small SH 401(k) while transitioning to new owner failed to withhold 401(k) from participants checks in Sept. Using SCP should the sponsor fund a QNEC equal to 50% of what the deferral would have been as well as the accompanying SH match?

Please tell me if this is reasonable. A certain (well-known ) recordkeeper has told a client that based on their history of not failing ADP/ACP testing, the testing, which they pay an extra fee for, cannot be scheduled for completion within the first 2 1/2 months of the plan year end. If they do end up needing refunds, the Plan will be responsible for the risk and responsibilities of any failure.

Am I wrong for thinking this is totally unacceptable?

The proposed regulations have a section that talks about allowing a DB/DC combo plan to utilize the average NHCE match (but not over 3%) as being counted toward the minimum gateway.

When can that portion of these proposed regulations be relied upon?

The Proposed Applicability Date section says:

Except as described below, these regulations are proposed to be applicable to plan years beginning on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. Taxpayers are permitted to apply the provisions of these proposed regulations except for those described in section III of the Explanation of Provisions portion of the preamble for plan years beginning before this proposed applicability date, but not for plan years earlier than those beginning on or after January 1, 2014. Accordingly, the ability to rely on a provision of these proposed regulations for periods prior to the proposed applicability date for these regulations applies to the disregard of certain defined benefit replacement allocations in cross-testing; the exception from the minimum aggregate allocation gateway with respect to certain closed plans; the special testing rule for benefits, rights, and features with respect to certain closed plans; and the rule applying the ratio percentage test to a rate group in the case of a benefit formula that does not apply to a reasonable business classification. Taxpayers may rely on these provisions (that is, the provisions that the proposed regulations would permit a taxpayer to apply before the proposed applicability date for these regulations) in order to satisfy the nondiscrimination requirements of section 401(a)(4) for plan years beginning on or after January 1, 2014, and until the corresponding final regulations become applicable.

The plan's definition of compensation was the safe harbor 414(s) safe harbor definition that excludes: reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation, and welfare benefits. The plan is deferral only, but deferral percentages were applied to all compensation. As of November 1st, the plan has been amended to be W-2 only, no exclusions and everything is being done properly.

I need to fix the error for the period from January through the end of October. The IRS Fix-It Guide clearly states that we can distribute the deferrals that were withheld on excluded compensation and treat as excess deferrals. My question is: If I have these deferrals distributed before year-end, will the employees be able to bump up their deferrals and still reach the maximum of $18,000/$24,000? I am not sure because, if they net the maximum amount into the plan, their W-2 will show deferrals exceeding the 402(g) limit. But is this okay because they will also be showing the distribution of excess deferrals in the same year?

Thank you!

Kathryn

I know that the ACA has adopted the controlled group rules for purposes of the employer mandate. What about for the nondiscrimination rules? I have reviewed the final regs issued 5-18-16 and cannot find any discussion about it. I have a group the does not provide health services and receives no federal funding; however, they may be in a controlled group with an entity that provides health services and receives federal funding. Does the fact that the two entities are in a controlled group mean that the "non-health care" entity is now subject to the nondiscrimination rules just by virtue of being in a controlled group with the health care entity? Any guidance would be greatly appreciated!

I am interested in hearing how members would apply Treas. Reg. § 1.411(a)-5(b) to the following situation.

The plan sponsor terminates qualified Plan A on December 31, 2011. The sponsor then establishes another qualified plan, Plan B, on January 1, 2015. Plan B is a successor plan under Treas. Reg. § 1.411(a)-5(b)(3)(v)(B). Participant began employment in 2010, has 2 Years of Service under Plan A, and is a participant in Plan B. Participant remained employed and performed at least 500 hours of service (determined under Code § 411(a)(6)) in each of 2012, 2013, and 2014.

Does Participant have zero Years of Service under Plan B, or 2?

