DB/DC combination. Eligible Employee (HCE, but not key) enters both plans 1-1-2016. They accrue benefits for 2016.

Now, both plans are amended to exclude this HCE (but not key) by classification effective 1-1-2017. Not eligible for deferrals, match, PS or anything, and not eligible for DB.

The plans are not frozen. Owners and NHCEs and other HCEs are still eligible and accruing in both plans.

A colleague is arguing that continuing additional top-heavy minimums must be accrued even after 2016 by this HCE even though they are fully excluded, assuming they meet the top heavy accrual requirement (1000 hours for DB or last day for DC). Based on grey book 2001-35.

The written plan language appears to require the participant be an eligible employee to earn a TH minimum accrual. Essentially meaning they must earn a top-heavy year of participation to accrue additional top heavy minimum accruals. If they are now excluded by class, they can't earn any more years of top-heavy participation.

My colleague states that this HCE became a "participant" on 1-1-2016 and that fact requires the plan to provide top-heavy minimums to comply with the law/guidance, since they are still a "participant" with accounts and/or benefit accruals from the 2016 plan year. The document might not have a formula for them for any more normal accruals, but the plan would not meet the law’s requirements if the top-heavy minimum was not provided, causing a qualification issue.

Your thoughts on this?

If you're assembling a plan's rule 404a-5 disclosure to participants ...

Do you include or omit a money-market fund's seven-day yield?

If you include it, what is your reasoning for showing it?

(I assume there is no one inarguably right or wrong answer. Rather, I hope to get some sense of customs of recordkeepers and TPAs.)

Non Owner Participant dob 6/28/46, terminated from company in 2015. Wants to roll over his entire balance to new employer plan before attaining age 70.5 to avoid RMD. Is entire balance eligible for rollover since he will turn 70.5 in 2016 but after the distribution? Or do we have to process an RMD and rollover the balance? Thanks in advance for any direction.

A plan excludes "overtime" from "compensation" for deferral purposes. Is "overtime" the full amount of pay (time-and-a-half) for any hour worked over 40 hours, or should "overtime," excluded from compensation for deferral purposes, include only the extra half pay for those hours worked over 40? There is no guidance in the plan document.

Hi all,

I have a quick question regarding the purchasing of Permissive Service Credits. Can a 457/401(k) participant use Roth assets to buyback permissive service credits in their pension? Is this buyback limited to pre-tax assets? I have only seen other DC plans mention pre-tax; however I have not seen any IRS rule/regulation specifically stating that only pre-tax assets can be used to purchase permissive service credits.

Any help would be appreciated. Thanks!

I am designing a new 401(k) profit sharing plan. I have a terminated participant who is young and has low compensation. They enter the plan and then terminate in the middle of the year. I want to use this participant to pass 401(a)(4) as it would be the cheapest option. I end up having to give him about 90% of his compensation. If i design the plan so that there is no hour requirement or last day requirement for discretionary profit sharing, I believe I can give him this large amount. But how should I handle vesting? Does he need to be 100% vested as I am using him so heavily to pass testing? Could he be only 20% vested? Or could I even leave him at 0% vested? How would you handle the vesting if he needed to be 100% vested, but you didnt want any other employees to be automatically 100% vested?

Our Esop plan doc requires payment in lump sum or in a period certain not to exceed 5 years. We don't have a distribution policy. Can an participant who has elected a 3 year distribution period now extend that payment period to 5 years by executing a new distribution form?

Our plan does not say one way or another.

However the requirement for a "payments over a period certain" could be interpreted as not being able to be changed. Although the new 5 year period would also be a period certain...

I can't find where the change would be a violation of any ERISA / ESOP distribution rules.

Hi. This particular 403b plan has the exclusion for those that normally work less than 20 hours per week.

An employee who had been full time (and there a participant) is changing her hours down to per diem, and expected to be <15 per week (though the plan sponsor at this point can't guarantee that). Does she now fall under the exclusion and is therefore unable to defer going forward? That would be consistent with treating this as a 'class exclusion'; she's now part of an ineligible class, have to test under 410(b), etc.

