Outside of normal IRC 415 Limits and ACP Testing, is there any problem with doing a match in excess of 100%?  Thanks for your reply?

Traditional DB formula of [52.5% (AMC) + 12.5% (AMC-CC)] x Part/25, fractional accrual Partic. / Total Partic.

Does this formula satisfy the requirements for a designed based safe harbor?

Our client has a pro-rata Profit Sharing, fiscal Y/E 06/30.  Well after we finished reporting for PYE 06/30/15, the client advised us that 2 of the comps reported on the census were incorrect.  One owner's comp increased by $200,000, and another HCE's comp increased by $100,000.

We had allocated originally allocated 25% to everyone; revising the allocation, this was reduced to 13.52%.  The two people involved of course get a lot more, one owner gets a lot less and all the NHCEs get a lot less a little over half of original amount.  Distribution of participant statements will be a bit touchy.

If the employer wants to avoid reducing NHCE allocations, is there a way he can get around the pro-rata formula for the year?

You do see some strange things in non-ERISA plans. Consider the following, which I think is likely a bad idea from employee relations and/or union contract deals, but I can't see anything technically wrong with it in terms of violating the 403(b) regs. Any other thoughts? Maybe I'm missing something.

This is for EMPLOYER CONTRIBUTIONS ONLY. Deferrals appropriately follow all the "normal" rules. 2-year eligibility (1,000 hours for a YOS) for employer contributions. Plan year is calendar. Fiscal year is 6/30 Y/E. If you don't meet your eligibility in the first two employment years, subsequent eligibility computation periods shift to the FISCAL year BEGINNING  AFTER the end of the two year period. So, in essence, it would be possible to completely ignore nearly an entire year of service depending on hire date - for example, if hired on July 15th, and you don't meet eligibility in the first two years, then the next eligibility period doesn't begin until 7/1 of the following year. Is that strange, or what? Anyone ever seen anything similar?

P.S. - I'm dubious that many of the new Pre-approved documents, when available,  would permit this anyway...

It has been my understanding that the new fiduciary rule issued by the DOL applies only to ERISA plans and IRAs (if and when it actually goes into effect).  As such, governmental plans and church plans would generally be exempt.  However, I recently came across the assertion (here) that money rolled over from an ERISA plan into a governmental plan would continue to be subject to the new fiduciary rules.  Has anyone else seen this interpretation of the new rules?  I can't find anything else to support the author's position.

(By the way, I do understand that advice regarding whether to roll funds between a governmental plan and an ERISA plan or IRA would be advice subject to these rules.  The article raises a separate issue by suggesting that the rolled funds would be subject to the new rules while in the hands of the governmental plan.)

Any thoughts on whether the following constitutes an ASG?

Dentist sells the assets of his practice to Buyer, AcquireCo.  

• Dentist's Co, OldCo, will be hired by AcquireCo to provide consulting services.  
• OldCo will pay Dentist a salary.
• Dentist is not an employee of AcquireCo
• Dentist performs no management services for AcquireCo
• Dentist has no ownership interest in AcquireCo
• All of OldCo's revenue comes from their consulting agreement with AcquireCo

I don't see how this is an ASG, but tell me if I'm wrong.  The only other issue I see is that Dentist could be considered a common law employee of AcquireCo.

Large employer dropping spouse coverage since not mandated under ACA.

Does not appear to be a COBRA qualifying event for the spouses losing coverage but doesn't smell right, anybody have a different view?

Seeking advice....my father retired two years ago and start receiving his pension from a labor union, which is 100 percent funded by employers. I am the only child, he is single, and I was left with a large burial bill, property taxes, and other estate bills. I discovered he changed his beneficiary on his pension to a friend, who will start collecting his monthly pension. Is there anything I can do at this point to receive his pension? Override the beneficiary or Obtain a DRO to assist with the expenses? 

Is anyone aware whether, for purposes of the special catch-up contributions, a non-governmental 457(b) plan can define "normal retirement age" at less than age 65 where the sponsor has only a 401(k) plan (with a normal retirement age below 65), and not a DB plan or money purchase plan?

I was wondering if anyone attending Pensions on Peachtree this past April?  I was told that Derrin Watson would be providing a sample form that would satisfy the new IRS guidelines for Hardship distributions.  I was hoping to get a copy of the sample notification.

Thanks.

Company A established a 401(k) plan in 1999. In 2008, the owners of company A purchased company B and we had a controlled group situation. Late in 2016, ownership changed and there was no longer a controlled group but the plan has become a multiple employer plan. Employee Z contributed to the plan from 1999 to 2005.  In 2016, he became a 10% owner of company B. He is currently not working for company A. He has an account balance attributable to contributions made while working for company A. He is not currently making contributions.

What happens to his existing account? Should it be accounted for under the assets of company A? Or, is it now counted as a company B asset? Plan B would become top heavy if the assets move to that plan.

Company A owns 100% of Sub 1 & Sub 2.  Sub 1 & Sub 2 sponsor a DB plan that requires a separation from service to receive retirement benefits.  Sub 2 is sold to an unrelated party and leaves the controlled group.

Can those employees of Sub 2, who have attained early retirement age, receive a distribution, even if they are still employed by the company formally known as Sub 2?  

Does the sale to an unrelated party result in separation from service and permit the plan to pay the distributions? 

I have a safe harbor plan that utilizes a basic safe harbor matching contribution.  Currently, salary deferral contributions are withheld from all gross pay including (but not limited to) vacation pay, sick pay, and bonuses.