The relevant portion of the Treasury Regulations provides:

(A) General rule. In the case of an employee who was covered by a predecessor plan, the time the successor of such plan is maintained for such employee includes the time the predecessor plan was maintained if, as of the later of the time the predecessor plan is terminated or the successor plan is established, the employee's years of service under the predecessor plan are not equalled or exceeded by the aggregate number of consecutive 1-year breaks in service occurring after such years of service. Years of service and breaks in service, without regard to whether the employee has nonforfeitable rights under the predecessor plan, are determined under section 411(a)(5) and (6) except that years between the termination date of the predecessor plan and the date of establishment of the successor plan do not count as years of service.

….

© Example. The rules provided by this subparagraph are illustrated by the following example:

Example.

(1) Employer X's qualified plan A terminated on January 1, 1977. Employer X established qualified plan B on January 1, 1981. Under paragraph (b)(3)(v)(B) of this section, plan A is a predecessor plan with respect to plan B because plan B is established within the 5-year period immediately following the date plan A terminated.

…

(3) Employee D was covered by the A plan. On December 31, 1976, D had 4 years of service. D had 4 consecutive 1-year breaks in service because during the years between the termination of plan A and the establishment of plan B, he did not have more than 500 hours of service in any applicable computation period. Because D's consecutive 1-year breaks (4) equal his years of service prior to his breaks (4), plan B is not maintained until January 1, 1981, with respect to employee D.

(4) Employee E was covered by the A plan. On December 31, 1975, E had 6 years of service. E had a 1-year break in service in 1976. E also had 4 consecutive 1-year breaks in service for the period between plan A's termination and plan B's establishment. Because E's years of service (6) are not less than his consecutive 1-year breaks (5), plan B is maintained for E as of the establishment date of plan A.

(4) Break in service. A year of service which is not required to be taken into account by reason of a break in service (within the meaning of section 411(a)(6) and §1.411(a)-6)).

Treas. Reg. § 1.411(a)-5(b)(3)(v).

One could interpret Examples (3)-(4) as deeming 2012-2014 to constitute 1-year Breaks in Service. If that's the case, Participant in the example has three 1-year Breaks in Service, exceeding service credited under Plan A. Therefore, she will receive no credit for prior service for vesting purposes under Plan B.

On the other hand, one could read the last sentence in (A) to mean that one determines whether a Break in Service has occurred according to the rules of the Code, since no plan exists. So long as a participant performs at least 500 hours of service, no break occurs. However, the participant's years of service for vesting purposes do not increase in the years where no plan exists. Under this interpretation, Participant has two Years of Service for vesting purposes under Plan B.

I have a CB plan that failed 401(a)(26) when testing the current year accrual. A couple of years ago the plan reduced the rank and file participants pay credit from 9.5% to 4%. Although I have never needed to use it, I believe that I could do accrued-to date testing for the purpose of passing 401(a)(26). Is that correct?

I have a plan where the plan has post tax Pre-84 employee contributions.

If a participant elects to receive a refund of the money we calculate a portion that will be nontaxable as part of the refund (using the IRS exclusion Ration) and the remaining nontaxable portion is captured in the residual annuity payments.

My question is whether or not it is allowable to have the non-taxable portion be only part of the refund or completely taken care of as part of the residual annuity. We are trying to simplify administration of the taxable payments and coding of a benefit system.

Profit sharing plan is terminated as of 10/1/2016. All plan participants received their distribution except one. His account balance is $20,000.

The participant refuses to sign distribution forms or receive distribution because he doesn't want any assets in his name. He can not be reasoned with.

The plan sponsor wants to close out the plan by 12/31/2016 and file a final return.

Is there any way to resolve this situation?

I have a plan that fails 414(s). They are a safe harbor match plan. (QACA, 100% of first 1% comp and 50% on all other deferrals up to 100% of pay)

Plan excludes bonus for allocation purposes, plan allows people to defer from bonus.

Thing is, if I include bonus, the employees' deferral rate goes DOWN, therefore DECREASING the match.

Should I just let it go?

