7 participant 401(k) with standard safe harbor match.  Plan is Top Heavy and has a New Comparability profit sharing formula.  Is a 3% minimum allocation to Non Key ee's if a Profit Sharing is allocated?  Does the safe harbor match not satisfy Top Heavy? 

Has anyone ever looked at how a QNEC that is figured wrong can be corrected?

Here is the scenario:

• In 2016 the plan administrator did not include all applicable Plan Comp in compensation for implementing match and employee deferrals. 
•  In accordance with EPCRS principles, a 25% QNEC was made to the plan on behalf of eligible participants. The Plan is a Safe Harbor Match - 100% of the first 3% of compensation and 50% of the next 2% of comp.  Under Rev. Proc. 2016-51, Appendix B §2.02(1)(b), Example 6, the QNEC should be limited by any amount that would exceed the 402(g) limit, taking into account the entire missed deferral opportunity, not just the 25 (or, if applicable, 50%) QNEC for the missed deferral opportunity.
• The QNEC was not properly limited, and a handful of participants have QNECs that, if the entire missed deferral were taken into account, would cause an excess 402(g) contribution. The QNECs were deposited in August of 2017. 
• The TPA wanted to treat as excess 402(g) deferrals.  However, the actual dollar amounts contributed to the plan were not in excess of 402(g). Rather, the QNECs were not figured correctly.

Does anyone know the fix?  

Can the excess QNECs be forfeited and allocated to a suspense account to offset future contributions.  Under the exact definition, of "Excess Allocation," I am not sure this qualifies, since it was "an amount made pursuant to a correction method provided under this revenue procedure for a different Qualification Failure,"and thus not an "Excess Amount" under the EPCRS definition.  Or maybe it is, because the actual amounts were not limited in accordance with EPCRS. 

Hi, I'm allowed two loans under my current plan. If I have two open loans and pay them both off, would that open up a new maximum loan? Or would the new loan amount be calculated using the highest balances over the last 12 months. Any help with be appreciated. Thanks

We have not run into any safe harbor plans that have wanted to suspend safe harbor contributions.

An accountant stopped by the other day and mentioned he had a small client (about 8 participants) that did not make their 2016 safe harbor contribution and don't want to fund it.

I explained that it was my understanding that if the company had financial problems and they could prove it, they may be able to provide a 30 day notice to participants and then not make any safe harbor contribution from that point (after the 30 days) to the end of the year. But I believe they are responsible for making the safe harbor contribution for the time up to that point. In addition, I think the plan then needs to provide top heavy minimums and run the ADP test for the year. 

He seemed to think that if the company could prove it had declining sales and business for the past few years, that they could simply not fund the safe harbor contribution.

Has anyone heard of this?

They are a going concern but has anyone heard of this for a company that was in very bad financial shape?

Thanks. 

I have a small plan with basic SH Match and discretionary PS (New Comp/cross-tested).  Using Corbel’s Volume Submitter doc.  Adoption agreement specifies SH Match to be calculated on an annual basis.  They prefund throughout the year (by depositing per pay period when they deposit deferrals).  Obviously, true-up is required at year end to ensure the annual calculation is accurate...

The two owners want to see a projection maxing out.  The TPA who performed similar projections last year did not true-up the Owners’ SH Match before solving for max PS, rather, they amped up the PS without taking into account the SH Match true-up.  I am trying to figure out why.

Although the owners are HCEs, all participants must have the SH Ma calculated on an annual basis, correct?  HCEs cannot just opt out of true up, can they?  One might say that as long as the NHCEs receive the true up, what is the harm?  I lean towards this thought, though:  FOLLOW THE DOCUMENT.  True up should be done for HCEs, too.  But, maybe I’m missing something here..?  

I searched the board and found a posting from a few years ago that said a client of theirs was under IRS audit for this and was still negotiating sanctions (but no update followed that I could find). Does anyone know where I can find supporting documentation - one way or another - on this?

Does anyone have the prescribed method for mandatory employee contributions that were missed due to improper exclusion from the plan.  While it is clear how to correct the employer contribution, it is not as clear if the employer is to pay the missed employee contributions as well.  Apply the same method as missed opportunity for after-tax contributions under EPCRS?

An existing, 3% safe harbor nonelective 401k plan, calendar year, uses a One Year Wait for eligibility.

The plan sponsor would like to amend the plan today, 12/1/2017, to permit anyone hired as of 12/1/2017 immediate eligibility.  This would bring in 2 HCEs and 6 NHCEs.

It seems that expanding the eligible ees is allowed mid year, but the timing seems aggressive, since the new entrants have only one month to defer?

Thanks.

