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.

Would it be in violation of any rules to offer a gift card to former employees who still have money in the Plan incenting them to roll out so that Plan participant count drops below 100 and they can avoid an audit?

Brokerage commissions are reported on Schedule C but I have received differing responses with respect to reporting brokerage commissions (ether those paid to the firm or to the advisor)on Schedule H, either lines 2(i)(3) (advice to the plan), 2(i)(4)(miscellaneous expenses) or not at all as commissions are not expressly stated in the instrucitons..Thoughts? Thank you..

Privately-owned C corp bank sponsors an ESOP and wants to give participants an election under Code Section 404(k)(2)(A)(iii) to reinvest cash dividends paid to the ESOP in shares of Bank stock.

All other issues aside, anyone have insight whether this will cause Bank stock to constitute a "designated investment alternative" under the ESOP for purposes of the 404a5 participant disclosure requirements? Based on a strict reading of the 404a5 regs it appears so - insofar as the ESOP is a "covered individual account plan" and the ability for a participant to direct dividends paid on shares in his account to be reinvested in Bank stock causes Bank stock to qualify as a participant-directed "designated investment alternative" (i.e., an investment alternative designated by the plan into which participants may direct the investment of assets held in, or contributed to, their individual accounts).

Any other thoughts out there?

Thanks in advance.

A company called Securian Financial has a program using daily valuation but takes loan payments directly from participant's personal checking accounts rather than run them through payroll.

Client has plan that allows too many loans and has constant battle keeping them straight. The savings in clerical seems to be worth the switch. Any thoughts on that porcess and possible employer liabilities?

Anybody with experience with this company?

We have a prevailing wage plan and the document states that hardships can be taken but I have read that hardships are not allowed from Prevailing wage funds. Any thoughts?

Shareholder X of a corporation which sponsors an ESOP owns 4.8% of the NUMBER of outstanding shares of the company. This 4.8% is based on his non-esop shares only, and the total outstanding shares includes the ESOP shares (all outstanding company stock).

Shareholder X is turning age 70-1/2, so determining his ownership % is important. If he is a >5% shareholder, he must take a substantial RMD for 2016 and all future years. If he is not a >5% shareholder, he does not have to take RMDs until he retires.

Reg 1.416-1 T-17 says a 5% owner is any employee who owns (or is considered as owning within the meaning of 318) more than 5 percent of the VALUE of the outstanding stock of the corporation . . .

To determine whether shareholder X is a >5% owner, can I do a pure number of shares owned over number of shares issued calculation, or do I need to know an appraised dollar value of shares for each of the other shareholders? In other words, the stock valuation for the ESOP may say ESOP shares are worth $10, but another owner may have a different per share value based on his specific discounts applied, depending on minority/majority and deemed marketability. If some shareholders' stock is worth say $8.00, then the math could work out that shareholder X owns more than 5% of the VALUE of all shares.

Assume voting rights are equal for all shares. Which way does the 5% determination need to be made - number of shares or dollar values - and has anyone heard of the non-esop shares being valued for a purpose like this?

Thanks.

My understanding of late deposit reporting applies to employee contribution.

My client auditor thinks the late payroll by payroll matching contribution associated with the late deferral contributions deposits need also to be reported on Form 5500 Schedule H line 4a.

do late matching contributions deposit (associated with late deferrals) added to the late deferral contributions and reported on Form 5500 schedule H line 4a?

I had it burned in my mind that once someone is in a plan, they are in. I think I am slowly learning otherwise.

The situation is a safe harbor match 401(k) with immediate eligibility. If we change that to one year of service, do all of those part-timers/short-timers just cease to be participants? Is any documentation other than the amendment itself required in order to achieve that result?

(I know - it is, um, uncertain if these folks were given the opportunity to defer.)

I know this has been asked before, but could not find it (easily) on a prior thread, so...

Employer wants to have a safe harbor plan eff 1/1/17. Its 12/1/16 and the safe harbor notice is due. Or is it? Is there an exception to the 30 days before the plan year starts requirement for start up 401k SH plans? We'd like to have this effective for all of 2017, but there a some plan design questions not settled yet so we cannot have the document signed by 12/1/16.

Thanks

HATFA section 2003©(1) amended Section 436(d)(2) of the Code to provide that if an employer sponsoring a defined benefit plan is in bankruptcy, no prohibited payment may be made unless the plan's actuary certifies that the AFTAP of the Plan is not less than 100%. For this purpose, the determination is to be made without regard to the amendment to extend the minimum and maximum percentages of the segment rate to 90% and 110% from merely 2012 to 2012 through and including 2017 (a subsequent amendment extended the application of such percentages through to 2020).

In working on a sale of the employer, the lawyer for the buyer suggested that the plan has to be amended prior to closing to provide for such an amendment. The proposed amendment seems to be merely parroting the statutory change made by HATFA and not adding anything to facilitate the implementation of such change.

I looked further into this. While IRS Notice 2015-84, which contains the 2015 cumulative list, references certain changes to Code Section 436, there is no direct reference in the Cumulative List to the HATFA changes, other than a cross-reference to a 2014 notice dealing with the HATFA changes. Since the proposed amendment appears to be merely parroting the statutory change, I would conclude that such an amendment would not be required since it would already apply by statutory operation.

Any thoughts either way on this?