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.

Participant terminates employment in 2008.  Receives a distribution, including surrendering a life insurance policy that he had in he plan.

Participant dies in 2013.  His named beneficiary dies in 2014.

The plan received a dividend check a few weeks ago on this policy.  Essentially the insurance company overbilled on the premiums and is refunding about $1,000. 

Who gets the money?  Had the money been in the plan at the time of the participant's death then it would have passed to the beneficiary, but it wasn't.  It wasn't in the plan until after both the participant and the beneficiary died.  Does it now go to the participant's contingent beneficiary or still pass to the original beneficiary's estate?

Thanks in advance for any guidance.   

Hello,

A client of mine wants to set up a clause to exclude employees with invalid SSNs and only allow for valid SSN employees and count this as the definition for resident aliens, how could this be better worded so it doesn't make obvious the possibility of invalid SSN employees working? 

Some ideas I've come up with are that don't satisfy the latter requirement are:

Only allow for employees legally residing in USA.

Exclude employees who use ITINs to file taxes.

Exclude employees without valid SSNs.

Only allow employees with valid SSNs.

Thank you for any ideas.

Johnny has a $5,000 loan s of 1/12/2017.  He terminates employment as of that date.  His 1099-R is:

a) $5,000

b) $5,000 plus any interest that accrues between 1/12/17 and the end of the "grace period" 

I realize that for loans that default when there is no distributable event the interest is accrued through the end of the grace period.  Is the same thing true for terminations (i.e., when there is a distributable event)?

Where would it say if interest from a participant loan in a pooled trust goes to the participant's portion of the trust or allocated across the entire trust?  Is the former possible in this situation?  It's been a long time since I've had a pooled trust with loans.  And I believe I would allocate interest to each participant who had a loan rather than the trust as a whole.

Assuming a DB/DC combo where everyone participates in both plans.  When the DC contribution (not including deferrals) exceeds 6%, then the total deduction limit to both plans becomes 31% and the DB 'loses' it's otherwise larger max.  Say the sponsor contributes 8% of pay to DC and 40% of pay to DB.  My initial assessment is that 17% of pay is not deductible.  To the extent it does not exceed the amount of matching contributions, no excise tax is due.  If it was made in the following plan year, they can take the deduction in the following tax year and avoid any non-deductible contributions. (But that eats into the next year's 404(a)(7) limit)  My question is this, is there a provision such that they do not deduct 2% of pay contributed to DC plan, leaving the amount at 6% and thus preserve the larger DB deduction?  My read of 404(a)(7) is no.  But I'm open to other interpretations or solutions to the problem.

Any insight on whether sponsors of self-funded health plans are sharing in rebates paid to the TPA when specialty drugs are run through the medical benefit instead the pharmacy program?

We are capturing the rebates paid to the PBM when run through pharmacy benefit. 

Facts:

Husband and wife each own 100% of separate companies (have a child under 21 so they are related). His is a Sch C, hers is an S-Corp.

The husband current contributes to a SEP based on his Sch C income (the max 20%). The wife set up a 401k PS Plan through her S-corp and contributes the max to it.

Issue:

Are you allowed to have SEP and 401k in same year? If you are not allowed to have both, we thought we would just have the husband contribute to the wife's 401k plan since they are related and figured he could get the same 20% in the 401k PS Plan.

Any issues with the above?

Thanks in advance for your help.

We have a plan that has a "safe harbor" formula of 100% of first 3%, then 50% of next 6%.  I believe this formula satisfies the ADP safe harbor, but not ACP. Unfortunately, that formula does fit on to the volume submitter document that we use.  The document was drafted for the "qaca" contribution of 100% of 3% 50% of next 3%.  Then a "supplemental" match of 0% up to 6% and 50% on 7-9%. 

Does this make sense? Is there any other discrimination testing that is needed? BRF?  If this is permitted would it be ok to recordkeep the "2" matches in same source?

Any thoughts would be appreciated...

We have a 401(k) plan that just keeps giving all year long......

If I use some incorrect terminology, please bear with....

We have a 401k plan (Jelly(k))for a group of attorneys. A org setup, PC.  Pretty straight forward at this point. 

However, there is an attorney in the same building/floor that is NOT part of the A org PC, not an employee of said employer, that is practicing too.  He has 3 employees that are run under the Jelly(k) employer for benefits and payroll.  So the 3 employees get a w-2 from Jelly(k).  The attorney then reimburses Jelly(k) for the 3 employees expenses.  The interesting part is that the 3 employees deferrals go to the separate attorney's 401k plan.

I don't think this is correct.  Can this work?  I'd think the 3 employees deferrals would belong to Jelly(k)'s plan, not the other.

What are your thoughts on this?

We have a client who terminated their  401k qualified retirement plan in 2014.  However, they did not pay out funds until January 2015.  Their funds were with a brokerage account.  Unfortunately the 1099R's were never done for all 9 participants.  This was strictly an oversight since the TPA at the time and the brokerage house thought someone was preparing those (along with the 1096 and form 945) 

Is there any way to get penalties for non-filing abated?  Has anyone every had this happen in their practice?  How did you resolve?  I assume we need to do the late 1099rs, etc and send those out asap.

This means that all affected may have to file amended 1040's.

This is a mess.

Thanks for any comments/helpful suggestions on how to fix this asap

Hi All.  What is a good standard today to establish a fixed interest rate for 401(k) loans? The Plan is just now adding loan availability.   Prime rate + x?  5 year Treasury + X?

And, If employees are on straight commission, and sometimes receive no paycheck, how would  we handle loan payback?

Thanks, all,

Ray