The client would like to allow participants to separately elect to defer from any bonus paid to them.

Is this an acceptable mid-year change if the proper notice is provided?

My understanding is that you cannot specifically exclude an HCE from a SEP Plan.  What about in the following situation?

Wife has a SEP sponsored by her self-employed real estate company.  She has no employees, so she is the only SEP participant. 

She works for her husband's company, of which she and her husband are the only two employees.  Her husband is the 100% owner.  The two companies are controlled with the wife owning 100% of her company and she is deemed, through attribution, to own 100% of her husband's company (this would not be the case if she did not work for him).

I have not seen her SEP document, but I highly doubt that her husband's company is an adopting employer of the plan.  So, can he be excluded from the SEP if his company is not a sponsor of the plan?  I do not handle SEP plans and rarely need to get involved.  Do most of them have language that indicates that employees of related companies will be automatically included, in which case a specific reference to the husband's company would not be needed and we have an issue since he has not received SEP contributions? 

Thank you!

A plan implemented a QACA effective 1/1/2017; prior to then it had a plain old ACA. The QACA auto enrolls at 3%, with 1% increases every January 1. The plan's first auto increases will be 1/1/2018.

1. A participant was already deferring 4% as of 1/1/2017; his rate stayed at 4%. Should that person ever have his deferral rate auto increased? If so, would his first increase be on 1/1/2018, or on 1/1/2019? In other words...since he's already at 4% - the minimum rate for the second period - does he skip a year before being increased?
2. Another participant became eligible 4/1/17, and elected to defer 5%. Would he ever have his rate auto increased? If so, when?

Thanks!

I have a client that wants to add an after-tax provision to their plan document.  One of the reasons for this is so that the HCEs who are due corrective distributions (due to an ADP test failure) can have them recharacterized as after-tax employee contributions.  I wanted to do some research before I consulted with them and I ran across 401(m)-2(a)(4)(ii).  It says: 

Quote

 

ii)Recharacterized elective contributions.—

Excess contributions recharacterized in accordance with §1.401(k)-2(b)(3) are taken into account as employee contributions for the plan year that includes the time at which the excess contribution is includible in the gross income of the employee under §1.401(k)-2(b)(3)(ii).

 

Upon reading this, it appears that if a ptp has a pre-tax elective deferral recharacterized to an after tax, that the after-tax contribution is tested in the ACP in the year in which the recharacterization is performed.  (This is very surprising to me.)  To clarify, calendar year 2016 test.  ADP fails and recharacterization occurs in 2/2017.  From my reading of the above, it appears that the recharacterized amount would be include in the 2017 ACP test. 

1) Do I have this correct? 

2) What if the participant terminates prior to the 2017 plan year?  Does the participant have compensation for ACP purposes?  Does the recahracterized after-tax contribution count as compensation?  Eligible compensation?  How does this get included for ACP purposes?  (I would not include this person in the ACP test if they did not have eligible compensation and work during the plan year.) 

3) Same issue as #2 above, but let's say he works 1 day in the 2017 year and earns a very small amount. 

4) If the elective deferral is a Roth elective deferral, I would think that this changes the issue and the recharacterized amount would then be included in the 2016 test as it was taxed in 2016. 

Any help is greatly appreciated. 

Hola Amigos!

I was wondering if anyone could point me to some guidance regarding the calculations of the deduction limit prescribed by IRC §404(a)(3) for an Employer that terminated their Plan mid-year, specifically if you use comp for the entire year, or just the portion of the year that the Plan was active.

I am inclined to say that it is for the entire year because I know that the deduction for DC plans is 25% of the aggregate comp of the eligible participants and that comp for deduction purposes is all comp paid or accrued to the participants during the Employer's taxable year.

I was hoping that someone would know where this scenario is described in the EOB or some other text. 

Thanks in advance!!

Hi - I am seeking practical feedback on the question of attribution of ownership to minor children.  I don't question that IRC section 1563 attributes ownership from parents to children under 21. This creates controlled groups of entirely separate companies simply because they are owned by spouses with minor children.  The thing I struggle with are the many cases where the issue goes unnoticed (or is even ignored). I have lost a couple of prospects because they refuse to believe that aggregation is mandatory.  For those with existing plans, they often say their TPA never notified them (even in cases where they are confident the TPA is aware of the facts.)

I am curious about others' experience.  Do you find this rule is often overlooked?  I've never heard of IRS making an issue of it.  Have you?   

I have searched the web and this site but can not find an example of a notice you would give to the participants of a plan informing them that they can establish an individual brokerage account away from the current financial advisor where their funds are being held.  Here is why I am looking for examples.....

A new plan to me... currently the plan has say 15 participants and all the participants have individual accounts at a legacy investment firm.  The owner has a substantial balance ($700K) and his account is being managed by a money manager at a smaller boutique investment firm.  The other participants do not have the minimums to open accounts at this boutique firm so their accounts are managed at the larger legacy investment firm.  Doesn't seem fair to me... why does the owner get to choose a different investment firm while everyone else is stuck at the legacy firm?  As you can guess, the owner doesn't want to give up his boutique firm so he wants to make it available to the other participants the option for them to choose where and who their account is invested. 

Does anyone have a boilerplate form that I can include as an addendum to the SPD as well as include at the end of the participant statement/SAR package given upon completion of the annual administration?

Thanks!