I have a 401(k) plan that has a two year wait for employer profit sharing contributions, with immediate vesting for that contribution.  The profit sharing provisions predated the implementation of a 401(k) program in the plan. There is, of course, a one year wait for 401(k) deferral contributions. The plan is currently top heavy, and the top heavy vesting schedule is 2/20. 
 
The question we have boils down to the following: can a plan run two concurrent vesting schedules for different employer contributions?  The profit sharing contribution is very generous, and the plan sponsor is adamant about keeping the two year wait to receive it, and intends to maintain full and immediate vesting on that contribution.  However, the plan sponsor wants to prolong vesting of the first year TH contribution as long as possible and utilize the 2/20 vesting for that contribution.
 
Is this possible?
 

Thanks!

IRS Loses $175 Million Class Action Lawsuit

The basics:

IRS made PTINs mandatory 

IRS justifies annual PTIN fee with  31 U.S.C. § 9701, which allows agencies to charge for a service or value provided

Two CPAs sue the IRS claiming that the IRS was not allowed to require PTINs and was not allowed to charge PTIN fees

Court held that the IRS can require PTINs, but that the PTIN is not a service or of value to the preparer, so the IRS cannot charge PTIN fees

Furthermore, the IRS must refund PTIN fees to the class (which includes many of us)

I am confident that nonqualified top hat plans will need to address the final rule, specifically when disability is a payment trigger; however, is the rule applicable if disability only accelerates vesting and is not a payment trigger? Would seem so, but I'm not certain. What if the plan only contains disability respective to the cancellation of a deferral election? Would the rule apply here as well? Thoughts are greatly appreciated. Thanks!

Client opted to freeze its 401k plan effective 12/31/16.  I understand that there are no more benefit accruals after that point.  The plan year ending is 6/30.  So we have period in the plan year that runs from 7/1/16 to 6/30/17 that the plan was frozen.  What compensation is used for testing purposes for the 2016 plan year?

Do you know if it is possible to retroactively change the Plan termination date? 

For example if a sponsor terminated a plan effective 8/31/16, could they now say that the Plan is terminated effective 12/31/16?

I am not aware of any provision, but perhaps someone here is. I do know that choosing the effective date is a settlor function, but i don't know if that means that it can be changed. 

Thanks!

For a cross tested profit sharing safe harbor non-elective 3% plan, how are imputed EBAR's calculated?  Are we adding a calculated EBAR for the safe harbor and a separate imputed EBAR for the profit sharing?

Employee opts out of medical coverage for 2017 but elects general purpose health FSA coverage during open enrollment because he is covered under spouse's plan.  Spouse terminates employment mid-year.  Due to the change in status, the employee enrolls himself and spouse under employer's HDHP starting June 1 and wants to contribute to HSA starting then.  Employee has exhausted health FSA balance.  Can employee terminate FSA effective May 31 and start contributing to an HSA thereafter?  I think not but cannot seem to find support either way.  Any help is appreciated,

While preparing the 12/31/2016 accounting for a pooled profit sharing plan, I just found out today that the employer paid a terminated participant her vested balance of $684.  Her account is all safe harbor non-elective funds, so she was 100% vested.   The distribution was done a year ago in April 2016.   The problem is that it was paid from the employer's checking account, not the plan's checking account.   Since it wasn't paid from the plan, no taxes were withheld and no 1099R was issued.     The employer did not include the amount in her W-2 either.   I know the plan cannot reimburse the employer.   I'm not sure how to fix this.   Can the plan pay her the $684 and she then write a check back to the employer?  

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Odd situation here.  Just wondering if anyone has any insight.  Two business partners had a 401(k)/profit sharing plan.  The two owners were the only employees/participants.  Each owner oversaw the investment of his own plan investments. A couple of years ago, one of the partners had some significant life changes and left the business.  (Possible mental health issues present). Business was reorganized to now have only the single, remaining owner. The problem is that the former owner (I'll call him Bob) hasn't provided any detail (and has ignored/rejected multiple requests) on his plan account investments since then. Remaining owner wants to make sure plan is in compliance.  Because Bob won't provide info (and has probably spent his assets), we don't know how to handle formalizing the distribution of his plan assets (which are not under the control of remaining owner). Do we 'deem' those amounts distributed at some point? Even if we do that, we don't have the assets from which to take withholding. Do we deem them rolled over? To where/whom? Trying to figure out what to do so that the distribution to Bob can be documented, and because distribution (after termination of employment) is required by plan.  I have called around to try to get informal input from DOL and IRS.  DOL not interested, since no non-owner participants involved.  IRS contacts had varying views.  Once said ' get into Audit Cap, like yesterday.' Another said, that it seems more like a tax issue for Bob, and less of a Plan qualification issue.  I'm stumped on how to correct. Remaining owner wants to do things right.  Any suggestions/insights? 

A profit sharing plan currently requires 2 years of service for eligibility for an employee to become a participant. Thus, the plan has 100% immediate vesting. The plan only covers non-highly compensated employees.

