Many of my clients, including me,  being in Florida took mild to substantial damage due to Hurricane Irma. Two questions:

1. I have a client located in Brevard County, Florida. Can any one determine if this client would qualify for special relief under Announcement 2017-13 and anything else? 

2. Under this announcement, even though special relief is being granted for qualifying for a hardship distribution, does anyone have an opinion on whether or not they would still be required to take a loan from the plan before the hardship distribution could be made?

Thanks for the help - Rick 

non pbgc  cash balance plan is terminating and they cant locate a few participants. is it possible to send  participant benefits to state unclaimed property?  i realize they could come back and request an annuity but wondering if people have  a practical solution for his problem.

A 501(c)(3) org. has a non-ERISA deferral-only plan and meets the DOL safe harbor rules. If the plan/investment arrangement permits rollover contributions will the plan be subject to ERISA?

I am the second wife. I was designated as beneficiary on husbands plan when we married (2012), and one year later I became vested as the beneficiary (2013) In 2014 his ex wife got a QDRO in state court, designating her as surviving spouse. I objected as I did not sign waiver. She had not been awarded surviving spouse designation in their PSA,  it simply said 50% of the benefits accrued on the date of divorce.  The Plan administrator subsequently confirmed their view that the PSA itself was not a QDRO. The question is - who's survivor designation is correct? I am still the current beneficiary on the record of the plan.

The PBGC recently filed a bankruptcy claim for $937 million against a plan sponsor who went bankrupt last March but where the Defined Benefit Plan they sponsored had an AFTAP OF 115% in 2015 ($911 million in assets and $789 in liabilities).

In looking over the 5500 all the assets are reported as being in a Master Trust Investment Account. Could an MTIA really be worthless in a bankruptcy? Or could this be the PBGC filing a routine claim to protect themselves?

2015 5500 and PBGC claim letter attached

Westinghouse - pbgc claim-1.pdf

westinghouse-5500.pdf

We are looking at the taxation of benefits to provide for egg extraction and freezing.  

Publication 502 provides that:

Quote

You can include in medical expenses the cost of the following procedures to overcome an inability to have children.

-Procedures such as in vitro fertilization (including temporary storage of eggs or sperm).

Two questions:

1. Does the reference to "overcome an inability to have children" refer only to a current inability to have children, or a future inability?  For example, suppose someone has cancer, and is just about to have radiation treatments that will forever eliminate the ability have children--can we provide IVF on a tax-free basis?  What about someone who is trans, who is about to enter hormone treatment that may impair fertility?  Or what about someone who is 35 now and has no partner, but wants to preserve eggs for later when her fertility may have declined?
2. How long is "temporary" storage?  I have heard, though been unable to locate documentation,  that John Sapienza, IRS Office of Chief Counsel, made  remarks at a May 2002 ECFC Teleconference that "temporary" might mean that eggs were stored and used within the same year.  Obviously, that would in many instances be insufficient even in the case of current infertility (for someone who took a long time to get pregnant, or wanted to have a second child).  And it would certainly be insufficient in instances such as those described in 1, above.

Has anyone had any formal or informal contact with the IRS on either of these questions?  Or does anyone have a copy of Sapienza's remarks?

I recently met with grandfathered Civil Service postal employee who is contemplating retirement. She is 55.

She was divorced in 2003 and her attorney drafted a COAP in 2004 that was submitted to the OPM. The COAP provided that the former spouse was awarded 50% of the employee's gross monthly annuity multiplied by a fraction , the numerator of which is the total number of months of Creditable Service earned under the marrage, from 9/10/94 to 7/02/03, and the denominator of which is the total number of months of the employee's Creditable Service accrued under the Civil Service Retirement System. The attached Paragraph 10 of the COAP also awarded the former spouse a survivor annuity pursuant to section 8341 of Title 5 USC. 

Attached is the OPM response. Note in Paragraph 4 the author comments that he finds no reference to a survivor annuity in the COAP. The employee, and I for that matter, are confused. The existence of a survivor annuity impacts her monthly benefit. Can anyone explain the apparent conflict?

OPM Letter.pdf

Para 10 of COAP.pdf

I have a question about the application of the  exception to full correction in EPCRS allowing a sponsor to not make a corrective distribution of $75 or less "if the reasonable costs of processing and delivering the distribution to the participant or beneficiary would exceed the amount of the distribution." (section 6.02(5)(b) of Rev. Proc 2016-51. 

The provider's fee is $100 for each distribution and it is charged to the participant (rather than paid by the sponsor).  Is the $75 threshold applied to the full amount of the distribution before fees are taken out or to the amount of the distribution that the participant would be entitled to after fees are deducted? 

As an example, say a participant terminated some time back and no longer has an account balance - they have been paid out their balance in a prior plan year.  They are due a now correction of $90 for lost interest.  Given the $100 fee, for purposes of the de minimis exception, are they due $90 or $0 (net the fee).  

