I represent a spouse going through a divorce.  His wife has a FERS benefit and he is getting half.  He wants a survivor annuity (he insists he will live longer than his wife - his call not mine).

To make sure he gets the maximum should I give him 1/2 of the gross annuity, self-only annuity, or net annuity?  It seems to me the gross annuity is the self-only annuity minus the cost of the survivor annuity, so those two choices are effectively the same here.  I'm not sure though if the net annuity would be larger.  I don't think it is, but I'm not sure.  Any thoughts?  Does it depend on other factors?

Hoping someone can help clarify what I think I must be missing.

What's the impact of nongovernmental 457(b) plans under the new 21% excise tax on $1,000,000+ of compensation paid by exempt organizations. (All 457(b) distributions are excluded for the "excess parachute payment" tax.)

The new Code Section 4960 applies the $1,000,000 excise tax on "so much of the remuneration paid...by an applicable tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of $1,000,000.... For purposes of the preceding sentence, remuneration shall be treated as paid when there is no substantial risk of forfeiture (within the meaning of section 457(f)(3)(B)) of the rights to such remuneration."

The term "remuneration" is defined as "wages (as defined in section 3401(a)), except that such term shall not include any designated Roth contribution (as defined in section 402A(c)) and shall include amounts required to be included in gross income under section 457(f)."

I've seen a few pieces of commentary saying that nongovernmental 457(b) plan balances will be included for purposes of the $1,000,000 excise tax when they are no longer subject to a substantial risk of forfeiture, i.e., when they become vested. However, the new Code Section 4960 only references immediate inclusion of amounts that become vested under Section 457(f). Separately, deferrals or contributions into nongovernmental 457(b) plans are not "wages" under 3401(a), but distributions from nongovernmental 457(b) plans are "wages" under 3401(a).

So it seems to me that all contributions (deferrals or employer contributions) into nongovernmental 457(b) plans would not be included, even when vested if later, but that all distributions from nongovernmental 457(b) plans would be counted in the year of distribution.

Am I missing something?

I am currently advising a client with respect to some potential prohibited transactions inside a self-funded group health plan. Part of that conversation has turned to a discussion about hiring an independent fiduciary.

What are some names of companies that offer independent fiduciary services to self-funded health plans?

I have a small S-corp consisting of 2 employees, my wife and I plan is to retire in 5-6 months at age 62. Currently I have a defined benefit plan administered by a large firm.  Due to significant market gains over the last few years, the plan will be over-funded by about 800K to 1M at the time of termination.  Both employees are at 415 limits.  From what I can find, a 401(h) plan seems to be my best option. I plan to roll over all excess assets into the 401(h) plan at the time of termination as per Code 420(F)(C)(i)(2).  Unfortunately I am  having trouble finding someone to set up this plan and take over administration of it.  A local pension firm suggested I use this forum to perhaps find someone with experience in this area.  If anyone has experience in this area please let me know.

Thanks,

A non-profit 501(c)(3) entity (not a church) has a 403(b) plan. They tell us they have only allowed employee deferrals to the plan since 2005. In 2004 and before, the plan allowed for employer match. The plan does not allow hardships. It does not allow loans. 2004 was the last year they filed a form 5500.

in 2006 they got a letter from the IRS regarding the 2005 Form 5500, and they must have told the IRS that they were exempt from filing because they now only allow deferrals.

Is that possible that this could this be a non-ERISA plan, or should they have continued filing 5500's after 2004 because the plan had already become an ERISA plan due to the match?

This is hopefully a simple question but I'm not having luck with quick assistance from Fidelity.

Question is what all needs to be done to add a Participating Employer to a 401(k) Plan on a Fidelity Volume Submitter  (Adoption Agreement No. 1 to the extent that may matter)?  

I know we will need to amend Section 1.02(b) of the Adoption Agreement to provide for a Participating Employer (they haven't had one before) and also complete the Participating Employer Addendum to list the company (which is a recently acquired member of the controlled group).  The general form of the Participating Employer Addendum provided, however, does not appear to include a place for the Participating Employer to sign. 

We plan to have a Board Resolution by Participating Employer authorizing participation in the plan but do they need to sign the adoption agreement or addendum anywhere?

Also, it appears that Participating Employers are generally treated as Employers with respect to credit for vesting purposes?  Is there any need to expressly provide for prior service credit for the Participating Employer or is that assumed by virtue of their participation?  (I assume the later but wanted to confirm.) 

Thanks

We have a law firm with 9 current shareholders with ownership greater than 5%.  There is one former shareholder who is receiving compensation based on revenue of his clients when he sold out (paid as W-2 compensation) - he does not actually work.  And there is another shareholder who has sold a portion of his stock, is now below 5%, who is "on call" for questions about his clients and is paid a monthly amount (about $200 a month) but otherwise not active.

The problem is these individuals are eligible for top heavy and are now considered NHCEs for discrimination testing. 

I am considering amending the Plan to have these individuals excluded from the Plan by definition (retiring shareholders as an example).  The Plan would easily pass coverage excluding them.

Any thoughts greatly appreciated.

Soon, “a plan providing disability benefits” must design its claims procedure to meet some conditions ERISA’s claims-procedure rule does not otherwise require for a retirement plan’s claims procedure.

https://www.gpo.gov/fdsys/pkg/FR-2016-12-19/pdf/2016-30070.pdf

If a 401(k) plan has immediate vesting for all contributions and allows a distribution on a participant’s severance-from-employment (without considering how the employment ended), is it fair to say the plan provides no disability benefit?