Or is this a special case so therefore once she is allowed to defer, she is always allowed to do so? Thanks.

Company X maintains a safe harbor 401(k) plan in which the matching contribution is structure to satisfy the safe harbor of Code Section 401(k)(12) (i.e., 100% match on elective deferrals up to 3% of compensation and 50% match on elective deferrals greater than 3% but not in excess of 5% of compensation). Employer X wants to amend the safe harbor 401(k) plan to allow for suspension of the safe harbor match by one or more subsidiaries or divisions. While it is clear that, subject to complying with the rules set forth in the regulations including the content and timing of the notice requirement and any supplemental notice requirement as applied to all participants, can the employer limit the suspension to one subsidiary and not lose safe harbor status?

Please let me know what options are out there, what you are happy with. FT does not have a 457f option. I am already familiar with Sungard Corbel, looking for others.

Thanks in advance!

They try hard, but they just can't ever seem to get things quite right.

I recently (August 29th) submitted a delinquent 5500-EZ filing (years 2005-2015). Naturally, each form had the required wording on the top of each form, and the full penalty of $1,500 was submitted, etc., etc.)

No 5500 forms were ever filed for this plan prior to this. So, now that they have "entered" it on their system, they generated a CP283 Notice assessing an $800.00 penalty for the 2015 form being submitted late!

Gotta love it...

Have always used Qualified Joint and Survivor at current age as the normalization factor for the most valuable benefit when testing a traditional DB plan. We have used this even if testing with a DC plan that does not have QJSA as the normal form of benefit.

If testing a Cash Balance plan I assume we need to use Lump sum available as the normalization factor for the most valuable benefit when testing correct?

Thanks.

A client fired an employee who has a small AB in the DB plan (approx. $340/month @ 65) - the employee did not sign distribution paperwork so distribution has not been made - the DB plan is now terminating - due to bad feelings, the participant does not want to sign distribution paperwork - any words of advice on how to encourage the participant to sign the distribution paperwork?

We're trying to get the plan paid out by year end but this one participant is gumming it up. THX

FACTS:

ABC is an S-Corp owned 100% by Mr. A

ABC sponsors a Safe Harbor 401k (Cross Tested) Profit Sharing Plan:

• 2 HCEs are elig
• 10 NHCEs are elig

ABC 401kPSP excludes employees of Affiliated Employers who have not adopted the Plan; Eligibility is 1 Year of Service with 1000 hours (no min age); Years of Service with Affiliated Employers are counted for plan purposes

Maryland LLC is a multimember LLC taxed as a partnership

• 5% membership interest: Mr A
• 95% membership interest: Partnership Z (2 partners, both of whom are unrelated to Mr. A)
• At 1/1/2016 the membership interest changed when Partnership Z wanted to close down. In response to this,

1. Mr A acquired 90% of the partnership's interest via an assignment of interest
2. Mrs A (Mr A's wife) acquired 5% of the partnership's interest via an assignment of interest

As a result of this change in LLC membership , Maryland LLC and ABC Corp are now under common control as of 1/1/2016

Mr. A hired an outside person (unrelated) to manage the day to day LLC operations as he simply does not have the time to do it.

There are 5 LLC employees (all NHCEs), 3 of whom are very very part time (never 1000 hours), the other 2, John and Jane, may or may not work 1000 hours in a year for LLC however they are also employed by ABC Corp and have had at least 1000 hours credited per year with ABC Corp. These 2 employees are 2 of the 10 NHCE Participants in the ABC Plan. They both receive 2 separate W2s -- 1 for ABC Corp, 1 for LLC

QUESTIONS:

