1.401(a)(4)-5 provides that benefits otherwise payable to restricted employees (generally the 25 HCEs with the highest compensation)under a defined benefit plan are limited if the plan is not at least 110% funded after the distribution.  If the value of the benefit is less than 1% of the plan's current liabilities, the restrictions do not apply.

Is the 1% exemption only applicable at benefit commencement date or (like the "110% Test") is the 1% exemption applied at every payment date and the full amount can be paid once the value falls below 1%.

For Tom Poje in Jacksonville, and anyone else, and their families and friends who may end up in the path or suffer the after-effects, my heartfelt best wishes for you all to come through this unscathed, or relatively so. We'll be thinking about you!

A terminated participant was provided a distribution check for $150 in December 2016.  In  2017, the investment company determined that the check was never cashed and has reversed the transaction and is including the funds in the plan's assets.  A new check was written in June to the participant and he is cashing the check.

For 5500 reporting, at 12/31/16 should the stale check be included in the ending asset balance?  Also, should the 2016 1099R for the participant be amended to reflect $0 distribution and a new 1099R prepared for 2017 showing the payment?

DC Plan NRA = 65

CB Plan NRA = 65+5

When combining the plans for testing, is the testing age 65 (because there is no uniform normal retirement age, in which case you use 65)? Or is it 65+5 (because there are different uniform normal retirement ages provided, in which case you use the latest nra)?

I have always understood the answer to be one thing, but for some reason I'm reading over the code today, reading through discussions, and find myself second-guessing things. It doesn't seem like there should be much controversy on this issue though. Just looking for some reassurance.

Thanks in advance.

An LLC partnership filed it's company taxes by 4/15/2017.  One of the partners extended his personal return until 9/15/2017.  Originally, when we were given the census information for 2016, the owner stated he would have deferral of $18,000 for 2016.  However, we noticed he hasn't yet deposited the contribution.  When questioned, owner first said he wouldn't make the contribution, but has now decided he will reflect deferral of $18,000 on his 2016 personal return, and will deposit it by 9/15/2017.  Obviously, the deferral is considered late, but should it be declared as a late deposit on the 2016 5500?  I am of 2 minds: 1) yes, it should be on the 2016 5500, because it is attributable to the 2016 plan year; 2) no, since the deferral wasn't technically due until 4/15/2017 (date company filed it's return), it won't be on the 2016 5500 as a late contribution, but will be on the 2017 5500 as late.  Anyone have a definitive answer, or have an idea of where I can get clarification?

I handle the administration for a construction fund.  It is my understanding that the IRS has required that a construction fund to use the Presumptive method to calculate withdrawal liability.

This fund has never needed to do a withdrawal liability calculation until now. This method requires 20 years worth of contribution history for the Fund but the Administrator can only give me 11 years worth of information.

Does anyone know if we could instead use the pool method since the information simply isn't available?  Thanks in advance!

The IRS modified tax return deadines for 2016.  What we are questioning is whether the deadline for making a contribution for a calendar year plan is still September 15th, or (as the form 7004 instructions suggest) has the deadline now changed to October 15th. 

Hello.  I a faced with a unique beneficiary designation and my inclination is that it is not appropriate.  The plan document allows for one or more primary beneficiaries to be named and one or more contingent beneficiaries if all of the primaries have predeceased the ppt (or disclaimed).

We received a custom beneficiary designation that names one or more 2nd tier contingent beneficiaries to each of the contingent beneficiaries, meaning that if all of the primaries predecease, then the named contingents do not split the account equally as would normally be the case.  Rather, the participant wants specific 2nd tier contingents to get any predeceased contingents' share.

I can't find any information on this online and I was hoping someone had some prior experience with handling this issue.  Thanks so much.

Interested in thoughts on the following as there seems to be some difference of opinion in the benefits community regarding when plan amendments are required to take advantage of the expanded relief offered under IRS Announcement 2017-11.

If you have a 401(k) Plan that currently permits safe harbor hardship distributions along with the regular 6-month suspension of elective deferrals following a hardship distribution and the plan wants to permit broader hardship distributions per 2017-11 (including distributions for non-safe harbor purposes, for affected relatives of a plan participant, and also to waive the 6-month suspension), is the plan required to adopt conforming amendments or can it instead simply modify its usual procedures for those cases falling within the 2017-11 parameters?  

My general interpretation of 2017-11 is that it only requires plan amendments if a plan does not currently permit loans or hardships and desires to make these per 2017-11.  However, if the plan already permits these, it seems to me a formal amendment is not required provided the plan sponsor complies with 2017-11.  (Seems to me if the IRS's intent was to require conforming amendments in all cases, it would say that in 2017-11 rather than simply noting that amendments are required if the plan does not otherwise permit loans or hardships.)  Others, however, think a plan must be amended to specifically track 2017-11 (e.g., to permit waiver of the 6-month delay requirement if the plan desires to waive that in connection with 2017-11).  Thoughts?

Good morning,

I was wondering what other practitioners are doing regarding the calculation of the excise tax for failing to correct ADP/ACP failure prior to the 2 1/2 month deadline.

The EOB says that the 10% tax is calculated on the excess deferral or excess aggregate contributions prior to the G/L adjustment, but the 5500 Preparer's Manual says that the tax is calculated after the earnings adjustment.

So are your calculating the tax before or after the G/L adjustment?

Thanks in advance! 

