Suppose John James had a DB plan years ago (1 man business, made scads of money, put a ton into a DB plan, ten ultimately terminated plan and rolled funds over to IRA). Now, some years later, he has another business. Wants to set up a new DB plan.

Do 415 limits take into account the benefit paid to him under the prior plan? I don't think he's a "predecessor employer" but it just doesn't feel right, somehow, yet I'm not sure there is actually a problem. I'd appreciate any insights.

P.S. - I have no idea what type of entity prior business was. Would it make a difference if he was a sole prop? I seem to recall that sole props "last forever" for some purposes.

It looks like when doing 1099's I would include code L, but ONLY code 1 if the participant is under 59.5?  If they are over 59.5, it is just code L?

Agreed?  This person is active so no offset.

In a 403(b) plan, the plan excludes participants who normally work fewer than 20 hours a week are excluded as a class.  If an employee who was previously a full time employee and not part of the excluded class is rehired, are they still eligible to participate in the plan?  Or are they excluded because of their new class status?

Thank you!

I have a plan on the FT William VS.  The plan excludes union EEs for SH & PS, but not deferrals or match.

There is no "regular" match selected for the plan, but it is in the Additional Match subsection for the Safe Harbor Contribs section.  The formula is discretionary.  The only other item checked is the match timing which reads:

The Matching Contribution and time period for all Collective Bargaining Employees shall be the amount specified in the Collective Bargaining Agreement

There is nothing about only the union getting the match.

Given this fact pattern MUST the non-union participants get a match, too?

Calendar year plan terminates August 4th.  The plan failed the ADP test.  Refunds made in December.  Plan sponsor is being told that the excise tax normally assessed on refunds made more than 2 1/2 months after the end of the plan year would not apply.  They are being told that even though the plan terminated creating a short plan year that the normal 03/15 deadline for calendar year plan still applies.

I don't find anything that indicates that the excise tax isn't required in the is circumstance.  Am I missing something?

Thank you for your help.       

Corporation sponsored a Profit Sharing Plan for several years.  The corporation still exists, but there are no employees.  The assets in the plan belong to the principal.  He no longer takes a salary from the corporation.  Some of the assets can not be easily distributed.  As long as he continues to file the 5500 and keeps the plan document current, any issue with the plan just going on.  He takes RMDs from the Plan and that is the only transaction.

Since the principal is the only participant entitled to a benefit, is there any issue with the Trust continuing. It is not an orphan/wasting trust since the corporation is still in existence.

Thoughts??

Scheduled to be published tomorrow.  Looks like we can go back to using forfeitures to fund safe harbor contributions, as long as your plan allows it.  Fortunately, our VS document has the phrase "unless provided otherwise under IRS guidance" at the end of the sentence about not using forfeitures towards SH contributions.

https://www.federalregister.gov/documents/2017/01/18/2017-00876/definitions-of-qualified-matching-contributions-and-qualified-nonelective-contributions

Quote

Explanation of Provisions
After consideration of the comments described in this preamble in the
“Background” section, the Treasury Department and the IRS are proposing to
amend §1.401(k)-6 to provide that amounts used to fund QMACs and QNECs
must be nonforfeitable and subject to distribution restrictions in accordance with
§1.401(k)-1(c) and (d) when allocated to participants’ accounts, and to no longer
require that amounts used to fund QMACs and QNECs satisfy the
nonforfeitability and distribution requirements when they are first contributed to
the plan.

Quote

Proposed Effective/Applicability Date
These regulations are proposed to apply to taxable years beginning on or
after the date of publication of the Treasury decision adopting these rules as final
regulations in the Federal Register. Taxpayers, however, may rely on these
proposed regulations for periods preceding the proposed applicability date. If,
and to the extent, the final regulations are more restrictive than the rules in these
proposed regulations, those provisions of the final regulations will be applied
without retroactive effect.

What are the fund change notification requirements for a plan not subject to DOL ERISA rules? Is it a matter of state law?

Thanks!

An employee, who was in our Dependent Care FSA plan that ended 6/30/2016, did not make an election for the plan year beginning 7/1/2016. The deduction was not removed from payroll and continued to be deducted from the employees pay. This administrative error did not come to our attention until calendar year 2016 was over. What is the proper procedure to correct this error including filing corrected returns?

In a governmental 401a defined benefit plan, each monthly annuity is paid in the month after it accrues (i.e. in February the member is paid the annuity amount accrued in January).  When a member dies, say 15 days into a month, his or her designated beneficiary is entitled to a one-time, lump sum distribution of the deceased member's prorated annuity amount (i.e. those 15 days in the month of the member's death that they were alive and accrued an annuity amount).  Is this prorated annuity amount paid upon the member's death considered an eligible rollover distribution or a nonperiodic payment?  We are trying to determine whether we should apply the 20% federal withholding on ERDs or the 10% federal withholding on nonperiodic payments with an option for no withholding.

A tax exempt's employment agreement entered into years ago provides for a payment to an employee on August 31, 2017 if the employee is employed on that date.  Thus the agreement is within the short term deferral rules under 457f proposed regs and 409A.  The employee would like to be paid and taxed in 2018 rather than 2017.  Under the STD rule, agreements can now be drafted to provide for vesting in one year and payment and tax by March 15th of the next year.  But can an agreement providing for payment in 2017 be amended to move the payment date to early in 2018?  Issues include: 

      1. If an agreement extending the payment date is entered into, does that agreement violate 457f or 409A (e.g., the subsequent deferral rules), assuming the extension still requires payment by March 15, 2018?

       2. If no agreement extending the payment date is entered into, can payment be made in 2018 without violating 457f or 409A, on the theory that there is no deferral of compensation, even though payment in 2018 violates the terms of the agreement? 

