Hello! I've read through a lot of old content on this board and just want to say thank you. It has been a huge help. Lord knows this industry in a minefield of misinformation and salesmen. 

I am the new administrator of a 20 year old group deferred annuity plan with MetLife for a mid-sized non profit. We are looking to terminate this plan and start a new 401k (or 403b) with much lower fees. We have calculated that each participant is paying an average of 2% in AUM fees annually (1.25% annuity fee + .75% ave fund fees). This plan also comes with a 7% surrender fee that decreases by 1% each year. 

We have been advised by a TPA to leave the plan open and start a new 403b with a different provider. However the provider that I'd like to work with (Guideline Technologies) does not yet offer a 403b. This would also drag out the closure of the MetLife account. Unless people are really pushed out of the plan, I imagine a lot of people will drag their feet. I'd like to avoid having to manage 2 separate providers for any longer than necessary. 

So I'm thinking it would be better to immediately terminate the 403b and incur all surrender fees (which I've calculated to come out to around 65k). I've run a cost analysis (attached) that shows that if we move to a low cost provider such as Guideline which has only .15% AUM fees, then our participants would be better off moving their assets immediately and incurring all surrender fees rather than wait a few years for the surrender fees to subside. 

So my question is... do you see any downside to this plan? Since the surrender fees would be paid by the individuals, could the organization be held liable for any damages? Or do you have a better solution for us? 

Thanks so much in advance. I'd be happy to answer any questions for clarification as well. 

Asset Loss v Surrender Fee Cost Analysis.xlsx

I'm seeing this recurring problem with floor offsets.  Strategy is to provide a 5% DC contribution as the floor offset for DB.  In order to pass 401a26, this needs to be provided to everyone including the owner.  If 401a4 requires higher PS allocations to pass, we are exceeding the 6% of pay DC threshold under 404a7.  Owner would be fine foregoing his 5% PS, but then we fail 401a26 because everyone else is 100% offset. 

After a few years of 31% of pay contribs, the DB gets underfunded enough that we can get bigger contributions to fund the 412 'minimum' given by 404a7 but that still doesn't fund the full 415 LS. 

Any solutions?

Plan requires cashouts of vested balances under $1,000.  PA has been negligent is this regard.

Is there any sort of penalty that could arise from not doing this?  (It has been universal, no one has been cashed out involuntarily)  What if it's cought in audit.  Is it one of those, just cash 'em out now and be more diligent in the future, type of thing?

Would you consider commissions to be classified as irregular pay?  If so, why?

We use Relius documents and bonus is listed as irregular pay.  Client I have has a plan doc that states deferrals come out of irregular pay unless the participant elects otherwise.  This plan also has commissions.  Plan sponsor did not withhold deferrals from either bonus or commissions.  I realize that this is part of the administrative procedures, but we want to make some things clear to the client so they know how to handle this properly going forward.

Thanks!

when taking over a plan with a volume submitter or prototype plan document, say that plan doc is up to date and there is no particular amendment or restatement necessary, at what point do you restate the plan under the following two scenarios:

1. prior tpa had their own determination letter

2. they used a provider document (ie datair, ftwilliam) with an Opinion Letter, but the new tpa uses a different plan document provider

Immediately upon takeover, or at such time as some kind of amendment (required or optional) is necessary?

Understood there are a variety of plan document provider scenarios.

We have a client with a prior employee who threatened to sue for wrongful termination.  She terminated in 2015, but the employer settled with her through arbitration.  She was therefore paid an agreed upon amount (not yet provided to us) through payroll in 2016 but worked no hours.

Q:  For 2016, is she included in testing as non-benefitting, or excluded altogether? Since she worked receive pay in 2016?  And if I include her, do I include at 0 hours, or equate the pay to some amount of hours? 

I know that if a PS for a year is deposited more than 30 days after the ER's tax return is due, then those amounts are annual additions for the year in which the deposit is made.  (Let's assume a calendar year plan and tax year)

However, what if it's a pooled plan, and some of it was already deposited timely?  Do I prorate the late amount across the participants?

For example, there are $25,000 (out of $60,000) from the 2015 PS allocation that hasn't been deposited yet.  For 2016, the owner is due $40,000 between deferral, SH and PS (under 50, no catch-up).  Is the owner's portion of the $25,000 prorated over the 2015 allocation?  (If he was going to get 40% of the 2015 contribution, then $6,250 of the $25k is slated as an annual addition in '16?)

I have a similar question to one posted earlier. This is in reference to a single employer, defined benefit plan. A former employee who is currently receiving a pension under the aforementioned plan will be brought back to help with training as a consultant for a month or two. The employee retired last year. The employer and the former employee have entered into a consulting agreement, whereby the consulting work is not considered reemployment under the plan. The question is, are there limits on the total compensation a former employee who is participating in the employer's pension plan may be paid? What is considered compensation? Do bonuses received at the time of retirement (a holiday bonus given to all employees) count as compensation?

Hey,

I had a question regarding successor plans. Let's say a company terminates a plan and immediately starts a new successor plan. What would happen to the sources (deferrals, Safe Harbor, match, etc.)?

I believe the deferrals and Safe Harbor sources would have to be directly transferred and still be treated as those same sources in the receiving plan (subject to the distribution rules applicable for deferrals). However, what about the discretionary match and profit sharing? Would those be transferred as the same sources or would they be treated as a rollover? Would a 1099-R have to be issued for the discretionary sources, but not for the deferrals and Safe Harbor contributions?