The plan sponsor wants to lower the eligibility to 1 year of service and introduce a 6-year graded vesting schedule. All existing Participants will remain 100% vested. How will this be handled for existing employees?

Some employees have been held out already over 1 year (some almost 2 years). However, they have not yet entered the plan and thus have no rights as a participant. Must they be 100% vested when the plan is amended to lower the eligibility, or can they be placed onto the 6-year schedule? How about those with under a year, would they be treated any differently?

What is the obligation of an employer to notify an employee who is collecting workers' compensation benefits that they may be eligible/should consider filing a claim under the employer sponsored/paid LTD plan?

Does anyone have a sense for what a normal number of days would be not for the blackout itself, but to be out of the market in cash.  I know plans typically go into blackout before the liquidation date to ensure everything has a chance to settle, and on the other end it often stays in blackout until everything is completely up and running which at times is after the repurchase.  I'm looking for a typical amount of time to be sitting in cash.  Are there any statistics?  I have some participants in a blackout complaining it was too long, and I don't have any way to evaluate whether or not this particular conversion was atypical or what.

I should note that blackout did not extend beyond the window disclosed in the blackout notice.  Obviously the market is either up  or it is down in these things, and as "luck" would have it, the market was up in this particular time frame.  I did not think it was appropriate or advisable for me to mention any specifics here so I won't.

do you think it is a plan sponsors responsibility or duty as fiduciary to monitor the reasonableness of fees and services for a brokerage window provider? 

now take it one step further, accounting and administrative issues aside, lets say the sponsor allows participants to do business with whatever broker they want to. do they still have the fiduciary duty to monitor the reasonableness of each broker chosen by participants and does it matter that it is the participants making the choice?

oh joy of joys

guess I will wait for someone to build this into the spreadsheet if this goes through for 2018!

https://www.ssa.gov/OACT/solvency/TCotton_20170601a.pdf

Thank you for your letter of April 12 regarding the implications for Social Security of reducing the employee portion of the payroll tax. The proposal would cut the payroll tax rate by 2 percentage points on Social Security-covered earnings up to:

· $28,258 for workers filing an individual income tax return,

· $56,512 for a married couple filing a joint return, and

· $28,258 for a married worker filing a separate return.

The proposal would reduce the employee portion of the payroll tax rate from 6.2 to 4.2 percent on annual earnings below the applicable threshold; the employer portion would remain at 6.2 percent. The tax rate for self-employed workers would be reduced from 12.4 to 10.4 percent on annual earnings below the applicable threshold. The dollar levels indicated above would apply for tax year 2018, with the thresholds increased by price inflation after 2018; that is, by the annual COLA increase percentage determined for December of the prior calendar year.

As we have discussed with your staff, this tax rate reduction would be implemented by way of a credit associated with the workers’ income tax filings. The reductions could not be efficiently applied in payroll withholding for at least two reasons. First, the employer would not know for certain the tax filing status the worker will use for the year. Second, for individual workers or married couples with more than one job during the year, it would not be clear to which job’s earnings the reduced payroll tax rate should be applied. As a result, the reduction in payroll tax would be received in the form of a credit included in workers’ federal income tax returns for the

year.

DB plan is terminating and it seems there may be some differing opinions on how to treat active participants.

- Actives cannot receive benefits until they terminate employment

- Early retirement subsidies starting at age 55 and 5 years of vesting (all have 5 years of vesting)

- As part of the Plan Termination, lump sums will be offered

- The plan was not amended to offer in-service distributions

Question #1

Do active participants that have met the age and service requirements for retirement (55 & 5) receive only the QJSA and QOSA Immediate Annuity options or do they get treated the same as Vested Terminated Participants and have the full allotment of annuity options as if they terminated employment and are retiring?

Question #2

If the answer to the first question is "NO", do the Actives that meet the age and service eligibility requirements get the subsidized QJSA and QOSA options or are the subsidies only available for those that "retire"?

Can anyone help me here please? We are getting divorced in the UK (it has to happen in the UK because this is where we currently live). My pension plan in the US states that the QDRO must be signed by a judge in a US court. We plan to attached the agreed QDRO to the UK court documents that will be signed/stamped by a UK court. How do we then get the QDRO signed by a judge in a US court? I don't know where to start with this last step.

For example, how do we find the relevant US court that would sign it? I am hoping the US court signature is a formality based on my belief that the US court will recognize the divorce as it has been approved by a UK court.

Thanks for any suggestions in advance.

We have client where wife has her own company (100% owner) and husband has his own company (100% owner) - unrelated businesses.  Wife is also on husband's payroll and he has DB, PS and 401(k) for his company.

Does anyone see a problem with wife benefiting in husband's plans and also having a SEP for her company?

Are not Defined Benefit Plans required to file form 8955-SSA as Defined Contribution Plans?

Question has come up as to whether a new 401(k) plan, either SH or traditional, can have a plan year off calendar year.

SH 3% would be using W-2 for cal year ending w/in plan year.

Have never seen a 401(k) off calendar year, but see no reason why not.