Certain classes of non-immigrants are paid W-2 wages but are exempt from U.S. social security and medicare taxes.  Assuming these employees are resident aliens, are they eligible for the 401(k) plan just like other regular employees?  The plan statutorily excludes non resident aliens.  Thank you!

A question similar to this started quite a debate at the ASPPA Annual Conference a few months back, but I don't think there was ever a clear answer...

Small plan with immediate eligibility, the participants are the owner, his son, and one non-related worker.  The son was not employed when the plan started  in 2015 (he came aboard in 2016) and has never worked more than 1,000 hours per year.  The company is expanding and now wants to change the eligibility provisions to have 1 Year of Service (1,000 hours).

If the plan provision is changed to require a YOS, is the son grandfathered in the plan, or is he now considered an excluded employee (i.e., no future contributions) because he has not met the new eligibility requirements?  Could the resolution (if the adoption agreement itself doesn't give you the flexibility to do it) be written to grandfather him in?  Is that discriminiatory?

If the son is terminated (and hopefully paid out) before the change, does it even matter?

Thanks.

Please help please.

I calculated x = $159,120 which is answer A.                                                                                       Based on the answer key form Joint Board, the correct answer is B.

DATA

Normal retirement age: 62.
Early retirement eligibility: Age 60 with 5 years of service.
Early retirement benefit: Unreduced accrued benefit.
Pre-retirement death benefit: Present value of accrued benefits.

      Plan assumptions:
           Interest rate 7%
           Mortality Applicable mortality under IRC section 417(e)

    Selected data for Smith:
        Date of birth 1/1/1956
        Date of hire 1/1/2006
        Date of participation 1/1/2007
        Date of retirement 1/1/2016
        Compensation for each year of service $178,000

   Selected annuity factors based on the mortality table:
        Interest rate        5.0%            7.0%
         ä60                    13.25          11.08
         ä62                    12.68          10.68

X = Smith’s annual IRC section 415 limit as of 1/1/2016.

Question: In what range is X?
(A) Less than $160,000
(B) $160,000 but less than $165,000
(C) $165,000 but less than $170,000
(D) $170,000 but less than $175,000
(E) $175,000 or more
 

Plan doc terms: Eligible on 1st of month next following 1 year of service
Payroll periods:  Twice monthly, but paid 5 days after end of payroll, so 1/31 payroll is paid 2/5

Question: Employee is hired 1/15 and becomes eligible 2/1 of following year. Would participant begin participating on payroll paid out on 2/5, or 2/20? Justification for 2/5 is that it is paid after eligibility date. Justification for 2/20 is that 2/5 is based on pay earned prior to eligibility date.

I understand this can be a complex matter and I will be seeking professional advice from an ERISA attorney, but i'm trying to develop a basic understanding of the relevant issues so that professional fees can be put towards developing and executing a plan instead of educating me.

My father had a business which has not been active since the 1980s.  They established a defined benefit plan in 1984 and it was frozen in 1985.  The plan has 2 participants.  My mother and father.  They both made contributions to the plan.  My father recently passed away(2017).  The plan is overfunded by ~800%.  The plan assets are cash and liquid securities.  The company has no assets other than the overfunded pension.  My father was trustee of the plan.  The stock is 100% owned by my fathers estate which I am representative.   The massively overfunded pension is not the ideal instrument for my mother's retirement. 

Can anyone direct me to online resources that provide a good overview of various termination excise tax mitigation strategies and the related issues.  I want to be informed when I contact the plan administrator and retain an advisor.

Plan started 07/01/2016; they are using the current year testing method for the ADP test. (per the document)....they have failed the ADP test based on current year actual data.

Is there any way to use the assumption that the average ADP for NHCE is 3% and pass?  Or is that reserved only for plans that use the prior year method for ADP non-discrimination testing?

Thanks

It has been my understanding that in order to for a plan to accept a direct rollover of designated Roth contributions the plan must allow designated Roth contributions. The IRS rollover chart points to a designated Roth account, which is defined in the Treasury regulations §1. 402A, Q&A 1, which I interpret to say the plan has to allow designed Roth contributions first. I also think that this concept is reinforced with the in-plan Roth "rollover" rules under §402A(c)(4)(B) where a plan must include a qualified Roth contribution program.

I have been challenged that a plan with no qualified Roth contribution program can accept a designated Roth account rollover. 

Does anyone have knowledge of any IRS guidance that says a plan with no qualified Roth contribution program can [or can't] accept a designated Roth account direct rollover.

Thanks.

A plan with 150 participants failed to start the loan payments on 10 loans.  The error was not found until after the cure period had ended.  The sponsor would like to file a VCP request to correct the loans and not issue a 1099-R. 

On the IRS website, the Voluntary Correction Program Fees page says to reference Rev Proc 2017-4 Appendix A.08.  That page also lists out fees in effect for corrections made after Jan 1, 2017.  In the Loan Failures section it lists the reduced fees, which are based on the number of participants with loan failures.  It also references Form 14568-E.

Rev Proc 2017-4, in Appendix A.08 contains similar information to the website, however it does not appear to mention Form 14568-E.  It only mentions section 6.07 of Rev Proc 2016-51 as the source for the correction procedures.

In this case, with 13 or fewer loan failures, and less than 25% of participants affected by the errors, is the $300 VCP Fee still applicable, even though the request to correct and not issue a 1099R is not one in which Form 14568-E can be used?

Thank you very much.

Company is being sold.  I just found out the owners are actually paid through Management company, Inc. which gets 100% of its income from Operating company, Inc.as a management fee.  Same people own 100% of both corps.