The thinking is that when there is a successor plan, the discretionary sources can be distributed, so just wanted to know how they should be treated if transferred to the successor plan.

Any help would be appreciated.

An employer deposited, erroneously, 2016 matching contributions into a number of employee accounts.  The mistake was discovered in January 2017; adjustments can be made to accounts; no problem.  But some employees have left and taken a distribution.  What duty does the employer have to seek repayment to the 401(k) trust?  Does employer have duty to notify the employee? To advise that the mistaken match isn't eligible for rollover and if not repaid a 1099 will have to be issued (or maybe just recharacterize as additional company non-matching contributions (all employees affected are nhce's as well as collectively bargained)?

Any insight is appreciated.

A plan that is covered by the PBGC is terminating. The plan is in the 60 day review period with the PBGC. One of the participants has a DRO that has not been signed by the court yet.  If the court does not sign the DRO by the distribution deadline how do we handle the distribution to the participant with the DRO?

Can anyone point me towards any authority (ERISA or IRC) which holds that a pension plan participant cannot receive pension benefits which are 25% greater than the salary they earned from the the employer? If this is true, does this figure include severance payments and/or payments for unused personal/sick time?

A PS has created a new company and wants make a new 401(k) plan soley by "carving out" existing participants.  Same investments, same recordkeeper, same docs. Do they need to provide a SOX notice to the "carved out" participants?  Appreciate the assist, happy to be on board.

As a company, we have a policy of testing plan with comp exclusions for 414(s) first, then using that compensation for ACP testing.  However, I do not believe that is necessary.  Under IRS regulations, 415 compensation can be used for ACP testing, and, if the plan passes, no further action is needed.  I remember seeing posts to this effect.  Am I incorrect?  Can someone give me examples of reasons 414(s) is needed for a plan with only a match that passes ACP on 415 compensation?  Thank you!

Doing a 2016 TH test (balances a/o 12/31/15)

We have someone who termed July 1, 2015 and took her balance in September 2015.  She was 60% vested.  She was paid $6,000 and forfeited $4,000.

How much do I add back in to my TH test?  Just the 6k or the full 10k?

I have a plan with 1 HCE and 2 NHCE.  Last day rule for this PS only plan.  One NHCE terms with 200 hrs of service.

Can I exclude him from the ABT test for contributions?  (I believe I can for coverage)

We have a client whose plan excludes fringe benefits from the definition of compensation under the 414(s) safe harbor alternative definition of compensation on an FT William document. Some of the things that the client believes are "fringe benefits" are not what I think is a fringe benefit. Neither the adoption agreement nor the base plan document defines fringe benefit. FT William says they can't give tax advice.

Treas. Reg. 1.414(s)1(c)(3) also mentions fringe benefits but fails to define that term.

Does anyone have a good reference that I can provide to my client?

One of my clients sent me employees compensation information directly exported from their payroll system.

A week later I have received W-2s for all employees, including W-3 (Summary of W2 Data Totals for Company).

Most employees’ compensation from the payroll system was higher than the W-2 box 5 compensation.

Majority of affected employees’ W-2 box 12a shows some amount with code DD (cost of employer sponsored health coverage). These employees’ compensation from the payroll system equals the sum of the W-2s box 5 and box 12a code DD.

For some other employees, I needed to add W-2s box 14 code GAP, box 5 and box 12a code DD to get to the compensation from the payroll system.

Compensation definition in the plan is 3401(a). I suppose I needed to increase the compensation by elective deferrals under IRC 402(g)(3), IRC 125, IRC 457 and IRC 132(f)(4).

Does this mean the compensation for retirement plan purposes has to be the sum of W-2 box 5, box 12a code DD and box 14 code GAP (or in short the compensation from their payroll system)?

Help please (if possible examples and explanation from the code or the regulation).

Owner A and Owner B both sponsor a 401k plan together for their employees.  There is no common ownership but there is overlap in operations for admin, financial reporting, payroll processing, etc.  As it happens, Owner B is an executive with Owner A (Owner A is a very large operation, and Owner B's is much smaller, so owner B has a very significant role in the operations of Owner A's business.    Owner B makes 401k contributions from the co-sponsored plan of $18,000 with respect to his compensation received from Owner A's company.

Can Owner B set up  a profit sharing plan and get $53,000 of proifit sharing too (testing passes taking into account all of B's employees, and that;s not really the question anyway).  The profit sharing plan is NOT a multiple employer plan - only Owner B's company establishes/maintains the Plan.

HEre is the regulation from 415(a)-1:

e) Rules for plans maintained by more than one employer. Except as provided in §1.415(f)-1(g)(2)(i) (regarding aggregation of multiemployer plans with plans other than multiemployer plans), for purposes of applying the limitations of section 415 with respect to a participant in a plan maintained by more than one employer, benefits and contributions attributable to such participant from all of the employers maintaining the plan must be taken into account. Furthermore, in applying the limitations of section 415 with respect to a participant in such a plan, the total compensation received by the participant from all of the employers maintaining the plan is taken into account under the plan, unless the plan specifies otherwise.

Plan's QDRO procedures stipulate that once a QDRO has been certified, there is a 60 day period in which either party may appeal (although I'm not sure if there are limits on WHAT they can appeal). The question is whether the participant or the AP should have investment control of the AP's interest during this time, knowing that there is some chance that the participant could appeal the QDRO in some fashion and the amount payable to the AP could be reduced or eliminated. Thoughts?