed earnings for the period the deposits were late.” However, if the missed payment is sent in, it will be applied to the following year. How will this affect the employee? His W2 states the full amount of his contribution, but the financial institution will not include the late payment for 2017. Instead, they said it will be applied to 2018. Are they correct? How should this issue be corrected? Thank you in advance for your reply. 

I have a participant that terminated employment in 2015.     The employer allowed him to make personal payments on his 401k loan.    The last payment he made was in January 2017 and according to the recordkeeper's amortization schedule that payment paid the loan up to April 2018.     Now he wants to make another payment.    Can he still do that since it's been over a year?   I thought there had to be at least a quarterly payment.  

Is there any issue with unfreezing a plan and soon thereafter (maybe a month) terminating the plan?

Thanks for any responses!

TCJA changed Code Section 165(h) of the law that defined a casualty loss. That same section of the code is referenced in the safe harbor hardship rules. Under the new language, expenses for repair of damage due to a participant's principal residence would not be available for hardship unless included under a federally declared disaster area.

Are folks modifying their safe harbor hardship procedures to restrict casualty hardship to comply with this?

Hello All,

At a TPA firm I worked at previously we had an excel spreadsheet and checklist that we used and were so helpful when completing testing. The spreadsheet ensured that you knew what your compensation totals (415, ADP, Gross, Pre-entry, etc.) and deferrals/catch-up totals should be in the beginning. As well as, the checklist made sure all testing items were addressed before having it reviewed. Unfortunately, when I left that company, I didn't keep any copies and the place I work at now, doesn't have such beneficial tools. Does anyone have any that they are willing to share?

Thanks bunches in advance!!

Rehire and no records to tell if they had a vested account balance.

A company was bought years ago and their plan merged with our plan.  We got good records for 2013.  But nothing prior.

If he had a vested account balance, he is immediately eligible on rehire.

What would you do in these circumstances?

Facts:  Sole proprietor (SP) uses cash basis accounting and calendar year tax year.  2017 Compensation (i.e., Schedule C net income minus deductible SE tax) is $100,000.  2017 Minimum Required DB contribution is $150,000.  2017 DB contribution deadline is 9-15-2018. 

Timeline:

4-10-2018      SP makes DB contribution of $80,000.

4-15-2018      SP files 2017 tax return claiming $80,000 DB contribution.

6-1-2018        SP makes DB contribution of $70,000, which he’ll deduct on 2018 return.

Question:

Can the $70,000 DB contribution on 6-1-2018 be deducted on his 2018 tax return (assuming he has at least $70,000 of Compensation in 2018), but be used to satisfy his 2017 Minimum Required Contribution?

Thank you in advance for your input.

A have a couple of questions related to PEOs that I hoping to get assistance on:

1.  Can the owner of a company and all of his employees be considered a common law employee of the PEO organization that is then a leased employee of the company?

2.  Can the company adopt its own retirement plan?  If so, are there any issues with this?  I assume it would depend on whether the PEO organization currently sponsors a retirement plan and what the agreement between that company and the PEO currently states, correct?

Thank you!

If a plan uses 3401(a) for the def of comp, then that excludes group term life correct?  The plan does not use w-2 def of comp, which would include it under 6052.  They also do not exclude fringe.

Takeover plan excludes HCES from the safe harbor match as it has non-physician professionals who are high paid and the owner physician does not want to give them the match.  One of them made just less than $120,000 in 2017 and so we started up the pay period SH match for 2018 and the owner is not happy about it.  Of course the plan cannot be amended at this point for 2018.

Looking ahead though, if the plan was amended for 2019 to exclude this class of employees from the SH match (instead of excluding HCEs), my concern would be testing.  There would be say 4 HCEs including the owner excluded and maybe one NHCE professional  how would ADP testing be done on this excluded/disaggregated part of the plan?   

FYI - the plan is not top-heavy at this time - thankfully!

Comments?

Tom

A Safe Harbor Plan is amending eligibility from elapsed time to hours of service to trim out the part-timers.  Anyone who has already met the elapsed time requirement must be permitted to enter the plan, but anyone who has not yet met the elapsed time requirement by the time the amendment goes into effect will be required to meet the 1000 hr/12 month rule.

My understanding is that, unless the employee moves into a class of employees that is defined by the plan as excludible by definition, once you're in, you're in.  As an employee who has met eligibility requirements under prior eligibility rules, you may continue to participate in the plan, and you are therefore eligible to continue receiving the Safe Harbor contribution.  This is being questioned, and I can't find any information that confirms or denies my assumption. 

Thank you!

Unfortunately I'm not well versed in 401ks and regulatory policies, however my employer is supposed to make an end of year match of 1.5%.  After not seeing it this month I checked with payroll and they stated:

"You won’t see that until a later date.  For 2017’s match, you should see it in your account by March.  You’ll receive a notice ahead of time from *COMPANY NAME* advising of the exact date of the match and how much it will be."

Now our posted benefit notice is - 

Company Match

*Company Name*  will match up to 3% on the first 6% you contribute to the plan (on a pre-tax or Roth basis).  The first 1.5% will be reflected on your bi-weekly paystub.  The additional 1.5% is contributed for eligible employees* by the company following the close of the plan year.

You are always 100% vested in any contributions you make, and any company match that is contributed on your behalf.

You are always 100% vested in any contributions you make, and any company match that is contributed on your behalf.

*Regular salaried employees who are active as of December 31 of the plan year.

(Yes, the line is posted twice...)

However, I read that as the end of the 401k plan year is December 31st...  So I'm basically losing out on 3-4 months of interest for a benefit that I earned last year. 

Is this normal? Legal? Ethical?