I'm thinking about how to avoid top heavy status for the first year a contribution is made, and I think the following works in this one odd situation. Thoughts?

Suppose in 2016, you have an employer who wants to establish and start contributing to a plan for 2017.

Why can't the employer establish the plan as a PS only for 2016, effective 1/1/2016, with 401(k) deferrals/other contributions to be effective for 2017, and then just contribute zero for 2016?

So, the rules for the "first year" apply to 2016, but in reality they are immaterial, as no contribution is made or allocated or accrued.

When doing 2017 testing, the determination date is 12/31/2016, and the account balances are all a big fat zero, so the plan isn't top heavy for 2017. No top heavy contributions required until 2018.

Any holes in this thought process?

It is my understanding that the 5 year loan term begins when the funds are withdrawn from the participant's account (essentially the date of the check) rather than the date of receipt of funds by the participant. Do you agree?

What if an amortization schedule is prepared with a 5 year loan term based on a date later than the date the funds are removed from the participant's account such as 30 days later from the date the loan is processed? This would cause the loan to exceed the 5 year max loan term at its inception. Would the entire loan be considered a deemed loan?

In an earlier benefitslink thread dated back to 2003, IRS seemed to take the position that curing a missed payment after the 5 year loan term but within the cure period provided by the plan and within the normal limitations of 72(p)-1, Q&A-10 would not violate the requirements of 72(p)(2(B). Payments made within the cure period are deemed to relate back and considered made on the date the installment payment was due. However, something posted by QDROPHIL seemed to contradict this opinion and reverts back to the cure period not applying to the last payment.

Thoughts on these two issues?

Any official cites or reference to material on this topic would be very helpful. Thank you!

An employer has maintained multiple 401(k) plans for various nursing homes over the years. It was decided to merge all of these plans into a multiple employer plan with an effective date of 1-1-16.

The TPA of the employer, hoping to make the 2015 audit of 5 of the plans that are merging the final audit of the plan (in a sense trying to avoid a one day audit for 2016), has indicated that the assets "merged" on 1-1-16. At 12/31/15, the assets were still invested in the various mutual funds maintained by the old plans, as they were to transfer in-kind on 1-1-16.

The TPA, in filling out the 2015 Form 5500, is maintaining that this is the final return for the old plans, and is trying to show, on Schedule H, the assets as of 12/31/15, with a liability "due to new plan" in the same amount, thus zeroing out the assets as of the end of the plan year. Their software is rejecting this treatment. Both the TPA and plan auditor is maintaining that the 2015 Form 5500 filing and certified audit are to be considered "final".

I have seen this happen in the past, but it was many years ago. What are folks opinion of the above scenario? Thanks for any replies.

Participant A took a hardship and Employer did not stop deferrals as required.

I know that the deferrals need to be returned to the participant, but are the deferrals included in the ADP Test?

Hi. Can anyone point me to a good discussion/article on issues (ERISA, tax, other, etc.) related to an employer awarding or granting paid time off as an incentive award to employees?

My employer is considering doing this, and I wanted to read up on issues related to this practice. I have been unable to find anything when searching online.

Thanks.

Let's say that a divorce is final in 2014. The decree states that 50% of the petitioner's 401k account shall be awarded to the respondent. The value of the 401k account at the time the decree was signed was 400,000. It is now 2.5 years later, and the QRDO is still not filed. The 401k account of the petitioner is now 510,000. Is the respondent entitled to half of 400,000 or 510,000? How much time can pass before the QRDO must be filed? Will the respondent ever be entitled to more than 200,000?

Our plan currently provides distributions will be made in the form determined by the Committee in one of the following forms:

1) lump sum

2) monthly or annual installments (not to exceed life expectancy)

3) monthly payments based on single life annuity, paid until the account is exhausted.

4) another option requested by participant and agreed by the committee.

We want to change it so for people separating from service next year there are only two options:

1) lump sum

2) installments that are accelerated to lump sum upon death of the participant.

Anyone who is retired or retired before next year still get the original (4) options above. Is this permissible?

