Are there any regulations regarding the allocation of EE 401k (pretax) and 401k Roth ( after tax) contributions on the paycheck that an employee reaches their annual IRS limit of $18K or $24K if catchup qualifies?

If the EE is contributing to both pretax and post tax 401k plans and maxes out ....is there an obligation to apply all employee elected contributions for that pay period to the pretax 401k plan first? By obligation, I am referring to legal requirements by the IRS or any other institution?

I would assume that whatever 401k EE election % was used would be applied in this situation and it is possible that a person reaches the annual combined 401k/Roth 401k limit of $18K w/out all EE contributions being applied to the pretax 401k limit first.

Is there a standard methodology for applying pretax 401k and after tax Roth EE contributions as they reach the annual IRS limits?

Thank you,

Linda A

Is there a requirement for 401k catchup annual limit amounts ( $6000 for 2017 tax year)  to be separately identified from an employees regular 401k annual limit amt of $18,000 for 2017 tax year for payroll deduction purposes? The IRS makes a statement that the $18,000 limit has to be reached before 401k catchup contributions begin; however, does that imply that the catchup amounts have to be reported separately to third party 401k administrators or the IRS?  I don't see any requirements for W2 purposes in breaking out the catchup amounts for 2017 tax year. I am not sure if the Form 5500 requires catchup contributions separated?

Any advice here would be appreciated as to whether catchup has to be separated for reporting purposes.

Thank you,

Linda A.

In the attached complaint, the Secretary of Labor asserts that a retirement plan's trustees (who also served as the plan's administrator) breached their duties by failing to pay or deliver involuntary distributions for participants who had a one-year break-in-service and a plan account less than $5,000.

Beyond the harm of not paying benefits when due, the Secretary asserts the administrator's failure needlessly incurred per-participant service fees ($7 per quarter-year, and so $28 for a year) on individuals who ought not to have been participants.

Acosta v Stapleton complaint.pdf

Can assets from an HRA be transferred to a former spouse upon divorce?  My inclination is that they can't be, but is there a specific Internal Revenue Code provision I can cite for authority?  Any help is appreciated.

Since the deadline for new Safe Harbor 401(k) plans falls on a weekend this year it is ok to start a new Safe Harbor Plan on October 2 this year? 

Is the maximum limit for high deductible plans a combo of in and out of network or can the limit be for each type of structure? We have a shared family deductible and then individual out of pocket limits. This year we are thinking about adding an out of network structure and the costs in the network would not be credited towards the out of network limit.

First RMD was due for a participant by April 1, 2017.  The RMD was not processed timely.  Participant did not receive the RMD until just last week.

Would you report this 'failure to provide a benefit when due on the 2016 Form 5500-SF line 10f or the 2017 Form 5500-SF line 10f?

My client is on a semi-monthly payroll and the last payroll of 2016 was paid on 1/5/2017.

Each employees W-2s as well as the W-3 total for the 2016 didn't include the payroll contribution for the payroll period 12/16/2016 - 12/31/2016 that was paid on 1/5/2017.

How does the regulations require us to treat this last payroll that was paid the following year?

As part of the 2016 payroll or as part of the 2017 payroll?

If possible, please include the part of the regulation that go over the treatment of this type of payroll contributions.

Many thanks!

There were a couple of threads on this subject back in 2000 but nothing since. Maybe that means it's settled law now. But here's the scenario. 401(k) plan applies the last day rule to the company match. It matches employee contributions each payroll period, but the match is placed (real dollars) in a "conditional match" subaccount within the employee's plan account. The employee has investment control over the subaccount, which accrues gains and losses. If the employee is not employed on the last day of the year, the subaccount is "forfeited." Back in the 2000 threads this was deemed perfectly acceptable, as long as the employee communications were clear. Is this plan design accepted practice now? I might argue on behalf of an otherwise 100% vested employee that his/her accrued benefit includes any amount allocated to the account, that there is no provision anywhere for "conditional allocations," that once real dollars are allocated to the subaccount they become part of the employee's accrued benefit, and that removing funds from the subaccount is a prohibited forfeiture under section 411. but I could be wrong...

one person defined benefit plan with january 1st valuation date.  the plan has a single lump sum feature.  the 2017 AFTAP was certified to in june 2017 and equal to 150% and the FTAP was 95%.  the plan has a substantial prefunding balance resulting in the difference in the FTAP and AFTAP.

plan benefit formula is amended in august 2017 from 5% of comp. to 6% of comp. and the new formula applies to prior years of service.

i assume a new 2017 AFTAP needs to be certified. that being the case, the new 2017 AFTAP taking the new benefit formula into account is equal to 120% and the new FTAP is 70%.

other than the plan being subject to quarterly contributions and not being able to use the prefunding balance to satisfy the minimum contribution requirements, are there any other reasons why i would need to burn a portion of the prefunding balance to increase my FTAP to the 80% or 100% threshold? i assume a mandatory burn is not required since my AFTAP is above 80%.

some insight would be helpful.

Plan sponsor terminated it's sole employee.  Only remaining employees are partners.  Sole employee takes a distriubtion in 2017. 

I assume I can just start filing a 5500-SF as a 1 participant plan, correct?

My question relates to 29 CFR 2510.3-2(b) Severance Pay Plans

The Regulations state "the total amount of such payments does not exceed the equivalent of twice the employee's annual compensation during the year immediately preceding the termination of his service." What does the phrase "the equivalent of" mean? Is the DOL referring to the time value of money?

