Just wondering if I am thinking correctly - NO inservice distribution allowed for safe harbor contributions.....

A new client was placed in a plan claiming to be a fully-insured (412(i)) cash balance plan with a companion fully-insured profit-sharing plan. This was originated back in the mid-2000's, driven by an agent who may have regulatory issues, which we are investigating. I am challenged by several issues, and appreciate your thoughts in general, and if you have personal experience, maybe some stories or facts to share.

First, it is clear that this must be an individually drafted plan. Is it possible to get copies from the IRS of any past plan submissions for qualification? None of the vendors (agent, or the three insurance companies used) has produced a plan document, although we are still pressing the issue.

Second, given the disparity in contributions by policy, we need to test non-discrimination. Would a cash balance plan projection be based on the credited interest rates in the individual policies? (So far, we do not see any variable annuity policies in the history, so I expect some stability on this issue.)

Third, I would expect that the fully-insured status was used to avoid an enrolled actuary certification, although I would expect that the insurer had actuarial review on the proper premiums for each policy. How does this meet the requirements for avoiding EA review, given that this is not a level premium safe-harbor design for a flat benefit or unit benefit plan with a minimum 25 year accrual rate (as far as I can determine so far)?

Any suggestions or comments would be appreciated.

Can the employer be the trustee of a 401(k) plan? I have seen it where an employee of the company is the trustee, but can the company itself be named as trustee?

I just got into the retirement plan space, so I've never been asked anything like this.

I have a client who is looking for the regulation that states a Plan year can be different from the company Fiscal Year. Is there a regulation that states this is allowed or a DOL/IRS ruling or guidance I can point to?

Scenario 1

The plan is a basic safe harbor matching plan where employees are also grouped in classes for profit sharing purposes.

If only one class of the NHCE receive profit sharing contribution,

does this trigger Top Heavy test or any other test at all (except 410(b))?

due to the fact other NHCE classes didn’t receive any profit sharing contribution?

Scenario 2

The plan is a 3% safe harbor NEC plan where employees are also grouped in classes for profit sharing purposes.

If only one class of the HCE are excluded from getting the 3% Safe Harbor,

does this trigger Top Heavy test or any other test at all (except 410(b))?

assuming no other contribution except deferrals and 3% Safe Harbor

The plan defines beneficiary as a person or other entity designated by the participant who is or may become entitled to benefits under the plan. The plan has interpreted "other entity" to mean an estate, trust or charitable organization. The plan received a beneficiary designation form from a participant naming a funeral home as his beneficiary. I think the plan should reject it based on its past practice of interpreting "other entity" not to include a for-profit business, but does anyone know if the Internal Revenue Code or ERISA contains any prohibition on naming a for-profit business as a beneficiary for a retirement plan? Any help would be appreciated.

It's still a controlled group (therefore, 5500-SF code 3H) as far as the 5500-SF is concerned rven if the other entity has not elected to adopt the plan, right? Thanks.

I have a collectively bargained plan that fails the ADP test. Rather than issuing corrective distribution checks, the plan sponsor has asked that the corrective distributions be reclassified as employee after-tax contributions. The plan document allows for this and PS understands that the participants will still get taxed on the corrective distributions. Based on the fact that the plan is a collectively bargained plan, it is deemed to satisfy the ACP test (401(m)-1(b)(2)). Therefore, reclassifying the corrective distributions to after-tax employee contributions will not adversely affect any non-discrimination testing. Does anyone disagree with this thought process?

Appreciate your responses in advance.

A plan's loan policy had a limit of 5 years for participant loans. The vendor issued a loan a couple weeks ago for a 15-year primary residence loan.

The plan sponsor does not want to adopt a new loan policy that allows for primary residence loans.

The loan is not in default, the end of the cure period hasn't passed. One payment just occurred. Has an actual error occurred that would necessitate VCP?

Could this be self-corrected by re-amortizing the loan now to not go outside 5 years or by having the participant pay off the loan now and borrow from outside the plan?

I'm trying to determine what direction I want to go with Year End Census Data collection from Employers.

We currently send a 33 page document asking the pertinent information and the definitions of such. I would love to reduce the questionnaire to as little as possible.

