Line 7 instruction to 5500 clearly says: "For pension benefit plans, “alternate payees” entitled to benefits under a qualified domestic relations order are not to be counted as participants for this line." (emphasis mine).

What about Schedule SB Line 3 Column (1): Funding Target/Participant Count Breakdown—Enter the number of participants, including beneficiaries of deceased participants, who are or who will be entitled to benefits under the plan? There are no mentioning of "alternate payees" here. Do you include them in the count?

Hello. I am new to 457 and hoping for some guidance. A tax exempt entity matches 457(b) deferrals. There is a vesting schedule causing the matching to vest and excess deferrals in years subsequent to the initial deferral. If the plan distributes the excess deferral after April 15, does this cause double taxation in a manner similar to the 401(k) plan treatment? My reading of the regulations and secondary materials suggest not. I can find nothing other than discussion relating to failure of the plan generally after April 15 and taxation of deferred amounts that are not subject to forfeiture. But if excess match is taxable in year vested and then distributed in subsequent year, how is it reported and is it taxable at distribution? Is there basis under sec. 72?

A previous discussion and example were helpful but did not address matching and did not address specifics as to what is the effect of plan failure given late correction.

Can someone provide an example with authority of reporting on W2 for an excess deferral caused by match vesting where distribution of excess is made in subsequent year after April 15?

Thanks for any help you can provide.

Forfeitures at end of year = $99.13  (WOW!) 

Could be used for plan expenses or allocated as Match or PS. - (no QNEC allowed)

Issues:  

1) There are no plan expenses

2) Match:  No prior match for ACP.  Match allocation does not exclude HCEs therefore ACP would fail and HCE refund of <$6 would occur (fee for refund is $100).

3) PS:  2 participants who otherwise do not have accounts would each receive an allocation of $2

Any suggestions for how to otherwise dispose of the forfeitures?  

Employer did not use the plan definiution of compensation correctly and excluded bonus payments for 2 now former employees. Sef-correction is being performed after severance from employment. 

Would the 50% employer corrective contribution count towards the employee's $18,000 annual contribution limit for 2017?

Thank you!

I have a question regarding the IRS 2017 Transit/Parking limit of $255/ month. We have some clients who have set up pretax transit/parking and also after tax parking/transit employee deductions. From an IRS limit perspective under the cafeteria plans, do I also include EE after tax transit/parking payroll deductions combined with the EE pretax transit/parking deduction limit of $255/ month?

Or is the limit of $255 just for pretax transit/parking ee payroll deductions and the employee can contribute more than $255/ month for aftertax transit/parking to their account?

I work for a payroll software company and we want to put a WARNING message on the employee's payroll when they exceed the $255/month limit...but I am not sure if the limit includes after tax transit/parking EE contributions so that is why I am asking.

Thank you,

Linda Adams

I work for a Wealth Management firm, and I have dealt a bit with SIMPLE IRA's, SEP's, and Solo 401(k)'s.

I have read alot of the IRS Materials on these plans and have executed these plans, but I would like some formal education/guidance on these plans.  Are there any educational webinars or exams I could take that would deepen my knowledge of the issues surrounding these plans?

I plan on taking the QKA next year at some point, not sure if that material is covered.

I know its a small topic but my worst feeling is when I tell a client something and I end up not painting a full picture or making them aware of issues or simply being wrong.

I did look at the recorded presentations here and could not find anything - let me know if i missed something.

Husband and wife each sign up for family HDHP coverage, creating a double HDHP coverage situation. Each signs up separately for HSA plan for the individual (not family) limit. So far so good, it seems, as neither has coverage that is not a Qualified HDHP.

The wrinkle: carrier reports coordinating benefits for the double HDHP coverage so that all plan deductibles and/or co-payments are waived, resulting in no-cost medical services being received.

This seems a bit problematic in that, while the employees seem to have done everything right, the carrier's action seems to negate the intent of the law. We are wondering how the IRS might view this situation.

Your thoughts and opinions would be most appreciated.

Company has an IRS Model SEP and wants to start a new CB plan. Can they start the CB plan for 2017? Does it matter if any SEP contributions have been made yet for 2017? If they cannot start the CB plan under the current situation, can they terminate the SEP before year end and then adopt the CB plan before 12/31/17. Is there any way that they can start the CB plan for 2017 and be in compliance?