Can anyone think of a situation in which a 401(k) plan’s administrator must decide whether a participant has a disability?

Employer sponsors more than one plan.  Each plan has a plan expense account (excess revenue account held within the trust). 

Question - Can the plan expense account from Plan A be used to offset reasonable administrative expenses for Plan B?

Any guidance would be greatly appreciated!  Happy Friday! :)

A client financial adviser suggested, the client could take very low salary for the next couple of years to reduce the tax burden.

My major concern is that each year we need to run Non-discrimination test under Treasury Regulation §1.401(a)(4)-9 Aggregating DB and DC Plans.

This client DB/DC combo plan use the minimum aggregate allocation gateway (GT) in order to test on a benefits basis

Isn’t the plan required to use plan year compensation, pay defined under 415(c)(3) (not 414(s)), and annual method to calculate allocation rate for gateway purposes?

If so, wouldn’t using very low current year compensation greatly affect the EBAR for gateway test, which in turn requires the plan to provide higher employer contributions in order to pass the test?

Please help, if possible include the section of the regulation that allow or disallow the financial adviser suggestion.

Many Thanks!!!!!

Any reason DC plan that didn't allow partial distributions at termination date (12/31/2017) can't be amended to allow them now? Final distributions won't be available for quite some time, and they want participants to be able to receive some money currently.

I think it is fine, but I seem to recall some post-termination amendment issues with DB plans particularly.

Thanks.

Are there any particular consequences to having a small amount of hard to value assets in a one-man DB plan?  ($15K out of $650K.)

It's some kind of private equity; it shows up on a brokerage statement as an alternative investment/held outside the account and they show the purchase price as the value.

That Q on the SF is grayed out for a one-man plan.  Do I just say "give me a true fair market value" and move on or...?  (I'm not the actuary, just the one providing info.)

Plan as a pro-rata formula for profit share. CPA tells client to put in $100,000 for profit share. However, HCE maxes out at the $54,000 limit so only $60,000 of the amount is allocated.

Client is not happy. Boss tells me to "make it happen." Can the remaining $40,000 then be allocated to the non-HCE's?

I have a prospect that wants to convert their 412(e)(3) plan into a traditional defined benefit.  I've never done this and the only way I can see when I read the ERISA outline book is to ask the IRS to treat the plan as if it was never a fully-insured plan.  I calculate funding minimums and maximums back to plan effective date.  If the contributions fall in the range and I do everything else the examining agent asks, then it would be "converted" or in other words, it was never a fully-insured plan.

Anyone ever done this?  Please share your experience, strength, and hope.

We provide a COBRA subsidy to our employees.

In our self-insured plan, the benefit varies based on position.  For example, 6 months for staff and 12 months for Senior employees.  Is this a 105(h) issue?  If so, what does this mean?  The first 6 months would be non-taxable for everyone, but the second 6 months for Senior employees would be taxable as an "excess reimbursement"?

Thanks for any help!

Background: We processed a forfeiture last year that impacted 4 individuals.  Three were still plan participants so we deducted the forfeitures from their account balances, but the other individual was no longer an employee and had already withdrawn his account balance.  We sent him a notice, but he did not repay the forfeiture.

Now: We are considering having this individual do some future work on a subcontractor basis, not as an employee, so not eligible as a plan participant. 

Question:  Are there any implications for us making future payments to this individual given that he failed to repay his forfeiture?

I am looking into training and development courses for 2 employees. One has no 401k experience and the other has some basic knowledge. I know there's a few different organizations out there that offer courses. Right now I'm looking for one that offers the basic ABC's of 401k administration.

Any suggestions?

Employee signed up for 401k in June 2016. The appropriate deferral amounts were taken out of his paychecks. However, the funds that he selected were not set up. Hence, his contributions were just going into the default money market account, A year and a half later, he just notices this.

What correction must be done to make the account whole? Apparently the client had just notified the payroll company to start the deductions but never sent the enrollment form to the recordkeeper to set up the chosen fund allocations.

Thank you!

I have a client with a great number of highly compensated employees.  They want to have a different matching formula for some of the HCE, but not necessarily all of them.  Is there a way anyone can think of that works and isn't considered "biased"?

For instance, can we have a different matching formula based on years of service and how big of a discrepancy could there be? 

Thanks in advance!

We recently took over the administration of an existing 401k plan (safe harbor 3% - but was SH match years ago) .  As the actuary was working on the 2017 combined testing and contribution calculation, they noticed that there was an employee with a rehire date in 2017.  Upon collecting the historical employment information, it was determined that this employee should have been allowed to contribute to the 401k plan back in 2009, his first date of rehire (after having met the plan's eligibility during his first employment period from 2/2008 through 9/2008).  No problem there - we can calculate the QNEC for this.  But, the employee then terminates in 2010 and is rehired again in 2012.  And then terminates in 2013 and is rehired again in 2017.  Phew.  So, my question here is when I'm calculating the QNEC, do I have to do separate calculations for each year for which he was rehired?  Or just for the first rehire period and call it good?  Technically, he should have been allowed to defer when he was rehired in September of 2009, and again in July of 2012 and now in 2018 (actually September of 2017).  Any comments on this are appreciated.