Management company has not adopted the plan.

Operating company takes 100% of the deduction and it is not a 404 problem.

Problem is contributions to employees of non-adopting employer.  (the owners)

Any suggestions on how to fix this?

This has to be pretty common - the harried HR manager puts the deferral amount on the wrong line of the template on the product platform's website so that Particpant A doesn't get his $50, but Participant B does.  We find it months later when we do our annual reconciliation because neither A nor B read their quarterly statements (or any of the gazillion notices, but that's for another day).

Is this a "lost earnings" situation?  On the one hand, Participant A did not have the access to his deferrals, so he was denied use of the money.  On the other hand, the Trust was not shorted anything, and the employer did not have use of the funds.  What takes precendence?  I'm trying to get some outside opinions because I find that people in my office are doing it both ways, and they are passionately defending their side.

Just as importantly - how would you correct it?  Transfer the overage from B to A?  Have the plan sponsor drop in an additional amount for A and short B's next deposit?  Have you had one method work consistently better?

Thanks.

HI I am working on closing a 401(K) plan as two companies merge and move to a single plan.

In the plan that is closing there are two life insurance policies owned by the plan on one of the employees.  The employee, who is retired, wants to take the cash surrender value of the insurance and receive it and then invest with his financial advisor.

Who pays the taxes on the insurance policies as they are distributed - the insured (Retired Employee) or the plan who owns the policy but is liquidating it and sending to the employee.

I am writing a plan with effective date 1/1/2017, but a deferral effective date of 4/1/17 so I can implement an EACA.  Eligibility is currently 21/1 with plan entry dates of 1/1 and 7/1.  Do I have to do anything to make those who would have entered on 1/1 actually active on 4/1?  (Because 1/1/17 there were no deferrals allowed.  Absent any specific language, would those eligible on 1/1 be able to make deferrals on 4/1, or would they have to wait until 7/1?)

My husband passed away and I don't know who the beneficary is...it's not me and not his son!

If a company wants to convert from an S to a C so that the owner/seller can make a 1042 election, will the owner have to then wait three years to meet that holding requirement of 1042? Or does their ownership of the S stock (assuming for three years) tack over?

I could have sworn that the ownership "tacks" but I can't find much support out there. If anyone has some support, I would appreciate it.

Thanks!

Another oddball. Dr. has a practice. A clinic purchases his practice, and hires him or her as an employee. Clinic pays the Dr. large quarterly payments for a year, based on large revenue from Dr.'s former clients. Apparently, this is "run through" payroll, but I have no details of what that means yet.

First, it seems odd that these would go through payroll under any circumstances - seems like they would normally have been 1099 payments to the prior entity. But what I think doesn't matter. Since being "run through" payroll, and plan defines compensation as W-2 wages, wouldn't these be considered for purposes of employer contributions?

So, suppose someone has a split dollar insurance arrangement with their employer. Reaches normal retirement age, and is eligible to have the life insurance policy distributed.

Is this treated as "wages" for purposes of contributions to a qualified plan? While distributions from non-qualified deferred compensation plans are generally considered includible for W-2 purposes, if it is a distribution of a life insurance policy, I don't see how any withholding could be done from payroll. I suppose it could count for purposes of an employer PS or SH non-elective.

Anyone dealt with this before?

P.S. - if instead, the policy is surrendered and the cash value, or a portion thereof, is distributed to the employee instead of the policy, then I assume it would be treated as wages.

But in either scenario above, if the only way the employee can receive the benefit (policy or cash) is to terminate employment, then this would be ineligible "post severance" compensation, and not included for plan purposes?

I am looking for some guidance on how to address the calculation of earnings on a QNEC, specifically how to handle the calculation of earnings for the lag time between the funding of the QNEC and when it actually hits a participant's account.  I am being told by the record keeper that there may be as much as a 3-5 day lag between the time the employer's bank account is debited for the QNEC (plus earnings thru that date) and when it actually is deposited in the participant accounts.  They propose calculating earnings up to the day the money leaves the employer's account.  I read EPCRS to require earnings up to the date the "contribution is made" to the participant account.  For some reason they are balking at carrying the earnings calculation forward to account for this possible lag time.  It would be helpful to provide them with some official guidance, etc. addressing this.  Any help would be appreciated!

Client wants to use the following formula for allocating the match to participants.

0-2 Years of Service - 0% match

3 or more Years of Service - 100% match up to 5% deferrals.

Eligibility conditions for match are 1 YOS (1000 hours) semi-annual entry dates.

I know that eligibility and allocation are not the same thing, but is this allocation formula an allowable one?  In essence they are keeping a participant out of the match for an additional 2  years.

Participant dies with no beneficiary form on file. The document establishes payment of benefit to:

1. Spouse (no spouse in this case) 2. per stirpes (4 children) 3. surviving parents 4. estate

An attorney for the estate is trying to tell the plan sponsor they must distribute benefits directly to the estate due to the estate documents. My response is "no" we must follow the plan document. Is there an instance where the attorney could do something to override the form of payment in the plan document? 

One thought is all four children and parents disclaim their benefits under IRC 2518. The funds then are paid to the estate.

Thank you

Participant passes away and does not cash a few months of pension checks received before his death.  He was receiving a single life annuity.  Under the terms of the plan, the amount of the un-cashed checks is payable to the participant's beneficiary in a single, lump sum.  Is this one-time payment part of a series of periodic payments not eligible to be rolled over?  Or, could it be characterized as a non-periodic payment because it is being paid in a lump sum?  Not sure how to handle this.