This is a new one... a plan received a letter from an attorney for a disgruntled ex-participant demanding the employer vest his match 100%.  The employer told him they must operate the plan in accordance with the plan document and provided him a copy of the SPD, but the attorney continues to ask for proof that they can't do it. Any ideas for other documentations? We can't find anything specifically citing that overriding vesting for 1 participant is prohibited.

A new one to me. Employer gives incorrect payroll data - essentially added back in deferrals twice, thus overstating comp for many participants. As it happens, this excess amount put one person over the top to be considered a HC. And this person, as incorrectly being considered HC, caused an ADP failure, resulting in refunds!

So, question is, can this be corrected as a valid self-correction under RP 2016-51, Section 6.06(4), by notifying the affected participants, and giving them the option to repay, or not, and for those who do, issuing corrected 1099-R's showing zero? Other solutions? Even if you went through VCP, I'm not sure what other reasonable solution could be proposed anyway?

This business is rarely dull.

P.S. - I just found this:

Profit sharing plan's year ends Dec. 31.  My boss wants to convert the plan to add deferrals and safe harbor non-elective 3%.  I know the regs. treat this as a new plan for ADP/ACP and notice purposes.  The issue I'm having is the deferrals are going to be effective as of August 1, but he wants the safe harbor provisions to be effective as of the beginning of the plan year on Jan. 1 so they can make the 3% contribution for this year, using it as an offset for the profit sharing piece.  I know the compensation computation period can exclude pre-participation comp., but something doesn't sit right with me on this.  Is there a reg. that precludes the safe harbor prior to August 1 as nobody can defer during this period.  And is the restatement date of Jan. 1 correct then, and there are no short plan year issues I'm missing?

Can an employer charge more than the premium amount for insurance like dental and vision?  I don't believe the employer is paying any portion of the premium.  It is all being paid by the employee.

Ok, so the company that originally set up the VEBA sold to another company several years later-2002, and amended the trust. In 2016, that company was acquired by another company. The VEBA has less than 100k all employer contributed, but there are no employee members and no way of finding out who was a member. Two questions, 1) can the new company transfer the assets to a charity without being subject to the tax benefit rule and 2) can the company amend the VEBA to include only the new company's medical plan and use the assets for current employee health coverage? 

Does anyone have a link to the text of DOL Advisory Opinion 81-78?

Thanks for any help given.

Company had a minority ESOP that they terminated over 2 years ago when new management came in to turn around the company.   They now want to start a new ESOP and sell 100% to the employees.  Can this be done?   Any successor plan rules to be concerned about (they seem to really apply to 401k plans).  Thanks.

ISSUES: Employer provides in its employee handbook "Employer will contribute 1% of employees bi-weekly pay to the employee as an incentive to participate"

QUESTION: Could this lead an IRS auditor to determine that the 403(b) plan is subject to ERISA?

BACKGROUND: Employer is under IRS audit of its 403(b) and 457 (b) plans. There are a number of compliance issues. Employer never maintained a 403(b) plan document, so we are hoping to use to "paper clip" approach, which would involve providing Employee Handbook with master annuity contract. 

Employer did not believe it was operating an ERISA plan, although vendors have some concerns about Employer's "discretionary authority." We are contemplating advising the Employer to apply for relief under DFCP for 5500s (which have never been prepared) before its too late.  The plan has been in existance since 1981...

DC plan not subject to J&S requirement.  Participant designated spouse and two children as equal 1/3rd beneficiaries of his plan account.  Spouse did not consent before participant dies, but spouse wants the designation to be honored.  Questions:

1.  Any authority to allow spouse to consent now, post-death, without a tax-qualification problem?

2.  Alternatively, because default beneficiaries under Plan terms are first the spouse, then children, can spouse disclaim 2/3rds and have those 2/3rds go to the two children, or if spouse disclaims must she disclaim 100%, not merely 2/3rds?

Not concerned by any Title I risks here, just qualification risks.   

From the W-2 instructions, I learned that an employer's contribution (including an employee's contributions through a cafeteria plan) to an employee's HSA is not subject to federal income tax withholding or social security, Medicare, or railroad retirement taxes (or FUTA tax). 

I understand that 415 compensation is grossed up to account for elective deferral amounts contributed to a cafeteria 125 plan but what about if the employer contributes to the HSA on behalf of the employee.  Is 415 comp grossed up for the employer contribution to the HSA? And ,if the answer is no, then I assume the plan document would not have to be amended to exclude the HSA employer contribution from the definition of Plan Comp for allocation purposes (SH & ER) because it is not comp for plan purposes.

Total Comp is defined as W-2 Comp and Plan Comp does not currently exclude deferrals / cafeteria. 

Greatly appreciate your input.

QNPG

We are making a deposit to a plan that contains a safe harbor matching source.  Can the corrective QNEC be deposited to that source as opposed to setting up a separate QNEC source?  They have the same w/d restrictions, correct?