Would appreciate any feedback on experiences with requesting a "minor" modification of a VCP Compliance Statement. Are such attempts typically successful? If request is denied, are there negative consequences?

Applicant discovered some additional corrections needed to be made within the 150 day period after receiving Compliance Statement. These corrections all related to the SAME underlying failures included in the VCP. At question is whether the corrections below could be considered "minor":

1. Three (3) participants were included in original VCP as "Overpaid"  (not being fully vested at time of termination). However, it was later discovered that they were not in fact overpaid (were age 65 at time of termination thus fully vested). Overpayment letters were sent to participants and then later retracted upon the discovery. 

2. Due to missing payroll records, Applicant listed certain assumptions in the VCP submission as a result of missing data. This data was later discovered, and it was determined that this assumption was not correct for 24 participants. The result was that the OVERPAYMENT to these participants had been originally calculated to be greater than it actually was. Thus, OVERPAYMENT amount decreased. 

3. Due to multiple record payments, two (2) participants believed to have received OVERPAYMENTS had in fact received a slight UNDERPAYMENT

Does IRS take into consideration the ratio of the corrections made under the original VCP submission to the number of modifications required in determining "minor"? 

Any input is greatly appreciated. Thank you!

- 

Plan sponsor will be finalizing the termination process during the 1st quarter of 2018. They have 40 annuitants. Expected liability for these annuitants is approximately $350,000.

We are having a hard time finding firms to bid on the annuities due to the overall size. Does anyone have firms that they have had success with smaller plans?

Thanks.

Plan uses Rule of Parity.    Exclude eligibility service before a period of 5 consecutive one year breaks in service if an employee does not have any nonforfeitable right to the account balance derived from Employer contributions.     Does not have a one year holdout. 

The employee is eligible to enter the plan on his rehire date if vested when terminated.   

My question is, is there a limit as to the number of years an employee is gone from the company so that his prior service will not count for eligibility?   

Employee is terminates in February 2005 and was 60% vested.     He is rehired in 2014.   He was gone for 9 years.    

Can an employee be rehired after 20 years and will that prior service count?   

I have a quick question.  X provided health and insurance services to its client.  From there, X offered that client a discounted rate for providing fiduciary services to that client for its retirement plan.  The retirement plan received a discount of 15% on the stated fee for the retirement plan because of the bundled services.  Prohibited transaction?

Do you have any thoughts or guidance you can provide? I have been unable to locate anything.  

Plan covers owner and sister. So covered by PBGC since sister does not have ownership. That's good as it allows 25% deduction for DC plan. Sister terminates. If she is not paid her benefit, remains in plan as terminated vested, I think the plan remains covered by PBGC, so we can still have a 25% DC deduction. Correct?

I'm starting to worry more every day about the reduction of pass through income taxes to 20% nder the new proposals.  Would 100% of pass through income be subject to just 20%?  In other words, does that include Guarnateed Payments and the allocation of ordinary income?

ASPPA put out a piece where they brought up the issuye that if clients only get a deduction for 20% whent he money goes in and then it is taxed as ordinary income when they withdraw, they will likely be paying MORE tax on the way out, creating a huge disincentive to save.

I've seen some write-ups, but nothing on the nuts and bolts mechanics of what this would look like.

I have two separate situations with a safe harbor plans: one that is trying to join the MEP and one that abruptly left and went to a large national payroll company. The first plan is a safe harbor plan that is being administered by a national payroll/benefits company. They were informed that the plan was leaving and stopped accepting payroll contributions in November. I am trying to contact the payroll company conversion specialists and ask if this is a fact. Because this is a safe harbor plan I thought we should merge the plans effective 1/1/2018 but the advisor wanted to start the plan 12/1/2017 because of this situation.   Should we make a quick amendment to allow contributions to trustee directed (i.e. pooled) and set up a checking account in the name of the plan so we have somewhere to hold the assets? 

The other safe harbor left the MEP abruptly in November 2017. I have contacted the client and asked if the payroll company he went to had provided any consulting about the impact on the safe harbor but have had not response. 

Any advice would be appreciated.

For DC plan deductible limit, in a plan with a last day requirement, does eligible compensation include compensation of participant who terminated before the end of the plan year?  Thanks.

Let's say a participant is terminated earlier in the year. He elects a rollover distribution, but later (after the check is issued), decides to put the funds back in the original 401k account. Is that permitted? I would think that it wouldn't be because he's no longer an employee of the original 401k plan. Would you agree?

Thanks,

A 401K, plan terminating in 2017, last day of plan year 2017 would be the dat all assets distributed, which I do not know yet, but obviously would be the month all assets out of the plan.

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?