A Form 5558 for 2016 was filed mistakenly for a plan that had a 2013 final return completed. Will this cause a problem? The plan is terminated.

Bob is an owner of a sole prop with DB and PS plans and just invested in a 50% partnership of another practice.  No attribution, affiliated service, or any other relation.  Since this is not a controlling interest, the employees of the partnership do not need to be covered by the sole prop plan.  Further, if the partnership wanted a qualified plan, Bob could benefit from fresh 415(b) and (c) limits.  Seems like a nice fit and wanted to double check if anyone had any objections.

Further, I think Bob is ok to have separate plans until he owns 80% of the partnership. 

Cheers,

Dan

In order to receive a PS contribution:

An Employee must be employed with the Employer on the last day of the Plan Year.

So, if someone has a term date of 12/31, do they get an allocation.  I would say yes, because, generally, your term date is the last day you worked.  Therefore, a DOT of 12/31 means you worked on that day and, thus, you were employed on that day.

Your thoughts?

I have a plan whose eligibility is 6 months of service and age 21. Entry date is first of month following. An employee was hired 5/13/16. Left on 6/21/16 and came back on 10/6/16. The system is making him eligible as of 11/12/16 and entering on 12/1/16. He basically only worked 2  of the 6 months. FT Williams says this is correct.

Any thoughts?

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§ 1.401-1(b)(ii) permits a profit-sharing plan to have discretionary contributions, but requires that it have a "definite predetermined formula for allocating the contributions made to the plan among the participants."  My question is whether a profit-sharing/401(k) plan can provide for board discretion to determine after the close of the plan year, but before a contribution is made, to which groups of participants the contribution will be allocated.

Specifically, what we want to do is to specify in the plan that the board can decide to make discretionary contributions as follows:

1. No contribution at all.
2. Contribution to be allocated solely to the accounts of collectively bargained employees.
3. Contribution to be allocated to the accounts of all employees (including collectively bargained).

In any given year, the employer could elect to make contributions under 2 and 3.  However, the employer would not be permitted to elect to make a contribution solely to the accounts of employees who are not collectively bargained.

On the one hand, it could be argued that the formula is not predetermined, because the board's characterization of the contribution could result in its all being allocated to collectively bargained employees, or allocated to all employees.  On the other hand, this seems no more objectionable than having two plans (one for collectively bargained, one for everyone else), and having discretionary contributions to each.

For various reasons, we don't want to split the plan.  Does anyone have any thoughts about whether this is a problem within a single plan?

Working with a BCBS group health insurance contract that gives employers the chance to elect "Pre-65 Retirees (Before Eligible Retiree Coverage) as a special eligibility / coverage category in addition to the default coverage for active, full-time employees working 30 or more hours per week.  There is a box for checking yes or no but no real request for additional information or parameters.  Employer has in the past attached a simple addendum explaining their general early retiree health insurance benefits (not sure if BCBS has required / requested that they do that or simply what has happened in the past).  In any event, the employer's Pre-65 coverage is not spelled out under their retirement plan or other policies in any detail--i.e., it's just sort of loosely reflects how they have in the past decided to administer this coverage.  Included among this is a general understanding that coverage will not be provided to individuals who are eligible to elect early retiree pension benefits who are involuntarily terminated by the employer or quit to take another job and so are not truly "retiring."

Am wondering if this is common place or routine and, in particular, what sort of parameters, if any, BCBS places on Pre-65 Retiree eligibility?  BCBS is not being very forthcoming with how to think about their own contract / forms.  Thanks. 

Our ESOP administrator reinstates shares for those rehired participants that terminated employment with a 0% vested balance. There is no time limitation for reinstatement.

It was my understanding that if a participant terminated employment 0% vested the terminatino date was considered a distribution and the 5 year Break in service rule calculation would start.

Is there a limitation on reinstatement for 0% vested rehires?

The plan doc does provide language for partially vested balances reinstated within the 5 year break in service for those that return the vested shares. 

Does anyone have any experience with tax reporting on distributions from this type of Plan?

We can't decide whether the funds should be returned to the City and paid out as W-2 wages or if the Trust pays the Firefighter and reports this payment on a 1099-MISC.

Any help from someone with some experience in this area would be appreciated. Thanks

In mid-2015, we switched to a new TPA and therefore adopted new plan docs.  In the process, the wrong box (Pro-Rata Formula) was checked for our Employer Profit Sharing Contributions rather than the Integrated Formula that had always been used.  We actually calculated the 2015 proift sharing allocation using the integrated method.  This plan doc error was only discovered in the last week while researching another process error. 