What do my colleagues here do for year end census? And how much information do you send?

I have seen a big 401k provider that really asks for very little. Are you eligible, what's the compensation, who are the HCEs, and who are the owners? A few more questions, but not much.

Thanks for your thoughts.

Has anyone else had this problem this year?

We sent a batch of Form 5558 to the IRS - timely, properly addressed, via certified mail. The IRS signed, and opened the envelope.

They then resealed the envelope, and included a letter stating that the extensions weren't properly addressed and that they were being returned.

I can't find any error.

The other batches we sent have not been returned. I'm hoping they were processed just fine.

As with other occasional issues, we've documented everything and have a letter drafted to resubmit the extensions, as well as one to use when the IRS says the 5500s are filed late. But it is just a pain.

In case this was part of some larger widespread issue this year I wanted to check.

I am looking for the old TEFRA percentage factor that is used to calculate RMDB when dealing with cash values. I believe it started at 140% and then was reduced 1% a year until age 75 when it bottomed out at 105%. A link or chart would be great

Who is considered an "interested person" for purposes of the VFCP notice under PTE 2002-51 (as amended in 2006)? Has anyone taken the position that (or asked the DOL whether) it is limited to only those participants and beneficiaries affected by the failure, or must the notice be given to all participants/beneficiaries in the plan (like the determination letter NIP)? I could not find any guidance on this, so just wondering about other practitioner's thoughts/experiences.

We mailed hard copies of our SAR, and of course a large percentage were returned due to bad addresses. The prior administrator stored the returned mail for 7 years, creating a lot of boxes with paper in them that we will never access. I would like to rid myself of these boxes. Can I:

1) make a note on the spreadsheet that was used for creating the mailing, noting that it was returned and why, along with any additional action taken, such as if the letter was resent to an updated address provided by the Post Office; or

2) scan the front of the envelope and store in an electronic file.

Any advice would be much appreciated.

We have a vendor whose system will not offset a loan for a terminated participant until the balance is paid in full.

I always thought that the needed condition is just the distributable event, and that I don't need to carry phantom balances and interest on terminated participants awaiting the day that they take their account elsewhere.

We also have an IRS audit that is having issues with the Loan reporting and balancing for 5500 vs. the Vendor's loan reports, etc. Quite a pain. The participant has a balance well above $5,000.

If a participant elects to have an in service distribution when there is an outstanding loan to the participant is it mandatory that the in service distribution trigger an offset for the amounts of the outstanding loan receivable?

Situation is as follows, say a participant has a 50k loan outstanding from the plan and a non-loan balance of 50k. The participant is eligible for an in service distribution and wants to take an in service distribution of the 50k and roll it over to an IRA.

For whatever reason, he wants to retain the loan balance in his account and wants to make repayments, as in he does not want to treat this as a loan offset.

Is that ok?

Is there anything in the code or regs. that makes a loan offset mandatory in these circumstances? All, I can see is that the terms of the plan document and promissory note govern.

What if both are slient?

A participant who is catch-up eligible and is an HCE by means of attribution has compensation of $30,000. If she defers $15,600 and receives a profit sharing contribution of $20,400 she will exceed her IRC 415© limit by $6,000. Can I treat the $6,000 as a catch-up contribution and only include $9,600 in the ADP testing or must I run the ADP test first using the entire $15,600?

In other words, is there an order by which a catch-up contribution must be determined if the deferrals do not exceed the 402(g) limit?

In this example, her deferrals in excess of $9,600 would cause a failure of the ADP test requiring corrective distributions to participants who deferred $18K.

There is a cash balance off-set plan with a participant count of 32 before the offset. After the offset, there is only one participant receiving a benefit under the cash balance side of the plan. When counting participants for the PBGC flat-rate premium, would we use the number of participants receiving a benefit before or after the offset?

Happy 8 / 8 / 16

If a calendar-year safe-harbor matching 401k plan gets set up in September, and it has a Jan 1 effective date in order to maximize profit sharing, would employees that terminated prior to the date the plan is signed have to be included in the profit sharing allocation/testing? Or could those former employees be automatically excluded since they terminated before the plan was signed into existence?