Starting with the fact that 1.401(k)-5 is "reserved" so that there is not necessarily any clear guidance...

Let us assume that both plans operate on a calendar year basis. Let's further assume that both businesses are corporations. Say Corporation A has a SH 401(k) plan. Corporation B has a non-safe harbor 401(k) plan. Corporation B buys Corporation A's assets, and all of A's employees come to work for B. B wants to assume the assets and liabilities of A's plan, and merge A's plan into its own plan while still preserving the safe harbor status of A's plan for the year.

I'm not sure I see any way to do this. I think corporation A's plan could be TERMINATED, and thus preserve safe harbor status, but I don't see how it would work in a merger of the plans. Thoughts?

If instead it were a stock sale, I don't see that it alters the outcome. Thoughts?

(If B's plan were a safe harbor plan of the same type, then I think a good argument might be made that the plans could be merged while preserving safe harbor status, but that's another issue altogether.)

Mr. Smith had a one-participant DB Plan which was over funded.  The DB Plan was terminated in 2014; all assets were transferred into a 401(k) Plan as a qualified replacement plan.  The over-funded amount was credited to a suspense account.  In 2015, a portion of the suspense account was allocated to Mr. Smith with the intent of allocating all of the suspense account within 7 plan years.  

Mr. Smith only paid himself each year on 12/31.  Contributions and suspense account allocations were based on that single pay date. 

Mr. Smith dies in 2016.  He had not taken any pay, therefore no allocation from the suspense account could be made.  Therefore any remaining amounts in the suspense account will now be subject to the 50% Reversion Tax.  

Is this correct? 

Thanks for your help.

From the W-2 instructions, I learned that an employer's contribution (including an employee's contributions through a cafeteria plan) to an employee's HSA is not subject to federal income tax withholding or social security, Medicare, or railroad retirement taxes (or FUTA tax) but are these amounts included in the definition of 415 comp? 

Plan sponsor contributes an employer contribution to the HSA on behalf of the employee but does not want to include this employer contribution in the definition of plan compensation (SH and ER). 

Total Comp is defined as W-2 Comp and Plan Comp does not currently exclude deferrals / cafeteria.  To exclude the employer contribution to the HSA from Plan Comp, is an amendment to the plan necessary? 

Greatly appreciate your input.

QNPG

Are employee and employer contributions to an HSA grossed up for 415 plan compensation purposes?  I am not too familiar how contributions to these arrangements affect plan compensation. It looks like they can be run through the cafeteria plan - if so then I assume they would be considered Section 125 pre-tax amounts and then gross up the 415 compensation? Another way to set up an HSA is like an IRA and then take the deduction on your 1040. In this way, I assume the compensation is also included as 415 compensation in the employee's 401(k) plan?  If an employer wants to exclude them, I think they have to be excluded under the plan compensation definition in the document?

Any suggestions to assist me would be greatly appreciated!

Are employee and employer contributions to an HSA grossed up for 415 plan compensation purposes?  I am not too familiar how contributions to these arrangements affect plan compensation. It looks like they can be run through the cafeteria plan - if so then I assume they would be considered Section 125 pre-tax amounts and then gross up the 415 compensation?  To exclude these amounts under plan compensation, I assume you need to exclude them in the plan document?

Another way to set up an HSA is like an IRA and then take the deduction on your 1040. In this way, I assume the compensation is also included as 415 compensation in the employee's 401(k) plan?

Any suggestions to assist me would be greatly appreciated!

ERISA Section 105 requires benefit statement to include a statement of "vested percentage of such benefits (or the earliest date on which benefits will become vested)".  Do you agree that the "earliest date" is the date on which a participant becomes partial vested?  That is, on a 2/20 vesting schedule, does a participant "become vested" when they become 20% vested or when they become 100% vested?

Thanks

Guy bought a franchise with a ROBS 401k and wants to terminate it.  Can the stock get rolled over to an IRA? I think not, because if it could, there would be no such thing as a ROBS you would just do it from an IRA.  I thought the whole point was to take advantage of the employer securities exemptions available in a 401k plan.  Any specific sites (cites??) you can provide would be appreciated!

Hi.  I work for a governmental entity (at the municipal level).  My salary information is public information and subject to any citizen's Freedom of Information Act request).  Are my contributions to retirement plans (403(b), 401(a), and/or 457(b)) included in that information that is FOIA-able?

Thanks.

Hi.  I work for a governmental entity and participant in a governmental 457(b) plan.  I make elective deferrals into the 457(b) plan.  How do those deferrals impact my future social security benefit?  For example, if my salary is $100k, but I defer $15k into the 457(b), are my reportable earning to SS the $85k?  I just want to make sure that I am not suppressing my future SS benefit by deferring into my 457(b) account.

Thanks.