Similarly, if a participant has no balance and is due $110 (gross), that would be $10, net of the fee.  Presumably, the $100 fee would cover the reasonable costs of distributing the amount, so the vendor would need to send a check to the participant for $10.

The amounts of any distributions not made due to application of this de minimis exception would be allocated to other participants in the plan.  

Not that it matters for purposes of this question, but this error was the subject of a DOL investigation, and the DOL has already issued a closing letter.  They have requested that the client confirm deposit of the interest amounts and allocation to affected participants.  That will take care of the fiduciary issue.  I am comfortable proposing to DOL that amounts under $100 be reallocated to other participants, and expect that this will be acceptable to them.  However, I realize the qualification defect will also need to be corrected, so I don't want to think this is all wrapped up and then have the IRS tell us we need to do something else with those account balances between $75 and $100, likely several months after all of the other distributions have been made.  

IRS Gives Tax Relief to Victims of Hurricane Irma; Like Harvey, Extension Filers Have Until Jan. 31 to File; Additional Relief Planned

Current relief is limited to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance.  Right now, that means US Virgin Island, Puerto Rico and some parts of Florida.  The scope of the relief will most definitely be broadened to include more Florida counties, but as of right now, the following counties have been designated as qualifying for individual assistance (and therefore tax relief):

• Brevard (added 9/13)
• Broward
• Charlotte
• Clay
• Collier
• Duval
• Flagler
• Hillsborough
• Lee
• Manatee
• Miami-Dade
• Monroe
• Orange (added 9/13)
• Palm Beach
• Pasco (added 9/13)
• Pinellas
• Polk (added 9/13)
• Putnam
• Sarasota
• St. Johns
• St. Lucie (added 9/13)

IRS Announcement 2017-13  allows loans and hardship withdrawals for Hurricane Irma victims, similar to relief announced for Hurricane Harvey

Useful links

FEMA disaster link You can use this link to view FEMA declared disasters by state or tribal government. 

IRS News Releases You can use this link view updated news releases from the IRS for the month of September

IRS Hurricane Irma Page

IRS Disaster Tax Relief page

Effens Thread on Funding Relief for DB Plans (Notice 2017-49)

* Edited to add more information when available

Hi Everyone,

I know this question has been asked a million times already, but I owe my due diligence to my employer to ask this question again in order to make sure that there's no way around this.  Please bear with me.

I am an administrator for our 401k plan which existed since 1999, and this entire time, our plan doc has allow all W-2 compensations which included bonus; however, our general unwritten policy has always been to exclude bonus from deferral.  All 18 years, we have never deferred any compensation related to bonus and now our auditor has recommended a SCP to correct this.  I've looked through the adoption agreement, asked our 401k vendor and confirmed that our plan indeed never excluded bonus. 

This is a new auditor and it's hard to believe that the previous auditors have missed this the entire time.  The recommendation is to do recalculate the missed deferrals for at least the last 3 years.  Is there a way to correct this without doing a SCP which includes QNEC from the employer of over 40-50k?

I am not sure it's helpful to know but we've always executed bonus payment in a separate payroll from our regular payroll schedule.

Thank you,

Notice 2017-49 that just came (within past two hours). Funding relief until January 28 if an Affected Plan.

Notice 2017-49 Hurricane Funding Relief.pdf

I have a scenario and I want to see what you all think.

A dentist is purchasing a practice (asset purchase) as of 9/15. He will have had nothing to do with the practice prior to purchase; no employment. He wants to start a cross-tested 401k PSP plan right away and wants all nine staff members eligible immediately and then wants to shift to statutory eligibility requirements moving forward.

If he were to recognize predecessor service for eligibility purposes, then everyone will be eligible right away except one of the nine staff members, the dentist and his spouse. If we then add a dual eligibility bringing the three of them into the plan, those three are otherwise excludable employees and for 2017 and 2018, and may be disaggregated from the the other staff members for 401(a)(4) general testing.

Anyone see any problem with this line of thinking? Do you think recognizing predecessor service for eligibility plus using dual eligibility is problematic? If not, there are no HCEs in the non-otherwise excludable group so it passes automatically. Following that line, if for the otherwise-excludable group I’m passing 401(a)(4) on a benefits basis, is it necessary to allocate a gateway contribution to all staff members or only the one staff member in the otherwise excludable group?

Plan sponsor is taxed as a partnership.  Plan sponsor uses a recordkeeper platform for their 401(k).  A few of the partners had 401(k) contributions that exceeded $24,000 deposited to their accounts during 2016.  It wasn't noticed until after 04/15.  

Since they are partners and not W-2 employees can this be  corrected by forfeiting the excess amount?  Just trying to avoid the double taxation; potentially they can be made whole outside of the plan.