1. How do the 2 "shared" employees, John and Jane, count in the 410b test? Assuming the 3 very part time employees of LLC never have 1000 hours, they will never meet eligibility for 410b testing, BUT, the 2 shared employees, John and Jane, have >12mos, 1000 hours and are eligible for the ABC Corp plan (i.e. they are active participants), yet excluded as far as their LLC employment is concerned. So would the NHC coverage be 10/12 essentially counting them as 1 person each in the numerator but counting them as 2 people each in the denominator (1 as ABC ee, 1 as LLC ee)?? I realize it will pass either way, but next year the LLC #s may increase.
2. Mr. A and his wife are eligible for the ABC Plan, yet assuming they have compensation from the LLC, that portion of their work/compensation is excluded from the plan. How does question #1 apply to them?
3. Does the LLC compensation that is excluded for allocation purposes have to be tested for reasonableness, to prove the exclusion is not discriminatory? or does the LLC compensation have to be included for allocation purposes, i.e. added to their ABC Corp compensation for allocation purposes (SH, TH Min, PS)?
4. Presuming the LLC Compensation is excludable, is 401(a)(4) testing done only with respect to ABC Corp compensation? or is the LLC compensation added in for Avg Ben, Rate Group testing purposes?

Thank you!

We have a client who is converting their 401(k) plan from Valic that is invested in an annuity platform contract. The contract provisions do not permit loans to transfer to the new recordkeeper and instead requires the collateral to remain in a security reserve account. The loans are made by Valic to the participant and must be paid back in full in order to transfer from the security reserve account.

Has anyone dealt with this issue on 401(k) plans? It seems more common for 403(b) structures. The loans are assets of the plan and should be allowed to be transferred along with the other assets in my mind. Valic is treating them as policy loans which doesn't follow 401(k) loan procedures. Any insight is appreciated.

A plan has a maximum of one loan per participant (and it's a large plan, so they don't want to expand that). A participant defaulted in early 2011 on a loan issued in 2010... and now she is asking for a new loan.

For loans that are still within the original five-year term, I'd have the participant make the plan whole with an after-tax deposit to payoff the loan (plus interest) before issuing a new one. Can the same apply with a loan past the maximum five years? Thanks.

What are the implications of exceeding the incidental limits for life insurance in a Profit Sharing Plan? Are there corrective mechanisms, penalties, excise tax, govenernment forms to report the excess?

Does anyone know how to upload an Excel file that includes just PlanID, a dollar amount, a fee description (for disclosure purposes) and maybe a date to Relius as a Fee Transaction so that it will apply that fee, pro-rata, to all participant accounts? I don't want to upload by fund, source, etc. which is what I see in the help file. Just a straight fee. But I need to upload because I have many plans at once where I need to do the calculation outside of RA.

Just for some background: I, and Relius Support, cannot figure out a way for RA to calculate a fee such as $____ for the first 20 participants with balances and $___ for each additional participant over 20 where RA calculates the total and then assesses the fee pro-rata. It can do several parts but not the whole thing. Hence why I need to do the calculations outside of Relius and bring them back in.

Any assistance would be most appreciated.

Year End Discretionary Matching Contribution amended to x% payroll by payroll Matching contribution effective June 1.

Client made the 1st payroll by payroll matching contribution in June for the payroll period ended March instead of the effective date of June.

Is this permissible to back date (effective date was June 1st for payroll by payroll) and match deferrals as far back as 3 months?

If yes, should it from the beginning of the plan year.

I didn't find any language in the amended & restated plan document regarding the possibility that the plan sponsor has discretionary power to back date and match deferrals on X% payroll by payroll.

Thanks!

Buyer in an asset deal has agreed to credit prior service with target for various benefit plan purposes including general eligibility / vesting requirements for the 401(k) Plan. The Buyer's 401(k) Plan does not have a minimum service requirement per se (new employees are eligible right away); however, the Buyer's 401(k) does generally limit entry into the plan to the first day of the month following commencement of employment.

How should a plan address this issue when crediting prior service with an acquired company. Administratively, the buyer would prefer to have the acquired / transferred employees just start in the 401(k) as of the first of the following month but transferring employees want to come in immediately upon commencing employment arguing that with credit for prior service their "first day of the month" should be construed as having already been satisfied.