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

I know this has been discussed on the boards before, but I'm not finding any definitive answer about how to determine if a 403(b) plan is subject to the QJSA rules. Lets say I have an ERISA 403(b)(1) with an annual discretionary matching formula. The plan has never had a transfer in of moneys that are specifically required to offer annuities as a normal form, the plan pays a deceased participant's entire vested benefit to the surviving spouse and choosing an annuity is not a distribution option for participants to choose from. Could my plan still be subject to the QJSA rules? Why?

participant has a 150,000 account balance in a 401(k) plan.  the plan allows one outstanding loan at a time.

lets assume the participant took out a 50,000 loan in 2015.  the current loan balance is 20,000 and the highest outstanding loan balance in the past 12-month period was 30,000.

the participant wants to repay the existing loan balance of 20,000 and take a new max loan.

is the new max loan (after the repayment of the existing loan) 20,000 or 40,000?

50,000 - (30,000 - 0) = 20,000 or

50,000 - (30,000 - 20,000) = 40,000

I was thrown off guard by a client wishing to have age 21, no waiting period but quarterly entry dates. Basic eligibility 101 but is this possible?

Client operated DC plan since 1983 as single employer plan with multiple adopting employers within the controlled group.  Discovered in 2016 that adopting employers were not, in fact, in a controlled group, resulting in the plan really being a multiple employer plan.  Client restated plan in 2016 (VS document) indicating that it was a multiple employer plan.  Throughout the life of the plan, all adopting employers signed participation agreements.  Question - is this a failure that we need to correct through VCP?  Is this a document failure going back to the original effective date?  What parts of the plan should be amended to reflect "multiple employer" status.  Any thoughts?

There is some debate regarding a vesting question: 

Plan B is merging into Plan A effective 1/1/2018.  The vesting schedule for Plan A is better at every point.

The plan sponsor wants to have the old (worse) schedule apply to the old money for all merging participants.

Two questions:

1. Does the merger with different vesting schedules constitute an amendment of the vesting schedule?

2. Must the new (better) vesting schedule apply to old and new money for a participant who works an hour of service after the merger date?

Non-owner participant has continued working past 70 1/2.  Plan has delayed RMD rule for non-owners.  Participant is retiring on 11/30/2017.  First RMD for this participant is due by 04/01/2018.  Termination and retirement distributions are normally done some time in May after the client has determined the allocation for the prior year.

If the plan pays the participant an RMD now (in 2017) based on the 12/31/2016 balance and then the participant elects next May to roll entire remaining balance, must another RMD be made from the Plan account based on the 12/31/2017 balance before rolling to the IRA?

I'm not sure if I have a question or am just musing; here goes...

When converting a self-directed plan we have several options:

1. Cash conversion.  Everything in the old platform is liquidated, and participants make new investment elections and their money is invested according to those elections.  I think this is best from the participants' standpoint, since they get to pick what they want.
2. Mapping.  Everything is liquidated and mapped to "like" funds.  This seems to be preferred, and I guess is "ok" from the participants' standpoint, since they are more-or-less getting what they elected, even if it may have been some time ago, and even if "like" may be stretching it.  We're working on one now and it's interesting that the receiving platform doesn't want, and is more or less insisting, upon not having an enrollment meeting until after the conversion, basically to streamline everything.  Participants will be notified and can change investments in the sending platform, before the conversion, so they'll have that opportunity, but I think it's kind of a crappy way to handle it; I mean, it puts all of the burden on the participants to get things lined up ahead of time when they haven't even had a re-enrollment meeting.
3. Target date conversion.  Everything goes into TD funds unless participants choose otherwise.  My hangup here is that if you have the enrollment meeting before the conversion, and if someone elects something other than the TD default, then someone is supposed to identify that and change that election manually.  Definitely not good for the "someone" who has to manually check all that.  It seems like a mistake to have an enrollment meeting first because it creates that burden.  OTOH, going back to #2, I think it kind of sucks for the participants because they're not given any choice in the matter, and then have to actively go in and change things if they want to. 

I guess the Q is, am I off-base, p*ssing into the wind on all of this, or...?  I guess the latter have become industry standards and I should just accept it.

Can a stock option award be amended to extend the term AFTER the original expiration date? Set aside any ISO/NQSO and accounting issues for now, I'm just trying to determine if it can be done.

Award agreement states that option expires upon the earlier of 10 years from the date of grant, or the expiration date shown on the grant notice.  Grant notice shows a date about 3 months earlier than 10 years from date of grant (related to date vesting begins). 

Example:

- Grant date: 12/31/2007

- Expiration date (as shown in grant notice):  10/1/2017

Can this award be amended to extend the expiration date to 12/31/2017?