I was under the belief that if the IRS Model SEP existed at any time during 2017 then they cannot start a qualified plan, but I have never faced this situation in actual practice.

Issue 1:  Do you believe that a plan administrator MUST reject a DRO if it contains tax language that is inconsistent with tax law?  For example, a DRO provision that distributions to a spouse or former spouse AP shall be taxed to the Participant or, conversely, that distributions to a child or other dependent AP shall be taxed to the AP.  Although most would say both provisions are inconsistent with federal tax law, can the plan administrator approve a DRO that contains one of them, then ignore the DRO tax provision and report/withhold based on applicable tax law?  If your answer is no, would it change your mind if the plan's QDRO procedures provide (1) the plan administrator will not reject a DRO based on any tax language in it, but (2) the plan administrator will report/withhold taxes as required by law, regardless of any inconsistent provisions in the DRO?

Issue 2:  Although it is clear that a Participant is taxed on distributions to a child or other dependent AP, there is no consensus on tax withholding from such payments.  Some TPA's do not withhold taxes from such distributions even without a withholding waiver on Form W-4P.  Some TPA's do withhold in this situation unless the Participant waives withholding on Form W-4P.  Earlier threads on this forum also don't produce agreement on this.  If you believe tax withholding is appropriate (absent a waiver), and if you received a DRO that directed the plan administrator not to withhold taxes from the distribution, would you (1) reject the DRO as inconsistent with tax law, (2) approve the DRO, but still withhold because the DRO is not an effective waiver, or (3) approve the DRO and not withhold taxes, treating the DRO as an effective waiver?  Does your answer change if the DRO also contained a provision, in the event the plan administrator requires a withholding waiver, that orders the Participant to fill out and return the appropriate tax waiver to the plan administrator?

I am a financial advisor who dabbles in 401(k) so I dont know a ton. 

I have a client who owns a business and has a Solo 401(K) custodied at Fidelity. So no real recordkeeper.

She put $18k in as an "employee contribution" in April.  She filed taxes yesterday and mistakenly tried to put in $27K as Employee and employer contribution ($9k employer contribution) and Fidelity rejected it because she didn't have enough cash in her account. She should have just requested $9k, but she forgot about her earlier $18k deposit.

Because she already filed taxes $9k this year is listed as Employer dollars.  Because Fidelity doesnt track Employee/Employer dollar differences in these type of accounts can I just basically say the half of the $18k deposit in April was employer dollars and request $9k be pulled today for another employee deposit? Would that cause any problems?

There is a multiple employer plan that has several adopting employers. One of the adopting employers has been operating under the plan without an adoption agreement since the spring of 2017. Can this be corrected with an amendment because it's still within that plan year or does it need to go through a correction program? 

Also, one of the adopting employers has merged into another adopting employer, does the merged plan need to sign a new participation agreement or should it be terminated? 

Client company adopted a QSEHRA.  Participants will purchase individual HDHP insurance policies and be reimbursed by QSEHRA.  May the company make direct HSA deposits on behalf of employees? (If employees make deposits, the amount is deductible on form 1040 but subject to FICA taxes.)  Is there a way for the company to make the deposits so that the company "does not offer a group health plan to any of its employees" and violate IRC 9831(d)(3)(B)(ii)?

One of my 401(k) client (plan sponsor/employer) is a gov't contractor specialized in staffing information technology and administrative fields.

From this client 2016 plan year employee census, I noticed there has been high employees turnover.

I find it difficult to determine whether this high turnover considered as a partial plan termination for the following reasons:

1. some of those employees separated from service, according to my office sales team,  either

• were  directly hired by the gov't agency sometimes later 
• or their contract ended because the plan sponsor/employer lost the bid
• or voluntarily left the plan sponsor/employer for a better position elsewhere

       2. whether this plan sponsor/employer that is a gov't contractor can be considered as any other staffing   agencies such as Robert Half that may or may not be under the same plan termination rule as regular employer

Let's say a QDRO creates a 50% separate interest - Participant is not yet retired and has not commenced a benefit, and is presently alive - and the QDRO creates a 50% separate interest in his accrued benefit during the period of marriage, for AP.  The QDRO also says that if Participant dies prior to the date the AP commencing her benefit, then the AP must be treated as Qualified Surviving Spouse under the plan, which provides by default for a QPSA equal to what they 100 percent QJSA would have been had the Participant retired the day before he died. So far, pretty standard? But the QDRO goes to state that if QPSA becomes payable to the AP, the extent of her entitlement is "50% of the benefit as set forth in Paragraph 5" which is the paragraph creating the separate interest. 

