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)?

Does anyone know how Social Security's Windfall Elimination Provision (WEP) would apply to a governmental defined contribution plan?  For example, some governmental agencies have done away with db plans as their Social Security replacement plan, and moved new hires into dc plans.  Some of these new hires have Social Security earnings from prior jobs and are wondering how or if the WEP would apply to them.  I'm not sure how it would work.  Does anyone have any insight on this?  Any help would be appreciated.

Hello,

Have a sole prop, no employees and have a Individual 401k plan with Fidelity and fill up Form 5500-SF.

If I open another 401k plan say with Vanguard, what are the issues that I should keep in mind?

Of course, max contributions etc. remain across the plans.

Does this mean I need to file 2 5500-SF or just 1?

Thanks,

Being not-for-profits, there's no deduction for the employer contribution, so is there a maximum amount allowed?  I get that most NFPs don't have tons of leftover cash to make excessive plan contributions, but let's say that this year is an anomaly.

Example: NFP has $800,000 payroll.  if this were a regular corp, the deduction limit (and therefore the maximum total contribution) would be 25% x $800K = $200K.  Is this the same for a NFP?

One of those things that I know I've seen before, but just blanking on it.  Thanks.

A participant terminated employment in 2016 and took his account balance.  Since he rolled part of his account, took part in cash and had a defaulted loan, he received three 2016 1099's.  However, the plan erroneously paid out all of his account PLUS his loan balance.  For example:  His account balance was $50,000 plus $10,000 loan balance, for a total of $60,000.  The 1099's were issued for exactly what he was entitled to, but not what he actually received.  One 1099 was for $25,000 in cash, one 1099 was for the defaulted loan ($10,000), and one 1099 was issued for the rollover for $15,000.  BUT, what he actually received was; $25,000 in cash, $10,000 (defaulted loan) and $25,000 was rolled over.  So the loan balance was paid to him (i.e., rolled over) in addition to his eligible balance.  After contacting the participant and the IRA company several times explaining that it was an ineligible rollover, nothing has been done.  The participant has not returned the money, the IRA company has not distributed the money (as far as we know), and we are at a point where we need to correct the 1099, restore the account, etc.  Since the extra $10,000 was not eligible to be rolled over, I assume that the 1099 that was issued for the lump sum would need to be corrected to reflect $25,000 instead of $15,000 and will be taxable to the participant (even though it was rolled over), correct?  The plan's assets are in a pooled account, so I assume that the amount (plus earnings), would just go back into the pooled account, correct?  And lastly, which compliance program would you use or would you just self correct?

Thank you so much in advance for your thoughts and opinions.  

Hello,

I have a client that had a business with employees and maxed out his profit sharing / 401k for 2016 ($59,000.) He sold business and terminated plan prior to end of 2016.  He then received consulting income from the company that purchased his business as a 1099 consultant.  Can he contribute under a SEP - consulting income and max this contribution for 2016 also?  Thank you.

Although President Ford signed the Employee Retirement Income Security Act of 1974 on September 2, it was Labor Day of that year and the choice was deliberate.

“It is certainly appropriate that this law be signed on Labor Day, since this act marks a brighter future for almost all the men and women of our labor force.”  President Ford’s statement on signing ERISA.

“I think this is really an historic Labor Day—historic in the sense that this legislation will probably give more benefits and rights and success in the area of labor-management than almost anything in the history of this country.”  President Ford’s remarks on signing ERISA.

So happy birthday, ERISA!

If a plan is discovered to be top heavy for 2015 and a corrective TH contribution plus earnings is made now I assume this contribution is accrued into the 12/31/2015 non-key balances in determining top heavy status for 2016?

We took over a company early 2016 (stock purchase) which has an NQ plan which is employee deferral only, no employer contribution (I'll call this NQ Plan 2). Eligible employees are Associate Director or above (currently 90 are eligible, about 25 defer)

We also have a current NQ plan for 10 Executives (directly report to CEO that is employer only contributions (10% of base pay). I'll call this NQ Plan 1. Currently none of the NQ Plan 2 participate in NQ Plan 1. 1 of the NQ Plan 2 employees (reports directly to the CEO and otherwise satisfies NQ Plan 1 eligibility and we would like him to be added to NQ Plan 1 effective 1/1/18

We do not offer current Assocate Director or above any NQ plan except for the 10 executives

Both plans have rabbi trusts. Distribution payout options are different 

It was decided to merge the 2 plans 1/1/2018.Does anyone foresee any issues with the merger?

What would the steps be to merge the plans? 

An option we are considering is perhaps to freeze NQ Plan 2 instead of merging it into NQ Plan 1 eff 1/1/18. Business case is current employees at Assoc. Director level do not have access to an NQ arrangement . We are past the transition period of the stock purchase agreement

Any issues to consider here?

Can we terminate NQ Plan 2 and force distribution of all benefits? The current payout options are lump sum or installment payments. 

My recollection is that if you terminate one  NQ plan must terminate all?

Any tax issues with merging, freezing or terminating plan?

Thanks in advance for any insights.

Lexy

Hello,

I have a sole prop (no employees) and have a solo 401k with Fidelity.

This year I opened a C corp (100% owner, again no employees) and understand that I have a Control Group situation.

Discussed with Fidelity and they have provision to add Corp to my existing solo 401k plan as affiliated group of employers.

Anyone see any issue with this?

Thanks,

Can I do an amendment today to make eligiblity in a safe harbor plan immediate without the need to provide 30 days notice?

I say yes, because 2016-16 says the new notice period does not apply unless we are changing information in the required content of the SH Notice, and eligibility is not required content.

All those in favor, say "Aye!"

Simple example:

Plan allows loans and hardship only from employee deferrals (no gains).

EE contributes 10,000, balance is 12,000.

Received a loan for 50% VB, or $6,000 total.

EE qualifies for a $10,000 hardship (for example).

I compute that the EE can receive $6,000 in hardship. 

Agreed?