Also, for the PS. Can I allocate it excluding the bonus (it's a pro-rata allocation) and then TEST it using full comp? (It's about a 7% PS, so I think I'd be ok with gateway.)

while it is the EZ, I would expect the same for SF and 5500

IRS Compliance Questions.
The IRS has decided not to require plan sponsors to
enter the preparer’s information at the bottom of the
second page of Form 5500-EZ for the 2016 plan year and
plan sponsors should skip these questions when
completing the form.
The IRS has decided not to require plan sponsors to
complete questions on lines 4a through 4d, 13a, 13b, 14,
and 15 for the 2016 plan year and plan sponsors should
skip these questions when completing the form.
The IRS expects that the above questions will not be
included in the 2017 Form 5500-EZ.

so maybe we will never answer those questions! in fact, the verbiage seems to say they won't even be on the form.

Is the 15-year catch-up included in 415 annual aditions? Thanks.

I have a calendar year 401(k) plan that I do administration for. Each year the accountant is very slow in getting me data to do the prior year's admin. For 2015, he didn't get me the data I needed until the first week in September, 2016. I got everything completed and submitted prior to the time the extension ran out. This plan has commingled money. Therefore, the last account balances that I have are as of December 31, 2015. I just had a request for a plan distribution from a prior plan participant. Given that we are halfway through November, I feel awkward paying out a balance that's almost 10 1/2 months old. If the plan has had gains during 2016, the participant won't share in them. Alternatively, if the plan had losses, the Participant is getting more than he deserves, What is the standard practice in a situation like this.

I set up a single Participant Plan. Everything fine for a year or two. Then guy stopped responding, paying bill and providing information.

He dies this year.

I am given 8 years of statements for intervening period.

I reconcile the account and find distributions (Loans? Doesn't really matter, no payments made) in 2010, 2012, 2013, 2014, 2015 & 2016. (Total is $103,000)

Beneficiaries want the $5,000 still in the plan.

If reporting is to be done correctly would I issued 1099s for 2010, 2012 etc requiring revised tax returns for the years listed?

Thanks for any thoughts.

We have a church that is not controlling over a school (of the same name and denomination) and the church's ministers teach in the school. The school wants to allow the ministers to contribute to the school's 403(b) plan and allow them to designate distributions as ministerial housing allowance. If the ministers' work qualifies as ministerial work for the school, can the school (and not the church) allow ministerial housing allowance designation or must the allowance come out of a church plan only?

Calendar Year Plan.

2016 AFTAP of 79% has been certified

Credit Balance of $30,000 not enough to wait to get to 80%

At current time, can employer voluntarily waive the credit balance and make a IRC 436 contribution to remove partial benefit restrictions brought on by 79% AFTAP.

Thanks for all responses.

Unlike an elective deferral under 402(g) where a partner in a partnership must make the election no later than the last day of the plan year, what is the timing requirement for an after-tax election?

Can a partner, in November 2016, write a check and say that it is an after-tax contribution for 2015, assuming no written after-tax election was in place by December 31, 2015?

I am working with an new administrator on moving plan assets and the blackout notice they provided to the affected participants does not specifically use the word "blackout". Rather, it uses the language "No Transaction Period" interchanged where the word "blackout" would be generally used. The notice contains all the other necessary language and dates, but I've just never seen a notice that doesn't use the word "blackout" to describe the period.

Is this allowed under IRS & DOL regulations?

Thanks

Hi,

Does every plan have to offer automatic IRA's for distributions between $1,000 and $5,000? That is, could a plan state that anyone with a balance under $5,000 distribute the balance in cash after a participant has been notified but has not responded after 30 days?

Thank you!

We are looking at our hardship withdrawal form and want to had a paragraph. We have the paragraph about stopping deferrals for 6 months.

We want to had a paragraph to put responsibility to restart on the participant. We are discussing how to word this for plans with and without automatic enrollment and with and without automatic escalation.

Does any one have any suggestions?

What other problems have been caused by this situation or solutions you have tried?