Plan excludes several forms of compensation. ADP/ACP is tested on gross less exclusions

HCE has total gross comp of 270,143.14.  14,373.96 is excluded

do you 1. use limit of 265,000 less 14,373.96 excluded and test on 250,626.04

2. use 270,143.14 less 14,373.96 excluded and test on 255,769.18

3 use 265,000 less a prorated exclusion of 9230.82 (14,373.96 less 5143.14 diff between 265000 & actual) and test on 255,769.18

or, is there another correct option that I am not aware of.

This one has me going in circles.  If the plan has a high limit investment which is offered to all participants, but and only one HCE takes advantage, does it fail the 410(b) component of the RBF test?

Does anyone know if State Retirement Plans are required to file 5500's?  Like I'm trying to find a 5500 for the Missouri State Employee Retirement System (MOSERS) and I can't find anything.  I did find their annual report on their website which gives me most information. Just seeing if they would have a 5500.

Someone at my work is asking about it - I have no idea why....

Scenario:  TPA uses Relius Administration for their pension clients.  However, they choose not to use the software past the point of inputting basic census data.  Meaning, they choose not to input or import investment data (account balances, distribution/transfer activity, etc.) into Relius for their clients.  Instead, they use a rudimentary Excel spreadsheet to perform Top Heavy testing and basic trust accounting for ALL their clients' plans.  

For audited plans, they provide the Relius SSAE SOC-1 or SOC-2 reports to independent auditors.  If they are failing to utilize their pension software, they are failing to adhere to the accounting standards which the reports are essentially certifying.  Correct?  If auditors do not realize that plans are being manually tested in a spreadsheet (and hence, not necessarily conforming to proper controls & standards, not to mention the increased risk for HUMAN ERROR if this is the TPA's ONLY method of testing), then isn't there potential for HUGE liabilities for all involved? 

The TPA knows they are not using the software as intended/designed, yet continues to supply the reports as though they do.  Management actually made the comment that "auditors and clients wouldn't know the difference anyway..." and "after all, we are technically performing the test... just manually."  When brought to their attention, their response:  "We've always done it this way.  It's too much work to get the trust data into the system.  We tried that one year..."

Wow.  

Now, imagine that two of this TPA's owners/managers hold ASPPA credentials.  Heck, one is even an ERPA.  

Could most of us manually complete a Top Heavy test in our sleep?  Sure.  Conversely, some admins on TPA staff don't have the foggiest notion.  But, that's not the point.  Regardless of staff experience to complete a test accurately (we hope), the FACT is that they are not adhering to accounting standard procedures because they are too lazy, overwhelmed, inept, or all-of-the-above to simply input the trust accounting into a software package which they pay good money to use, and then knowingly try to fly under they radar and pretend that they are following those standards.

Their failure to disclose that they choose to deviate from the controls addressed in the pension software's SSAE SOC reports is deceptive and could potentially cause significant public harm.  They are fully aware they are allowing clients and auditors to infer that they follow applicable procedures for the software they use to provide their services.  Like I tell my kids, allowing someone to infer something that is contrary to reality is the same as lying.  Plain and simple.  At minimum, this is a professional ethics concern.  

At the very least, think of the added expense (time and money) for the clients if this must be addressed.  I guarantee that if the Top Heavy tests for all these years were reviewed, you'd find errors.  You'd find plans that were top heavy and not treated as such.  What if that jeopardizes a plan losing their qualified status?  Think of all the employers and participants who could be affected.

Your thoughts???  How would you handle this?

These things also make my head spin! We are setting up a 401k for a company that was formerly under a PEO plan. 

This company owns a chain of restaurants. I am waiting to find out what exactly the ownership percentages and who owns what.

When they were under the PEO, only management and the people who worked at headquarters were in the plan.

Now they want to open this new plan to the restaurant owners and possibly all of their employees. They want to include some restaurants and not others.They also want to set up one match for management and one match for everyone else.

Could they do a separate plan for management and a separate plan for the rest of the employees? Each having their own plan provisions.Can they choose to include some but not others?

Large plan has ACA and excludes Part time and temp employees from plan (if they work the 1000 hours, that changes them, but that is not the case here for this question).  Six P/T ees were allowed in the plan in 2015 in error, but were stopped.  Seven people were allowed in the plan in 2016 but were stopped.  What is the correction?  Some of these people are terminated from this employer and dollar amount range from about $4 to about $100.

Employer has organized a weight loss challenge.  Participants pay a $25 registration fee to participate.  The winner takes the pot.  No employer money is involved.  Are the winnings taxable to the recipient? 

Thanks.

Interesting situation - self employed individual makes deferrals based on a "draw" during the year, then discovers after end of year that earned income is zero. So deferrals have to be refunded as an excess.

Now, in a more "normal" situation, where there is, say, an ADP failure, I know the IRS position is that those deferrals count toward determining allocation rate to the Key, even though they are subsequently refunded. However, it seems a stretch to apply this to someone who is ultimately determined to have zero compensation, so I'd argue that no top heavy minimum would be due for the NHC's.

Any other thoughts/opinions? 