I have a few questions about how to correct, but don't know what is allowed:

1. Can we make a retroactive plan amendment to correct the method and leave the 2015 calculation alone? (What provisions/regs apply to retroactive amendments?)

2. If not, I assume the only alternative is to go back and use the pro-rata approach for 2015?

3. If we execute an amendment immediately (January 2017), do we still have to follow the existing plan doc for the 2016 contribution that has not yet been calculated?

I don't know if it sets any precedent for administering according to the plan doc even when errors were discovered, but we corrected another similar error found in mid-2016 regarding last-day requirement for PS eligibility, and in that case we did make a contribution for the employee who left mid-year.

Thanks for your assistance.

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mike

Have a plan that did not auto enroll a few employees going back 3 years.  Am I crazy or is EPCRS silent on how to determine ADP in the case where the plan is tested separately for otherwise excludables?  Do I run one single test?  I guess that is the answer, but I can't find anything. Even the EOB seems to ignore this obviouis question...

Is a cafeteria plan responsible for the costs of changing HSA custodians or can it force the burden on the participants?

While the HSA accounts are opened and owned by the participants, the plan selects the designated financial institution where the employer contributions (including employee payroll deductions) are deposited. The plan has sole discretion in selecting this institution and any change to other institutions

I have two plans whose ERs are in a controlled group.  Do the owners who are in both plans have 2 415 limits?

Does it matter if they pass coverage on their own or if they must be combined for testing to satisfy coverage?

I know that if a participant terms with less than 500 hours, I can exclude him from coverage testing.  But can I exclude him from the general testing, too?

Hi there!

I have a plan that has always been an easy one to administer.  Generally max out the top tier (and near max to execs) and give the minimum to others to pass gateway.  

*Plan excludes pre-entry comp*

However, they hired a younger person in 2015 (and made enough comp to be an HCE in 2016) that became eligible in 2016.  He is part of the tier that receives the max and his EBAR is through the roof.  I won't be able to individually target young NHCEs because they are also lumped together (just 3 tiers in plan overall...hundreds of people).  

My question - can I use full year comp for everyone when running ABPT/calculating EBARs rather than plan comp?  His EBAR would nearly cut in half.  Gateway would still be using plan comp.

Thanks!

After coming across some posts about fraud, was wondering about this scenario:  A company's owner gives his 2 daughters a salary, maxes out their 401k contribution, and gives them a safe harbor and profit sharing contribution every year.  They get a W2.  We have tracked their vesting since they are on the census each year with hours listed. They do not work for the company. Ever. Not even for 5 minutes.  Could this be an issue? Is it illegal?

I got a call from a broker today - we service a mutual retirement plan client.

The client is a Subchapter S.  The owners deferred throughout the year weekly on compensation they received.  Now they are asking if they can max out.  He deferred 13,372.87 through the year and she deferred 12,980.70, so they obviously did not reach the 18,000.  They are not 50 yet.  His comp was 222,000 and hers was about 40,000.

Is there a way to get more deferrals in for them?   Are there normally any K-1s for the owners of Sub S Corp.  I get a little confused on whether they can draw a salary and receive a K-1 in addition. 

They can do a cross tested profit sharing contribution per their document. 

Any input would be appreciated.  Thanks!

Looking for guidance or clarification.  I have 4 groups with individual plans, they are controlled and no employees overlap.  410b passes for all sources but one group does not pass 410b for PS.  Nondiscriminatory Classification passes so I go onto the ABT.  As I do not administer all of the groups, I do take care of the coverage testing.  2 of the groups are also now SH and are no longer putting in PS. 

A - 401k, Disc Match, New Comp      PS Benefitting 40 HCE 225 NHCE

B - 401k, SHNE                                  No PS, if Benefitted 5 HCE 82 NHCE

C- 401K, SHNE                                  PS Benefitting 4 HCE 55 NHCE

D - 401k, Disc Match                          No PS, if Benefitted 3 HCE 16 NHCE

The Plan passes AVBT when all are tested together.  I just want to make sure that I am doing it correctly by testing them all together even if they are not putting in the PS Contribution.

In the process of terminating a DB plan, one participant elected a split distribution - part as lump sum, and part as a rollover.  The lump sum amount is great enough to require 20% withholding.  Client's CPA is saying that the company is not responsible for submitting the withholding taxes, the participant is, due to the plan termination.  Client has issued a check to the participant for the full lump sum amount, and instructed him to submit the W/H taxes himself.

Never heard of this before.  Is this something new in the tax filing world?