IRS has started notifying employers it suspects were Applicable Large Employers for 2015 but who have not filed 2015 Forms 1094-C and 1095-C (see redacted letter 5699 attached).

I'm wondering what "records" iRS used to make this determination, perhaps the filing of a threshold number of W-2s in 2014 that might indicate ALE status for 2015?

IRS Letter 5699 Request for 2015 Forms 1095-C_15342356(1).PDF

We have a plan that has everyone in their ow group for PS allocations.  They exclude terminated EEs from receiving the PS.  As a result this year, I only have 7/12 NHCE benefitting, 58%.

Average Benefit Test passes.  Am I OK to use the ABT, because I think we have a "reasonable" classification of terminated EEs. We (the client) did not pick or choose certain people to not benefit; the document did that for us.

Do we add 2K as a plan characteristic code if a plan only has a Safe Harbor Match?  Instructions say not to use it if the arrangement is solely 401(k) + QNEC or QMAC.  Is a SHM considered a QMAC?

Is a Safe Harbor plan deemed to satisfy 414s if the HCE's are excluded from the 3% SHNEC?  Logic tells me no, as you could just exclude HCE's from the SHNEC and then exclude everything but thought I would check!

Plan's definition of comp is Simplified 415.  No exclusions.

Participant New York W2 report looks like this:

Box 1 & 16:  48,500 = 50,000 gross (-) 500 sec. 125 (-) 1,000 401(k)

Box 3 & 5:  49,500 = 50,000 gross (-) 500 sec. 125 (-) N/A 401(k)

What is comp for plan purposes?

I believe it should be 50,000, the gross.  Admin here used the Box 3/5 result.

Who's right?

. 

Defined benefit plan governed by ERISA.  Currently, an employee becomes a participant in the Plan once he/she works "x" hours in a year.  Once he/she is a participant, he/she gets a Year of Vesting Credit for each year that he/she works "y" hours.

Can the Plan be amended to say that, after the effective date of the amendment, any new employee must work "a" hours in a year (with "a" being more than "x"), and then that employee must earn "b" hours each year to get a Year of Vesting Credit (where "b" is more than "y")?

In other words, can a plan be amended to require more hours to become a participant and get a year of vesting credit for new employees while still keeping the old rules for current employees?

Thanks.

My wife has participated in an employer sponsored SIMPLE IRA from June 2011 to Dec 2016. During this period, her employer failed to follow IRS guidelines for the plan. I'll list the violations I was able to spot:

1) Voluntary payroll deductions were not deposited in a timely manner. In some years, all payrolls deductions were held by her employer and deposited as a lump sum at the end of the year. Other years, no deposits were made until the following year. 

2) Her employer gives no notice of an enrollment period. She's had no notice of plan changes or any details about the plan since she joined in June 2011. 

3) Her employer has not specified whether they follow a 3% match or 2% non-elective compensation.

4) Regardless of item 3, her employer only deposits 1% of her annual salary to the fund. I'm not completely certain this is how they're calculating the employer match because the employer deposits are sporadic and even absent some years.

My wife's employment ended Dec 31, 2016, but I noticed these errors while my wife was still employed. I encouraged her to contact EBSA to file a complaint regarding the missing and late deposits, but she was afraid of being fired. So, she approached her employer and asked for the deposits to be made in a timely manner. They weren't very receptive, but they did begin to deposit her voluntary contributions monthly. They did miss some months here and there and as of now the most recent deposit was made on 10/03/2016.

She left the company after being denied a cost of living increase and I'm reasonably certain her former employer will not be making any more deposits into her account, despite their legal obligation to do so. I think I've finally talked her into pursuing this with the EBSA, but I'd appreciate some advice on what to expect.

First, will the source of the complaint remain anonymous to her employer? She is now self employed in the same field that her former employer operates in and she is fearful that they will defame her character in retaliation if they find her to be the source of the complaint. I'm almost certain she is not the only employee whose IRA has been mismanaged, for what it's worth.

Second, after some reading it appears the SIMPLE IRA may be invalidated for a year in which the employer made certain violations, like not depositing matches. Is this a possibility her? What should she expect if this happens? Will there be tax liability on our end?

Third, will her employer be responsible for compensating lost earnings due to late deposits? Her investment fund wasn't the greatest, but she did miss out on some earnings. 

Any and all advice you can offer is much appreciated. 

Edit: I've uploaded a screen shot of the plan transactions so you can see how sporadic and untimely they were. My wife was being paid biweekly and had $50 voluntarily deducted from each paycheck.

The following is being used as a "substantially equal" periodic payment over 10 or more years, to avoid 20% withholding. I'm not yet convinced it qualifies, but on the other hand, it seems reasonable that it should.

Participant terminates at age 65. Takes a 13 year payout (well over the 10 or more years required for the exception). Account is distributed as 1/13th the first year, 1/12th the second, etc.

It seems to me that in order to qualify, under Revenue Ruling 2002-62, this method would require establishing an initial LIFE EXPECTANCY, and similar methodology could then be used over that life expectancy. But I don't think you can arbitrarily use a lesser number for that same methodology. Opinions?

In a governmental 401a defined benefit plan, each monthly annuity is paid in the month after it accrues (i.e. in February the member is paid the annuity amount accrued in January).  When a member dies, say 15 days into a month, his or her designated beneficiary is entitled to a one-time, lump sum distribution of the deceased member's prorated annuity amount (i.e. those 15 days in the month of the member's death that they were alive and accrued an annuity amount).  Is this prorated annuity amount paid upon the member's death considered an eligible rollover distribution or a nonperiodic payment?  We are trying to determine whether we should apply the 20% federal withholding on ERDs or the 10% federal withholding on nonperiodic payments with an option for no withholding.