Hello,

My wife and I own a business with no other employees. We each have a SEP IRA set up and employer contributions for 2017 have been made. I now realize I should have set up solo 401 K accounts.

It looks like I can still set up a solo 401k account and make the $18,000 contribution for 2017 if my SEP is not a 5305. I set up the SEP IRA's at Vanguard and don't remember filling out a 5305 form and they have no record. How would I know if I have a 5305 and if I do is it possible to change that? 

Thank you. 

Have a pending Cycle E2 determination letter application for an individually-designed plan.  I am in the middle of the Employee Plans Specialist's review and there will likely be a Closing Agreement matter relating to a missing interim amendment for a prototype plan that was merged into the plan a few years ago.  The sponsor knew of same, and it was noted in the cover letter.  Nonetheless, there will be some sort of sanction to fix, and I am OK with that.

A few days ago, the sponsor indicated that it had not adopted a discretionary amendment to the individually-designed plan that added a Roth feature to the plan in mid-2016.  The Roth feature has been implemented, but no adopted amendment to date.  I could fix this via a separate VCP filing and pay the VCP fee, because, per the determination letter rules, the plan is not "under examination" re this item.

But, would it be possible to save a buck or two and voluntarily raise this new issue with the Specialist and deal with it with the pending other nonamender failure . . . with the hope that the sanction will be baked into same, say the VCP fee of $10,000 or so as the CAP sanction.

Or, should I just wait a few weeks, get the determination letter/closing agreement, and then file a VCP application to fix the new issue?

Thanks.

Is a 403(b) plan sponsored by a non QCCO 414(e) religious organization subject to Code Section 414(s) testing?

Wording has changed a little bit in the Revenue Procedure 2016-51 from prior Rev. Proc. - it is a bit less explicit regarding the following.

So, let's say you have a SIMPLE-IRA to which you have contributed during 2017, then you established a 401(k) and contributed to that as well. Whoops. So, when it comes to correcting, can you file VCP and count the SIMPLE as an "Excess Contribution" and refund it? Can you still have the option under the VCP to retain it in the SIMPLE, but pay the 10% excise tax on the retained amounts (but apparently get no deduction for it, so probably not a savory option anyway?) Other wonderful options?

I tend to favor refunding, particularly when fairly early in the year where participant can have time to make it up anyway under the 401(k).

Appreciate any opinions/thoughts. P.S. - anyone recently submitted one one way or the other, and if so, with what results?

For someone with no experience getting into TPA service, what would you recommend as educational sources? Specifically on designing 401k plans and obtaining approved safe harbor agreements?.

Defined benefit plan has a provision that says that if a participant dies before retirement, his/her beneficiary can elect an alternate death benefit instead of a Qualified Pre-Retirement Survivor Annuity.  The alternate death benefit is a lump sum payment of 100% of the contributions made to the Plan on the participant's behalf.

If a beneficiary chooses the alternate death benefit, is the plan's administrator required to withhold any taxes on the payment?  If so, how much?

Thanks.

Client thought employee Y was not eligible to participate in plan because they considered her a part-time employee.  Entry is immediate for deferrals (and 1 YOS for match with semi-annual entry dates) but Plan does have a part-time employee exclusion, but that exclusion no longer applies once an employee works 1000 hours in the computation period.

Employee Y was hired on 2/11/11 as a part-time employee.  At the end of the 2011 plan year, we learned that she had worked 1000 hours.  What would you consider her entry date into the plan?

Since the plan has an automatic 2% contribution rate, should we be calculating the missed deferral opportunity at 2% or do we rely on the ADP test results and use the average rate of the NHECs?

Please advise.

Controlled groups give me a headache; anyone have an opinion on this (BTW, I think it is a controlled group)?

Individual A owns 100% of X LLC which has no employees. X owns 50% of Company B which has employees. The other 50% of Company B is owned by another individual.

Can Individual A make contributions to a 401k which is under X LLC without any obligation to employees of Company B?
 

An owner takes out a loan in Oct 2016 with monthly scheduled payments.  He doesn't make a payment by the time we notice in May 2017.  Is there anything that can be done to make it so the loan is not in default?

After all, if he had taken out the loan with quarterly scheduled payments, the first missed payment wouldn't have occurred until Jan, and the loan wouldn't have defaulted until June 30th. 

But there is a catch here.  It is the fiancée's house.  She lives with the fiancée but the mortgage is not in her name.

The distribution at the most broad level is to prevent the eviction.

"(4) Payments necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage on that residence;"

Based on a literal interpretation of the regs it seems to me she would qualify.

We are instructing our new solo k clients that they should file a Form 5500-SF instead of the Form 5500-EZ.  Do the same rules apply for the asset level that requires a filing? In order words, is it correct that even a Form 5500-SF is not required for a solo k until the assets exceed $250,000?

I have a participant wanting a hardship withdrawal to purchase a primary residence.  I have been looking for what is not allowed in the closing cost.  For example can they be reimbursed for the down payment they already made or for the amount going into escrow for property tax and homeowners insurance which would be part of the monthly mortgage payments.  My thought is that these are not "immediate and heavy financial needs"  is there something in writing that I can send other than "immediate and heavy financial needs"