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?

Issue: A loan made to a “disqualified person” (owner/participant) that; 1) exceeds the maximum amount permitted under Code section 72(p), and 2) exceeds the maximum payment period under Code section 72(p). Because the loan was made to the owner (“disqualified person”) over the maximum amounts there is also a prohibited transaction. So, there are two issues.

1. Violation of 72(p) which results in a deemed distribution and can only be corrected under EPCRS/VCP where the maximum period for repayment of the loan has not expired. To permit the Plan Sponsor to report the loan as deemed distribution in the year of the correction instead of the year of the failure or to request relief of reporting the loan as a deemed distribution at all is only available upon request in the VCP application.

2. Fiduciary violation under ERISA where correction is permitted under the DOL’s VFC Program. In addition, the Applicant (Employer), can request relief of the excise tax under IRC section 4975(a). Upon receipt of a compliance letter from the EBSA, the EBSA will not impose the penalty under section 502(l) of ERISA on the amount repaid to the plan.

I understand the correction method under EPCRS and the VCP application. My main questions are regarding the VFCP and coordination of these two correction programs.

1. Can you confirm that a Form 5330 would be required for each year of the loan failure. Example; loan originated 2014 and was corrected in 2016. Would there be a Form 5330 in 2014 for 15% excise tax and then an additional 100% since the PT was not corrected in taxable year and the same for 2015 and 2016?

2. When correcting loan failures in regards to the VFCP application are the correction methods set forth in EPCRS Section 6.07 appropriate? Are there any additional earnings calculations that are required?

3. Should the VCP application be done and a compliance statement be received from the IRS prior to submitting the application for VFCP? How does one coordinate these applications?

4. In order to request exemption for the excise tax under 4975(a), I understand that a notice to interested parties within 60 calendar days of the application must be provided; do I also prepare all Forms 5330s showing the amount for the exemption (but not submit them to the service w/payment)?

5. Is there anything that I am missing? For example; is there excise tax besides the one under 4975(a)?

Thank you!

Payroll was not basing the deferral election percentage on Gross Pay, but rather the Net Pay for the Roth contribution. Taxes were calculated correctly using Gross. Result is the Roth contribution is less than what was elected on the deferral election. Goal for the participant was to have the same contribution amount for pre-tax and Roth.

Example:

Gross Pay $1,000

Roth Election 4% ($40)

Taxable Income $1,000

Fed w/holding (15%) $ 150

Net pay $850 - This was used to determine the Roth Deferral of $34 (short by $6)

I'm confident that the result is a "missed deferral opportunity" and can be corrected with EPCRS. Where I'm hazy is what the corrective QNEC contribution should be? It is a 09/30 plan year so the plan year is almost over so there is definitely less than 9 months left in the plan year, so that option is out. So, the only other option is the corrective QNEC.

Rev. Proc. 2013-12 states that the corrective QNEC for after-tax contributions is 40% of the missed deferral, 100% of any missed match and of course plus earnings.

The relaxed corrections with 2015-28 do not seem to apply to after-tax contributions. Can anyone tell me otherwise and point me in the direction of any guidance that has been issued by the IRS of the appropriate corrective QNEC for after-tax contributions?

Thank you!

I have a church plan that has elected not to be subject to ERISA. However, they have filed a 5500 for several years. If they want to continue to file in future years, are they automatically an ERISA plan? If so, and if they amend to be subject to ERISA, are the prior years when they filed 5500s considered operational failures?

In Plan Year 2013 the owner contributed the max, $51,000, twice, and we just caught it.

What is the best course of action?

Thank you.