When is consent of spouse required for distributions?

A parent company was formed after a company merger (Parent, Company A and Company B). Both companies in the merger have their own 401(k) Plan. Intent is to rename the plan sponsor of Company A Plan as Parent Plan and make Company B a Participating EMployer.

Issue is that the EIN assigned to the Parent is the same EIN as Company B.

The goal is for their to be no new participants in Company B Plan (but not to freeze it), with all new participants going into Parent Plan.

Any thoughts?

Thanks.

Company X maintains a QACA safe harbor plan for its employees. All employees must be at least age 21 to participate. Those employees who are classified as interns, seasonal employees and part-time employees, are eligible to participate if they completed at least 1,000 hours of service. During 2014, certain employees who had not attained age 21 and certain interns, seasonals and part-timers who had not completed at least one year of service are permitted to participate prior to satisfying applicable age and service requirements. The employer has two options here: (1) treat the premature participation as an overpayment and reduce the account balances of the affected participants with earnings by the amounts prematurely contributed. If the amounts prematurely contributed were elective deferrals, they would be refunded to the affected employees. If matching or other employer contributions were allocated, such amounts plus earnings would have to be held in an unallocated account to reduce future employer contributions or (2) adopt a retroactive amendment eliminating the age and/or service requirement for eligibility for the year the affected employees started participating going forward.

As to option (2), Rev. Proc. 2013-12, App. B, Section 2.07(3) says that if an employee is prematurely allowed to participate in the plan, the retroactive amendment may change the eligibility requirements with respect to only those ineligible employees that were wrongly included, and only to those ineligible employees." This seems to suggest that the amendment could be adopted solely to let those participants prematurely in and no one else provided that the other requirements specified in the Rev. Proc are met. It seems that this option would be the cleanest for an employer to adopt if it is in fact permitted.

Does anyone else read this language as narrowly as I am?

Company did not sign PPA restatement of prototype adoption agreement by 4/30/2016.

Submitting VCP application to IRS, but there is no check box on Schedule 2 (Form 14568-B) for a missed PPA restatement for a prototype plan.

Do you just check the "Other" box? If yes, what is the formal description of the "late amender failure" that has to be specified?

A client allowed a participant to begin deferrals a quarter too early (1/1/15). During that time, he deferred $220. We've just now been able to have the client confirm his hire date. February of this year, he took a loan for pretty much half his vested balance, which still included the ineligible contributions.

He's continued to make deferrals, so at some point he would have accumulated enough to secure the loan. We're working to get the ineligible contributions out of his account, but I'm not sure what correction would apply for the loan. Would the client have to go through VCP? The IRS page on self-correction seems to indicate some loan failures can be corrected that way.

Thanks for any insight.

Hello, I have a loan outstanding from my Solo(k) plan that was set up with quarterly loan repayments. My custodian Voya Financial (clears through Pershing) hired a TPA to administer all qualified plan loans for plans under their custody. I notified the new TPA in writing about quarterly payments and sent them the loan agreement as proof. The TPA started billing me on a monthly basis so I called them about it. They told me that their system cannot handle quarterly payments and for me to wait until the bill for the third payment is received and pay the bill that includes 3 monthly payments.

I have taken this approach for several quarters. For the most recent bill they added a $14 late payment fee.

Questions:

1) do they have the authority to change my loan terms?

2) if they refuse to keep adding late fees do I have any recourse other than changing custodians

3) is there any way that I can take over custody for the loan since I was already doing the administration: loan doc, amort schedule, accounting for loan payments, etc. It is very frustrating to be charged $48 per year for loan admin to a TPA that cannot accommodate my loan terms.

Thanks!

Plan has a late contribution deposit in 11/2015. Company realized it and deposited the contribution three weeks late. Late deposit was found during large plan audit.

Lost earning were calculated and were deposited to the plan in 7/2016.

I'm preparing the 5330. Would the filer tax year be 2015, they have a calendar year. and if so, then the form is late since a 5558 was not filed,

Or is the tax year 2016 since that is when the lost earnings were deposited?