Additionally, in referring to the annual compensation, how is that determined? Is the annual compensation the employees previous years salary or is it the salary it would have been if he had continued working? Essentially I'm asking if anyone knows what they mean by "usual rate of compensation".

Any thoughts? Thank you!

I don't believe there is any advance notice requirement, even if ERISA applies, correct? Yes, any eligible expense incurred prior to the amendment date would need to be covered, but still no legal/regulatory requirement for advance notice, similar to a 204(h) notice in the qualified plan world?

Thanks.

Hello out there,

Our TPA firm is considering switching from Datair's PE WIN admin software to FT William's admin software.  We do not use document software from either Datair or FT Williams and will not be our doc system.

Has anyone made this switch that could offer opinions on whether or not they are happy with the switch, ease of use between the two platforms, support, preferences, etc.

We are not familiar with FT Williams so do not know if we would be trading for something more difficult to learn and use than Datair.  

Thank you in advance for any input offered.

We have a calendar year PS with Y/E requirement for contribution.  Owner is selling his (veterinary) practice to another larger company - probably by mid-October; he intends to keep his corporation active and he and his wife will remain on payroll.  All other employees will be moving to new company and probably rolling their money into the new company's 401(k) plan.   He wants to make a 2017 contribution and has already deposited most of that money.  What we want to do is a mid-year valuation in which we allocate Profit Sharing and earnings.  This would probably be 09/30/17 or whatever they select as official termination date for participants.

I need to determine what documentation we need in order to accomplish this.  We need to address partial termination as well as mid-year valuation ignoring year-end employment requirement.

Announcement 2017-13 states provides certain loan and distribution relief for "employees or former employees whose principal residence on September 4, 2017 was located in one of the Florida counties identified for individual assistance" by FEMA caused by Hurricane Irma.

However, FEMA announced on September 15, 2017 that 3 counties in Georgia (Camden, Chatham and Glynn) are now areas designated by FEMA for individual assistance. 

Should we assume that employees in these 3  Georgia counties are now eligible for the Announcement 2017-13 relief even though the literal reading of Announcement 2017-13 states it the relief is for employees in "Florida" counties?  My gut is telling me the 3 Georgia counties are now permissible, and that the IRS just rushed to get Announcement 2017-13 out the door and incorrectly put in Florida counties. Other thoughts? It should be noted that the above sentence is the only sentence in Announcement 2017-13 that mentions "Florida" counties. 

I am working on a plan with the following situations:

A new 401(k) in place effective 5/1/16 with

1. 3 months eligibility for EE deferrals
2. 6 months eligibility for employer match
3. ER matching 100% up to 6% of compensation
4. 415 Limit Compensation definition that includes EE deferrals
5. true up contributions after year end

A hypothetical employee -

• Date of Hire = 1/1/2016
• Monthly compensation in 2016= $10,000
• 2016 annual compensation = $120,000
• Made10% deferral contributions only for 2 months (10/2016 & 11/2016)

At the end of 2016 plan year, the total deferrals = $10,000 x 2 x 10% = $2,000

Questions:

1. What is the compensation amount that should be used to calculate the deferral rate for purposes of ADP testing and true up contribution?  Is it $120,000 (annual gross comp.) or $80,000 (comp. since plan effective date 5/1/16) or $20,000 (comp. for the months in which the participant made deferral contributions)?
2. What is the compensation amount that should be used to run the true up calculation and ACP testing?  $120,000, $80,000, $60,000 or $20,000?
3. The plan has a class exclusion and fails the Ratio Percentage Test for 2016.  What is the compensation amount that should be used to run the next step - Average Benefits Test?

Thank you!

Assume that a 401(k) plan with matching and/or profit sharing subject to vesting has a cash-out and buyback provision and language in the plan document that says that forfeiture of nonvested portion of account occurs immediately following the participant's taking a lump sum distribution of vested portion. Assume plan document also says that forfeitures can be used to pay admin expenses and that any amount not used to pay admin expenses may be used to offset "any payments that the employer would otherwise be required to make to the plan." Could the employer not transfer to the plan amounts withheld from employees' pay as elective 401(k) contributions and loan repayments and credit to the accounts of the affected employees instead amounts pulled from current forfeitures? Assume that the crediting of the previously forfeited amounts would be at least as rapid as if the withheld amounts were transferred to the plan and credited to the affected employees' accounts and that the time period would pass the DOL's requirements.

We have an owner that is selling his shares to the ESOP, but the shares will be voted under a "voting trust" where the trustee votes based on the selling owner's interests (the selling owner is the beneficiary of the voting trust).  As the shares are paid off, the voting trust stops applying to the paid-off shares.

Is the selling owner still considered an owner for purposes of 409(p) testing.  The selling owner doesn't participate in the ESOP, but is relatives with someone who does and whether or not the selling owner is still considered an owner could have a big effect on the test.

Thank you!

So if an employee is part of a Long Term Incentive Plan, and they are now terminating after 20 years, they are eligible to receive their payments from the LTIP for the next 5 years, based on the plan.   The question is reporting it - my understanding is that the Current Present Value of the total amount being paid over 5 years is to be reported on the this years W2 as an employee but for FICA purposes only as it has not been paid yet.  I've heard this was done to benefit the EE as well as the company for FICA purposes, because the HCE has probably met the SS Maximum for the current year, so truly it's only reported for Medicare purposes.   I also know that the total amount being added to Medicare earnings for this year must be reported under Box 12 Code Y for this current year.

My question, over the next 5 years, the terminated EE will receive a payment from the LTIP, which is to be reported on a W2 for Federal Income Tax purposes only.  What entry is necessary to reflected on Box 12?