Client receives letter for typical 5500 Audit for 2015 Plan Year (calendar year).  Form filed was Form 5500-EZ for Owner & Spouse.  During audit it was discovered that data submitted by Client does not tie into W-2 of Spouse.  Looking back it is determined of the years back to plan inception (2007), only 2 years tie into the Spouse's actual W-2 for that year.  During the other years the Spouse's income was slightly overstated by $1,400.  Result is that monies allocated in those years exceed maximum deductible contribution.

Question:  Is related penalty tax only applicable for 3 years back, and does that mean 2015, 2014, 2013 and 2012?

Sorry, not my usual area and our in-house expert is unavailable so please forgive what is likely an ignorant question.  If employer with self-insured plan uses look-back method for determining full-time status and has an executive who is stepping down and curtailing hours significantly (so will still be a salaried employee but only working 15 or so hours a week), can they use the look back method to extend full-time status through the stability period and not have to provide COBRA to them until they lose full time status after end of the stability period even though they are clearly in a part-time position?

I know the rules are generally aimed at making sure employees get a chance at full time status and coverage if hours may fall below but here they are basically using the rule to provide extended coverage to a form HCE.  If that's the way the rule works though, I suppose no 105(h) issue if everybody (NHCEs and HCEs) all get treated the same?

Thanks  

I contacted a client who is delinquent in sending their census information for 2016. It's a safe harbor plan, so testing refunds are not a concern. I asked about a tax return extension to decide if I needed to be concerned about the getting them contribution numbers by March 15.

During 2016 the plan sponsor was bought out. They responded by saying that the new owner is a sovereign nation and does not file a tax return. Based on questions that they asked before the buy out, I know that this is somehow related to being owned by a native American tribe. But it is a payday loan company and not in any way related to tribal government.

Do any of you who are more tax savvy than me have any idea what they're talking about?

I'm working on a calculation of employer match for a self-employed participant/plan.  The plan has 10 common law employees.  We're transitioning from one software provider to another.  The provider we've used for many years, includes the salary deferrals of the participants in the common law plan cost.  The new software provider only includes the employer match in the common law plan cost.  While this doesn't impact my match calculation directly, it does impact the resulting plan compensation for the my self-employed.  So my question is, which software provider is correct?  I've not had any luck doing a search to see if this has come up before and reading the SE instructions hasn't been helpful either.  Thanks.

Where in the regs say that you can test by "carving out" the otherwise excludable NCHEs and test the otherwise excludable HCEs with the Nonexcludables?

(I'm too lazy to look for it, and I was hoping someone would have it in their memory and at their finger tips.  I'm not asking anyone to go out of their way and do work for me.  Only post it up if it'll only take but a moment.  Thanks.)

Hi,

I don't usually work with Defined Benefit plans. Could someone please confirm if the RMD dates are different for DB plans than for DC plans? Is the RBD April 1st of the year following the year in which the first RMD is required and then it switches to December 31st of each year after that?

Thank you.

There is an audited plan with 700 employees. They have a matching contribution. It is calculated on a pay period basis.  Client would like to convert to matching on year-to-date minus prior (ie true up).

Reason is they have some sales people who receive bonuses near the end of the year, in which they max their 401k contribution. Due to pay period, they don't receive a full match and they want their salespeople to receive higher matching dollars. This would impact approximately 10 HCE's and 100 NHCE's. Obviously the HCE's affected would be getting more matching dollars than the average NHCE. 

Can the 2016 plan year be amended in 2017 to change how the match is calculated? Assume it is not a discretionary match.

An ER incorrectly contributes to a 401(k) plan an amount that is in excess of the amount that the EE elected. This happens once, and the correct amount is withheld and contributed in the next payroll period.  The error appears to have been made when the first deferral election on file was not cancelled after a second deferral election was made.

What is the best way to make the correction?  Should the amount be returned to the EE from the plan (as compensation)?  I can find nothing in EPCRS that addresses this situation.  There is no excess deferral, just a one-time human (or perhaps computer) error.

Question:  Plan has a quarterly matching contribution with a requirement that participants must be employed on the last day of the quarter to get the match for that quarter. Problem is they might match one or two quarters during the year.

Anyone have any suggestions for how to run coverage?  Can I treat anyone employed on 3/31/2016 as benefitting in the Plan, even if there was no match in that quarter?  What is someone terminated 4/15/2016, but there was no match until the 3rd quarter? Can I treat that employee as benefitting?

One of our clients has an FSA where they contributed a certain dollar amount for each employee regardless of whether they enrolled in the FSA or not. Now we have found out that they have an HSA. Without telling us, they have been putting that employer contribution into the account of anyone who has the HSA. We have still been putting that employer contribution into that FSA for everyone. The employer is not happy!

Can the employer choose where she wants to make that employer contribution on an employee by employee basis? That is, if she decided she's funding the FSA, doesn't she need to fund it for everyone? Can she fund it only for those who aren't in the FSA?