I've been reading and reading, and it seems like it should be reported for 2015, but doesn't seem fair since it wasn't discovered till it was found in the audit. Employer didn't realize it had to be reported as late.

And if the 5330 is prepared for 2015, I have to prepare another 5330 for 2016 since that is the year it was corrected. Is there another excise tax due for 2016? if so, what is that based on?

A section 414 employer group includes two corporations at different locations with difference workforces. Corporation A includes the business owner and one other highly-compensated employee, and has a few non-highly-compensated employees. Corporation B has a larger workforce, and has only non-highly-compensated employees.

A has a 401(k) plan that provides a matching contribution of 100% on elective deferrals of the first 3% of compensation and 50% on elective deferrals of the next 2% of compensation. A intends this as a safe-harbor plan.

B has no retirement plan. IRC section 410(b)(6)© relief concerning the owner's acquisition of B expires with 2016.

The owner is considering creating a retirement plan for B's employees that would "mirror" A's matching formula, allow entry on the same age and service conditions as for A's employees, and provide 100% vesting on the matching contribution.

But which other plan provisions must be aligned to meet non-discrimination rules?

And which plan provisions may differ without tax-disqualifying either plan?

Both plans will exclude employer securities and provide participant-directed investment. Both will limit investment alternatives to shares of SEC-registered "mutual" funds. Both will provide daily valuation and daily direction. But does it matter that A's and B's designated investment alternatives differ? If so, what kinds of differences are permitted or precluded?

Am I right in presuming that if A's plan allows a hardship distribution, B's plan must?

If A's plan allows a participant loan, must B's plan allow it equally?

The IRS definition of HCE is:

Highly Compensated Employee - An individual who:

• Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or
• For the preceding year, received compensation from the business of more than $115,000 (if the preceding year is 2014; $120,000 if the preceding year is 2015 or 2016), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation.

401k communication about DC plan's top heavy status came during the year in which a plan was top heavy and key employees had been making contributions during the top heavy year.

Is it allowable to unravel their current year contributions (EE/Matches etc) and run it through payroll so that their effective contribution rate is 0% in order to avoid owing a top heavy contribution?

Hi All,

Fringe benefits are excluded as eligible compensation for my client, and they are currently having deferrals being taken on $200 monthly payments to employees who have opted out of the Company's health insurance (Cafeteria Plan). Note, to do this, they have to show proof they are in they have health insurance elsewhere.

I've done some research, and what I've come up with so far is that these cash out option payments are taxable income and in box 1 of employees W-2's and that a Cafeteria Plan is considered a fringe benefit.

Does anyone have an excerpt that I can show the client where these cash payments for opting out are considered to be a fringe benefit that is within the employees total compensation?

IRS guidance is 4.23.5.13 and 4.23.5.13 15-B. I've cruised through all of the internet, including this forum, and cannot for the life of me find a definitive answer.

Please let me know what additional information would be needed.

Darn - I think I deleted this before posting, so I'll try again. Let me state at the outset that I know nothing about RSSP's before today, and after a little internet research, I know a bit but still not much!

Employer makes matching contributions, and deposited the match "late" for one employee.

On this side of the line, a late deposit to a 401(k) could easily be self-corrected with an earnings adjustment.

I don't know if an earnings adjustment is required, or even permitted, for an RSSP. Anyone know, or know of a source to find out?

Thanks!

I didn't see this posted in any other forum and this seems the best place to post it.

In case you didn't read the bulletin, the IRS has released RP 2016-47.

This provides for self-certification for a waiver of the 60-day rule, based on 11 enumerated reasons.

https://www.irs.gov/uac/new-procedure-helps-people-making-ira-and-retirement-plan-rollovers

https://www.irs.gov/pub/irs-drop/rp-16-47.pdf

No more PLRs for these 11 reasons. Also, since they probably vetted all the prior PLRs for legitimate reasons, I think the future success of a PLR for another reason will have a low probability of success.