I am taking over a Plan who allows everyone to contribute to the 401(k)/Safe Harbor portion of the Plan. However it is only the salaried employees eligible for the Profit Sharing portion (it's about 50/50 as to salaried and hourly employees). Am I wrong to think that the Profit Sharing portion also needs to simply pass the 70% test on it's own?

Thanks for your help in advance! I just want to be sure.

DB participant reaches age 70 1/2 in 2016.

DB plan is terminating and making lump sum distribution 3/1/2017which participant intends to roll to IRA..

TPA firm is saying no 2016 RMD required since plan termination distribution occurs before required beginning date of 4/1/2017.

Which means there will be no RMD with respect to this $$ for 2017 either since $$ not in IRA on 1/1/2017.

Doesn't seem right so requesting thoughts of others more familiar with DB RMD rules.

Thanks

It has been awhile since we calculated an RMD if the participant wants to take two distributions in one year.

As far as I can remember

DC

12/3115 account value used for both 2016 and April 2017 divided by life expectancy uniform table for age in 2016.

The second distribution has to be taken by 12/31/2016 and is based on the 12/31/2015 account value less the amount of the first distribution using the factor for the participant's age in 2016.

DB

Can't use the account balance method after 2005.

Actuary has advised accrued benefit as of end of prior year x 12, but that seems too simplistic.

How do you calculate if two distributions in one year?

Partners will be receiving bonuses in January 2017, attributable to 2016 settlements.

Can the Partners:

1. Assuming an election is made in advance of the settlement payment, defer for 2016 from the 2017 settlement payments?

2. Have 2016 Profit Sharing allocated based upon the settlement payment?

Control group:

Company A wants to adopt safe harbor match of 100% up to 4%.

Company B wants to adopt safe harbor match of 100% up to 6%.

Both companies have HCEs.

Can this be done? Do we just need to aggregate and test 410(b)?

Am I missing anything?

Thanks.

Greetings,

Is it permissible to submit a "supplement" to a VCP already submitted for an additional failure/correction? We are submitting a VCP for an employer match failure and it has come to our attention that a vesting correction must also be made to affected participants.

Has anyone been able to supplement a submitted VCP for an additional correction? Or would this be at risk of requiring an additional VCP submission/fee.

Thank you.

An employer has asked if a Medicare premium reimbursement can be "run through" a cafeteria plan on a pre-tax basis?

This will display my ignorance in this arena, but it seems to me that while it may be possible to have a Medicare reimbursement program if the requirements of IRS Notice 2015-17 are met (i.e. those enrolled in Part B or D are offered health coverage that is minimum value and not solely excepted benefits) that it couldn't be pre-tax through a cafeteria plan? Or is that incorrect? I'd appreciate any thoughts on this. Thanks!

An employer maintains an individually-designed plan. This plan is in cycle A. The plan received favorable determinations for the previous intervals of the cycle. The employer will not apply for the IRS's determination this winter.

For whatever could be the subject of a remedial amendment, what is the last day for the amendment to be executed?

Is it January 31, 2017?

Or is it (assuming all relevant tax and plan years are calendar year) December 31, 2016?

Client has an EACA Plan with 3% default Not a Safe Harbor Plan. They want to increase the percentage to 4% and also increase the cap on the auto escalation. They want the changes effective 1/1/2017.

The platform has notified us that they can not get this change implemented before the end of the year, and therefore the client has to wait until 1/1/2018. Per the platform you can not make changes to the EACA mid year.

I thought I read you could change the EACA mid year, however it would only apply to new participants. However, since the EACA will not be a uniform percentage for the 12 months, the client may lose the ability to correct ADP refunds by 6/30 - they would have to have refunds issued by 3/15 to avoid the excise tax.

Was I dreaming this or is my thinking correct. If I am correct, where can I fund documentation to support this position???

A SH plan sponsor contacted me yesterday asking if she could amend her plan to allow for immediate entry effective immediately. The goal is to allow a new hire to be in the plan now so she can make a 2016 deferral allocation.

The safe harbor notice doesn't specifically mention the plan's deferral eligibility rules, instead referring the reader to see the SPD for details. It does mention the eligibility for the SH (which is statutory, though deferral eligibility is currently faster).

Obviously, there's no time to give a 30-day advance notice at this point, but I'm wondering if that's really a thing here; the wording in Section III.C. of IRS Notice 2016-16 is not clear to me:

C. Conditions for Mid-Year Changes to a Plan’s Required Safe Harbor Notice Content The notice and election opportunity conditions applicable to mid-year changes to a plan’s required safe harbor notice content (for purposes of applying the provisions in the first paragraph of section III.B of this notice) are described in paragraphs 1 and 2 of this section III.C. This notice does not require any additional notice or election opportunities for changes to information that is not required safe harbor notice content, even if that information is provided in a plan’s safe harbor notice. Also, this notice does not modify the rules governing information required to be included in a plan’s safe harbor notice.