The actuary finds this confusing. Is she entitled to a QPSA calculated on 100% of participant's accrued benefit, 50%, or 50% of 50% (25%?) 

But, looking at 417, I think this QDRO is trying to do something contrary to the plan (and law). A qualified plan must offer a QPSA and a QPSA's payment must not be less than the amount that she would have received had he retired with a QJSA while alive, correct? 

If the QDRO orders that she's treated as the surviving spouse, and then Participant dies before commencing a benefit, isn't AP's separate interest irrelevant at that point? She's entitled to the QPSA actuarially equivalent to 100% of his accrued benefit, or am I wrong? Because if he had retired before death with a QJSA, that's how much would have been payable as a survivor annuity. 

But wait, the actuary's saying.. He "lost" 50% of his interest in the QDRO, so even if he'd been alive and retired with the 100 percent QJSA, it would be based only only 50% of what he had accrued prior to the QDRO. 

So, then is the AP's QPSA based on the 50% interest that Participant had retained after the QDRO but prior to death? 

Does this make sense? Thank you.

Hypothetically speaking, suppose you had debt owed by the ESOP to the selling shareholder totaling $4 million, with the company as the guarantor. Primarily because the company's payroll can't even come close to supporting a deductible contribution equal to the loan payment, the company made the loan payment directly to the selling shareholder in the prior year and that is continuing into the current year.

An option for solving what will be an annual problem is to have the company assume the ESOP's debt to the selling shareholder and negotiate a new inside loan between the company and the esop that can be supported by using deductible contributions to make the payments. Assume that would amount to $400,000. The term of the old and new esop notes would be the same so the share release would not change. The question/concern is does this restructuring create issues because of the uneven exchange of notes? A deemed dividend to the esop? A forgiveness of debt? Something else?

The parties are well aware that this hypothetical plan should not have been set up the way it was, nevertheless it was so they have to deal with what they have. Another option is a redemption, but for reasons of cost and an ongoing DOL audit the preference is to look at the restructuring first. Thoughts on the restructuring will be appreciated. Thanks.

If a Safe Harbor plan is terminated mid-year, what are the ramifications? It seems that it doesn't matter now if the plan is SH Match or SH Profit Sharing, since the IRS has provided additional guidance.

I've read from a few posters on here that the ADP/ACP testing must be done in this case. However, the IRS guidance seems to indicate that Final Short Plan Year is a valid reason to avoid testing: 

"The safe harbor plan regulations set out several exceptions to the requirement that plan provisions satisfying the rules of §§ 1.401(k)-3 and 1.401(m)-3 be adopted before the first day of the plan year and continue for an entire 12-month plan year. These include exceptions for (i) a short first plan year, (ii) a change in the plan year, (iii) a short final plan year"

So, the question is: does testing (ADP, ACP, and Top Heavy) have to be done for a Safe Harbor plan that terminated mid-year?

Also, does it matter what the reason is for termination? For instance, does it matter if the plan simply terminated or if it terminated due to a merger into another plan?

Thanks.

https://www.ssa.gov/OACT/COLA/autoAdj.html

this was on the soc sec website, taxable wage base = 128,700

What is required proof to obtain a residential loan from 401K?

If 10,000 is borrowed, but only $5,000 is used as a downpayment, is that acceptable?

is proof needed to get the loan or only if you happen to be audited?

Let's say that there is plan that defines a plan year as 1/1 to 12/31. The limitation year is based on the plan year, so if the plan is terminated, the 415 and 401(a)17 limits will be pro-rated. What if the plan terminates of 3/2/2017? How would the limits apply? Specifically, since the plan terminated during the month of March, should be limits be:

1) 270,000 * (3/12) and 54,000 * (3/12) for 401(a)17 and 415, respectively.

or,

2) 270,000 * (61/365) and 54,000 * (61/365) for 401(a)17 and 415, respectively.

Basically, when the pro-rated computation is done, is it based on the number of months or the number of days?

Thanks in advance.

the participant is 72 (already reached RBD).  ex wife does not receive her share of account pursuant to QDRO until 2017. does ex spouse have to pay her share of the 2017 RMD?  she had no account to value as of 12/31/2016 therefore i would say no RMD due from her. anyone agree or disagree?