Thank you for any guidance.  

Has there been any news on which mortality tables will be used for funding and lump sums after 2017?  Unless we missed something, we would expect to hear something soon regarding this matter.  We know the proposed regs are out, but nothing final yet.  Thanks.

Have a small calendar year defined benefit plan that terminated and distributed all assets 2/28/2017. The final 5500 is due 9/30/2017. However, I don't believe the 2017 electronic forms are available yet. What do we do?

Thanks

Company maintains two plans - 401(k) for non-union employees and a DB for union employees.

We provide tpa services for the 401(k), another firm provides actuarial services for the DB.

We recently found out that 6 union employees declined participation in the DB plan (?) and the company offered them participation in the 401(k).  These employees were listed on the annual census, but never identified as union employees.  The 401(k) plan excludes Collectively Bargained from plan participation, always has.

I do not believe that this situation can be corrected under EPCRS and in regards to the union employees who were allowed to participate in the 401(k) plan they will have to;

• return deferrals plus earnings, not eligible for rollover, no 10% penalty
• all returns are taxed in the year returned
• 1099-R will use a Code 8
• rerun ADP / ACP testing without these employees
• forfeit match plus earnings

Does anyone know of any solution where the excluded employees could remain in the plan?

Thank you.

A single member LLC is a partner in a general partnership.  The LLC receives a K-1 for its partnership distribution, which the accountant treats as self-employment income.  The LLC also has other sources of income.  The LLC has employees and has established a defined benefit plan and a 401(k) plan.  With respect to the 100% owner of the LLC, can the partnership income which passes through the LLC be counted as compensation under the LLC's plans?  If the owner was the partner personally, then the partnership income wouldn't be counted since the partnership would be deemed the "employer" and it isn't sponsoring the plan.  Does the answer change when the income is distributed to the LLC (which is a disregarded entity) and then the LLC ultimately distributes income to the owner?  If no, how do you track what portion of the LLC distribution reflects the partnership distribution?

Thanks, Cathy

can 1099 employees treated as employees of a company and contribute salary deferral into the 401(k) Plan if the plan eligibility provisions looks like as shown below?

Plan Description: Prototype Non-standardized Profit Sharing Plan with CODA

I. ELIGIBILITY AND PARTICIPATION REQUIREMENTS
A. Eligible Employees (Plan Section 1.1.25)
Must choose either 1 or 2:

1. [x ] All Employees of an Employer are eligible to participate in the Plan.

2. [ ] All Employees of an Employer are eligible to participate in the Plan, except
Check each appropriate box (a-g) to specify excluded employee groups, if applicable.
a. [ ] Salaried Employees.
b. [ ] Hourly Paid Employees.
c. [ ] Any nondiscriminatory classification of Employees employed in or by one or more specified divisions, plants, locations,
job categories, or other identifiable groups of Employees as determined by the Board of Directors. Please specify:
(Note: Under Treasury Regulations, part-time and seasonal employment is not a nondiscriminatory classification. This
item should not be completed with a definition that by its terms defines an excluded classification as including NonHighly
Compensated Employees with the lowest amount of compensation and/or the shortest periods of service.)
d. [ ] Employees included in a bargaining unit covered by a collective bargaining agreement with the Employer in the
negotiation of which retirement benefits were the subject of good faith bargaining (unless the bargaining agreement
provides for participation in the Plan).
(For a Plan that includes union employees, specify whether less than all union employees are included. For example: If
the Plan is set-up for employees in Union X, but employees in Union Y are excluded, Union Y should be specified.)
e. [ ] Employees covered under any other tax-qualified retirement plan with respect to which the Employer is obligated to
contribute. Please specify:
(Specify the retirement plan, if applicable. For example: XYZ, Inc. Pension Plan.)
f. [ ] Leased Employees.
g. [ ] Employees not required to be taken into account for nondiscrimination testing purposes under Code §410(b)(6)(C) but
only during the Code §410(b)(6)(C) transition period.
(Note: If selected, in the event of a corporate acquisition, employees of the acquired company will be excluded from
participation in the Plan for a period not to exceed two years, as determined by the acquisition date and Plan Year.)
 

Hi.  I'm working on two related companies (that do not rise to the controlled group or affiliated service group level) where the top guy (who is in both companies/plans) took a max $50K loan from each plan - each loan was a valid loan based on amount, etc.

Now there may be a change in ownership that will put these entities into the same controlled group.  There is even talk about merging the plans.  His loan balance will be more than $50,000, but is that OK since the loan(s) were valid when they were taken?

Thanks.

If a doctor (an s-corp) has her husband working for her and he appears each year on the census with under 1,000 hours, can we deem him, as her spouse, to have worked over 1,000 hours.  This is what our actuary is saying we can do.