We have the son who owns his business and has a new qualified retirement plan.  His mother does his bookkeeping and he wants to include her in plan.  She works on 1099 and they want to have her join plan as a sole proprietor adopting employer by means of a joinder agreement.  She has no EIN for her business, but files under her own SSN.

He is in import/export business, she does bookkeeping.  Is this allowable? 

A plan is amended to adopt standard PPA lump sum rates and remove an enhanced lump sum basis equal to the 30-Year Treasury Rate minus x% on benefits earned through 12/31/2008.  The enhanced lump sum basis is being protected on the 12/31/2008 benefit, including the Mortality Basis which is the Applicable Table incorporated by reference, including any subsequent pronouncements.

Can this plan now amend the enhanced lump sum basis in 2017 to state that the mortality table for the enhanced lump sum protection is and will be going forward the 2017 Unisex table?  In essence do future mortality improvements under IRC Section 417(e)(3)need to be protected on the enhanced lump sum calculation on benefits earned through 12/31/2008.

If the plan can be amended as described, is an ERISA Section 204(h) Notice required?

Hello all. Any experience or insight as to excluding a classification of employees from a traditional 401(k) plan would be helpful: 

ISSUE: Employer (traditional 401(k) Plan Sponsor) wishes to exclude a division of employees working on a new contract in order reduce costs and win contract. This would include mostly new employees hired to perform under this contract as well as a handful of current employees who already participate in the plan. The [Note: not a full time vs. part time classification issue and this is also not a new line of business for the Employer.] 

[Option 1]: I believe the Employer can exclude the NEW HIRES from participating in the plan (so long as Plan meets minimum coverage requirements). However, could the Employer exclude the CURRENT employees (already in the plan) from accruing additional hours of service for their work in this division, or would this constitute a cutback in benefits?

[Option 2]: Alternatively, could the Employer exclude all employees in this division (new hires and existing employees) by requiring 3 years of service in order to be eligible (currently plan doc requires 1 month)? 

[Option 3]: Alternatively, could the Employer include both new and existing employees in this division in the Plan but with less of a match? (Concern is that decreasing the match for existing employees in the plan could be a cutback in benefits)

Your thoughts are most appreciated. Thank you!

Opinions please.   Participant names Bene.   Part dies and it is determined that the  Bene died prior to the Part.   I say that the Bene designation became void when the Bene died and the account should go to the Part's estate (assuming no contingent bene and the document specifies the estate is the default).  Others are opining that the account goes to the Bene's estate.  Which do you agree with?  Thanks for your help!!

Can an alternate payee (ex-spouse) request a hardship from the Plan?  I have an alternate payee that wants to do this. The plan document is silent on it. They first wanted a loan, which obviously they cannot have because payments cannot be made via payroll. Not sure about hardships though.

Thanks in advance!

I am trying to figure out whether the 4979 excise tax on excess contributions applies only for one year or whether it applies for each subsequent year until the ADP failure is corrected.  I have looked at the statute and the regulations, but they don't make this clear.  While there is lots of commentary out there about the 6% excise tax on IRA excess contributions applying every year until correction, I can't find anything suggesting that this would be the case for the 4979 excise tax.   I'm beginning to think that means the 4979 excise tax applies only for one year.  Does anyone have any thoughts on that or know where there may be more guidance on this?  Thanks in advance!

We have taken over a plan under which some, but not all participants are covered by collective bargaining agreements. Some, but not all, of the  bargained benefit changes have been incorporated into the document, either by amendment or as part of a restatement. For example, a benefit increase for one union  and a benefit freeze for another union are nowhere to be found in any version of the document or amendment. We have also scoured the document and nowhere does it incorporate by reference any of the CBAs.

We think this is a problem while an in-house attorney for the former actuary/document provider says it's not a big deal because the CBAs "trump the plan document". We think the IRS would disagree with that assertion. I found an article that referenced inconsistencies between document and CBA being a compliance failure, at least in the multiemployer plan context, but I don't see a difference (our plan is not multiemployer).

http://www.unitedactuarial.com/research/pdf/2009_36.pdf

We have advised the client that we think a VCP submission is in order for this (in addition to other administrative/operational failures).

Does anyone have direct experience with IRS looking at a plan where the document and CBA do not jibe?

Any other thoughts?

I am looking at a DB plan with a very recent favorable DL that by its terms limits an alternate payee's distribution options under a separate share QDRO to less than what's available to a participant (e.g., can't elect any of the joint and survivor options available to participants).  Putting aside the fact that there is a favorable DL, is that permissible?  I thought the statute, or at least the DOL's interpretation of the statute, provides that a QDRO can give the AP the same distribution options available to the participant (except entitlement to statutory QJSA rights).    

A number of law firms seem to have 2 separate plans for Partners and Associates. I understand the goal is probably to allow the partners to receive a greater profit sharing contribution...is this the main reason? Forgive my ignorance on plan design but isn't it more efficient and less expensive to encompass all levels of the firm in one plan?

Due to the use of an incorrect definition of compensation it was determined in late 2016 that several plan participants had made excess contributions to the plan during the 2015 and 2016 plan years. Participants were making salary deferrals on types of compensation that were not eligible compensation under the plan document  (i.e commission). 

A distribution from the plan is the appropriate way to correct for such excess contributions.  But would it also be permissible for to refund the excess contributions (adjusted for earnings) to the employees through payroll, particularly if the correction was being made within the same plan year as the error? i.e. If an employee had $100 in excess contributions in 2016, could the $100 plus earnings be returned to the employee as taxable income in the 12/31/2016 paycheck? What about an excess amount from the prior year (2015)?