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?

Company B became a wholly owned subsidiary of Company A due to an acquisition effective 4/1/16.  Company B did not maintain a plan.  Company B will adopt Company A’s plan; however, they want to implement coverage transitional rule.  This means that the plan does not have to cover Company B’s employees until 7/1/17 correct?  Plan does not count years of service for eligibility with Company B prior to the acquisition date.

The plan has 6/30 fiscal year end:

Eligibility for deferrals age: 21/1 yos:  7/1 and 1/1 entry dates.

Eligibility for profit sharing:  21/1 yos:  One entry date:  7/1  (Retroactive to first day of plan year preceding date ee meets eligibility).

If Company B adopts the plan effective 7/1/17, when will their employees be eligible to enter?  One would think 7/1/17 for the deferrals, but what about the profit sharing?  The retroactive entry date is skewing my thinking. 

By what date must the participation agreement be adopted?

Thank you.

ACA provided substantial funding to DOL to audit (they say "investigate") group health plans for ACA compliance and there is anecdotal evidence that a few audits may have occurred.

If anybody has experienced a recent audit would you mind posting a copy of the initial DOL letter and attached list of required documents (with employer information redacted of course)? 

IRS has made several announcements of when they expected to start sending notices to large employers regarding 2015 ACA penalties (originally targeted October 2016 then delayed to March 2017, then June, yada yada).

Has anybody seen an IRS ACA large employer penalty notice for 2015 yet?

Suspicion is they can't get the data matching to work and no employers will ever pay ACA penalties for 2015 (and maybe 2016, etc.). I recall the ACA revenue projection from employer penalties was $3B per year or more.

IRS permitted individuals to file 2016 tax returns without answering the ACA penalty question (so if you owed the penalty you didn't have to fess up and pay with your tax return).

Have they done any follow up with those taxpayers or does it appear nobody had to pay for 2016?

I know they keep saying the penalty is still in effect but wondering if enforcement has slacked off.

Hello,

Started a C corp recently and am looking to set up a Solo 401k plan as I have no employees so far.

Have the following questions:

(1) For employer profit share, do I need to have profits or can I make contribution, which is 25% of W2 wage, from reserves/capital etc.? I know the term is profit share but then it is 25% of employee compensation and not a % of profits. Hence the question.

(2) How soon after I pay myself do I have to transfer funds to Fidelity, both profit and employee contribution?

(3) What happens when I hire employees? I understand that I'll need to close this solo 401k account? what is the process? If i hire employees in the middle of the year, can I still make employee and employer contribution for part of the year?

Thanks for your assistance.

Annuity payments, by default begin on 1st day of month following the month of the annuitant's 85th birthday. Unless a change is requested 30 days prior to 1st annuity payment, annuitant will receive monthly payments for life 10 years certain. Owner may request a change of the method of payment  or extend the annuity date delaying any annuity payments. Is a Florida insurer required to provide prior notification to owner of his or her rights or is insurer only required to provide notification if contract requires or prospectus requires?

I have a situation involving a 2005 employment agreement that makes severance payments (to be paid in installments over 18 months) contingent upon a release of claims being signed no later than 45 days following delivery of the required release by the Company but without any other of the necessary release timing provisions in 2010-6 / 2010-80.  (A copy of the form of release required was provided as an exhibit to the employment agreement so I think an argument could be made that the executive was generally provided the required release as of termination; however, that form was not personalized.)

The individual has already been terminated so we do not appear to have the ability to correct the provisions without penalty per 2010-6.  A large portion of the severance (but not all) is exempt from Section 409A.  If we cannot find a basis for claiming the release timing provisions satisfactory and must pay an excise tax, can we exclude the severance amount exempt from 409A from the excise tax calculations or is there any concern that the entire severance benefits may potentially be subject to the excise taxes since the entire employment agreement / severance payments are not exempt.  Thanks  

Client has approx. 5000 employees.   There is very high turnover within the first 90 days of employment (about 40%).   The client permits date of hire enrollment so 401(k) sign up happens during completion of new hire paperwork.

QUESTION: Can automatic enrollment be added to the plan that such that participants become automatically enrolled first of the month after their 90th day of employment?   Therefore, anyone who's made it through the first 90 days and hasn't completed a 401(k) election would then be automatically enrolled.

Thanks!

We have a 457(b) Plan (tax-exempt, not governmental) where we want it so money in fixed-rate funds can be distributed 3 ways but money in mutual funds can be distributed in several additional ways.  Is this ok?

Has anyone experienced a recent DOL audit concerning Required Disclosures to defined benefit plan participants at time of termination, periodic statements to deferred vested participants who have not  yet reached NRA, and to participants once they reach NRA?  In addition to a copy of the SAR and SPD documents, what do they audit to determine if we have complied with actually mailing out the documents?   Apparently,  there has been a complaint that we have failed to provide periodic statements (SAR, SPD, and benefit statements) to deferred vested participants by a participant whose address has not change in the 15 year period since he left the company (no excuse for bad address).  The previous employee responsible for doing so worked here for over 25 years and basically documented nothing concerning the mailings.     Could you please clarify exactly what documents are to be mailed to deferred vested participants, when and how often in a defined benefit plan and how proof of mailing each category should be documented.   Thanks!

Small 401(k) plan intended to terminate plan and merge assets into a PEO plan a couple years ago.  Client never paid for final reporting (including 5500), or termination documents and did not respond to requests for information/payment.

Two years later client receives a letter from the IRS requesting filing of the 5500 for that plan year.

We can certainly do the final reporting and have started the process.  During a review of the transactions, we discovered that one of the participants (also an owner) is missing $509 in salary deferrals for that final year. 

So, there are document issues to fix, along with the missing deferrals.  Since all of the assets are no longer in the investment accounts for the plan, not sure how to fix this.  Use a bank account in the name of the plan, then deposit the deferrals + earnings and transfer to the PEO plan?

For the document, the intent was to terminate the plan in March 2015.  With the deferral correction that is needed, would the termination date need to be current?  Not sure how to proceed on this.

Unmarried participant elected to receive DB Plan benefits in this form, and named a beneficiary to receive any further payments after her death, but did not provide for the contingency that that beneficiary would die inside of 10 years.  Participant died inside of 10 years, then beneficiary died later also inside of 10 years.  Who should get the remaining payments?  Plan document does not come close to addressing this.   Assuming no contrary precedent in administering this plan, I think it should be payable to the beneficiary's estate.  Anyone disagree, and if so why?