Also, because there is an HSA, can't she only have a limited FSA? Or can she have 2 FSA's? The limited one for those employees with the HSA's and a full FSA for those who do not have the HSA.

I have a plan that does the 3% safe harbor and also has the option for discretionary.  If we give the staff 3% can we give the highly compensated 9% (the 3% base plus 6% discretionary?).   The plan passes Top Heavy due to the 3%, the Gateway test due to the 1/3rd rule and also passes the 401a4.

Thank you for your help!

I have no clue about what to do and can't afford an attorney. In my decree, it stipulates 50%, my problem he is deceased. Which, I have to amend the drafted QDRO stipulate the marriage time and deceased date. How do I amend the QDRO? I am spending too much time on something possibly easy to do.

Please help! 

I've got a participant's CPA who is saying that because we haven't electroncially filed the 1099-Rs yet, if his client electronically files their 1040 it will bounce because there is no 1099-R at the IRS to match it up to.  I don't think I've ever heard of this before - is this is thing?  Thanks.

Controlled group, 2 companies, new comparability plan.  Must use component plans (restructuring) to pass a4 testing.

So far so good - oops gateway rears up and says you must give me to those involved in the cross-testing.  In the cross-tested, restructured plan, those who are in the OTHER plan are treated as if their contribution is zero - therefore no gate way.

In the OTHER plan, testing on a contributions basis, there is no need for gateway. 

So is this true - we can avoid giving some people only their real contribution and not the gateway.

We have a plan that has a 21/1, quarterly entry policy.  However, they started letting a bunch of people defer early.

I know one correction is to amend the plan retroactively to allow them in.  We have four people involved and 1 will become an HCE in '17.  So, it's a 75%-25% HCE/NHCE ratio.  Is that ok?

My main question is:  do they have to let everyone in whom the ALLOWED to defer?  Or just those who CHOSE to defer.  For example, if we have 12 people hired in '16 who were given the chance to defer, but only the aforementioned 4 people chose to do so, whom do we have to structure the amendment around?

Hi I'm new to this forum (I just signed up). I hope I can contribute from time to time.  I am a California QDRO Attorney.  I want to share a recently completed project that I think will be useful to pro per litigants (and maybe a few attorneys).  It's an online 'Joinder Generator' and it generates joinder packets (groups of judicial council forms required to join a plan) after answering a few questions via online form.  

Please check it out and give me any feedback about it.  Do you like it? Would you use it?  Did it work?

Thanks so much for your time and feedback.

http://www.qdrodivision.com/joinder-generator/

-David T. Ruegg

The TPA charges 700 to review and approve QDROs submitted by plan participants.  Can this fee be charged to the plan and allocated to all participants or must it be either paid by the client or split between the plan participant and alternate payee?  Most concerned about if it can be paid by the plan.  Thanks!

Is 20% withholding required on distributions to qualified trusts who are beneficiaries of a qualified plan (e.g., a 401(k) plan) ? IRS Notice 2007-7 Q&A 16 states:

• A plan may make a direct rollover to an IRA on behalf of a trust where the trust is the named beneficiary of a decedent, provided the beneficiaries of the trust meet the requirements to be designated beneficiaries within the meaning of § 401(a)(9)(E). The IRA must be established in accordance with the rules in Q&A-13 of this notice, with the trust identified as the beneficiary. In such a case, the beneficiaries of the trust are treated as having been designated as beneficiaries of the decedent for purposes of determining the distribution period under § 401(a)(9), if the trust meets the requirements set forth in § 1.401(a)(9)-4, Q&A-5, with respect to the IRA.

https://www.irs.gov/pub/irs-drop/n-07-07.pdf

I know that qualified trusts can be directly rolled over to IRA - so they are eligible rollover distributions. I also found reference in 402(c)(11)(A), which states, in part: 

• (11)Distributions to inherited individual retirement plan of nonspouse beneficiary

I received an interesting question on whether state mandated short-term disability benefit payments should offset a qualified plan's definition of compensation. My gut feeling is that since most compensation for such purposes is driven by employer-provided payments via its payroll system, and such amounts are or are not subject to federal income tax withholding, that the state mandated disability benefit payment should not even enter into the compensation definition in any way and therefore, should not offset the employee's other compensation which is taken into account for qualified plan purposes.  I know that the mandated benefit is taxable to the employee to the extent that the employer paid the premiums for the benefit.  However, this should not affect my conclusion on whether such payments should offset the employee's compensation for qualified plan purposes, or am I missing something?

A key employee of a corp. has comp of 70,000,  defers 20,000 (18,000 plus 2,000 catch up).

415 limit   70,000 x .25 = 17,500

If a profit sharing contribution is made to another plan of the same corp. is this key emplyee entitled to 

an allocation?

My thought is no. because the employee reached 415 in 401K plan and PSP doesn't have catchup??