...1. An updated safe harbor notice that describes the mid-year change and its effective date must be provided to each employee otherwise required to be provided a safe harbor notice under § 1.401(k)-3(d), 1.401(k)-3(k)(4), or 1.401(m)-3(e), as applicable, within a reasonable period before the effective date of the change. Whether this timing requirement is met is based on all of the relevant facts and circumstances, but this timing requirement is deemed to be satisfied if the updated safe harbor notice is provided at least 30 days (and not more than 90 days) before the effective date of the change. If it is not practicable for the updated safe harbor notice to be provided before the effective date of the change (for example, in the case of a mid-year change to increase matching contributions retroactively for the entire plan year, as described in section III.D.4 of this notice), the notice is treated as provided timely if it is provided as soon as practicable, but not later than 30 days after the date the change is adopted. For purposes of this section III.C, if the required information about the mid-year change and its effective date was provided with the pre-plan year annual safe harbor notice, an updated safe harbor notice is not required.

...2. Each employee required to be provided an updated safe harbor notice under section III.C.1 of this notice must be given a reasonable opportunity (including a reasonable period after receipt of the updated notice) before the effective date of the mid-year change to change the employee’s cash or deferred election (and/or any aftertax employee contribution election). For this purpose, a 30-day election period is deemed to be a reasonable period to make or change a cash or deferred election. If it is not practicable for the election opportunity to be provided before the effective date of the change (for example, in the case of a mid-year change to increase matching contributions retroactively for the entire plan year, as described in section III.D.4 of this notice), an employee is treated as having a reasonable opportunity to make or change an election if the election opportunity begins as soon as practicable after the date the updated notice is provided to the employee, but not later than 30 days after the date the change is adopted.

It seems like it wants a 30-day notice in advance, but if you can't, no big deal. That can't be the correct interpretation, can it? Is the answer different if the goal is to also make the SH eligibilty immediate, too? Thanks.

Is the RMD determined by the when 70 1/2 is obtained or the year it is obtained.

Participant DOB 3/1/2016 so will turn 70 1/2 on 9//1/2016.

Participant does a rollover before on 8/1/2016. Is a RMD required before the rollover?

Hello,

When you set up two new plans (401k 001 and cash balance 002) with the same effective date (1/1/2016), is it possible to exclude prior services for the vesting purpose for one plan (CB) and not the other (401k)?

Cash Balance will exclude services prior to the effective date of the plan.

401k plan will consider all services including prior to the effective date of the plan.

Thanks.

QUESTION: Is the following scenario a permissible IRA investment for a self-directed IRA (SDIRA) or a self-directed LLC IRA (SDIRALLC)?

My wife and I own (via a joint revocable trust – for estate planning purposes) 23.25% of a privately held bank holding company. We are the largest stockholders. Two other family members (brother and sister to my wife) own approximately 22% each. Thus, the family owns 2/3rds of the bank holding company. The only asset of the bank holding company is 100% ownership of the subsidiary community bank.

Additionally, I beneficially own part of an existing ESOP (that is part of a KSOP retirement plan). The ESOP has a 14%+ equity interest in the holding company. (I am the largest ESOP beneficiary at 25.4% of the ESOP, or about 3.7% of the holding company.) My ESOP account was acquired when I worked for the bank. My employment with the bank ended in 2007. I was, also until 2007, on the bank’s and holding company’s board of directors. Since 2007 I have not been employed by the bank or holding company nor on either’s board of directors. (My wife has never worked for the bank or holding company, nor has she ever served on the boards of directors of either.)

(Of note, I may go back on the board of directors of either or both the bank and holding company in 2017. There is also a remote possibly that I may once again be employed by the bank, or serve in some consulting capacity.)

My wife and I do have our main banking relationship with the bank. These are all in various deposits accounts (plus a safe deposit box). We have no loans at the bank.

The bank is likely to terminate the ESOP part of the KSOP in 2017. The 401(k) part of the KSOP would remain. The ESOP was established in the early 90s as an add-on to the existing 401(k). It was “active” for three or four years, “active” meaning the bank made contributions to the ESOP for the participants. There have been no ESOP contributions since these first few years. The only current activity is the dividends that are paid to the ESOP for the holding company shares owned by the ESOP trust [and subsequently moved to the respective ESOP beneficiaries’ 401(k)], and former employees who in rare times cash in their ESOP balances for a cash out distribution in which the ESOP is a market maker.

If the ESOP is terminated, I would like to roll my ESOP “shares” into a SDIRA (or SDIRALLC if this is required) rather than take the cash payout to a rollover IRA. This would be a trustee-to-trustee transfer as I am not purchasing any holding company stock with any cash ESOP/401(k) funds. I just want to keep what I have. It is my understanding that ownership by a SDIRA of privately held C Corp stock (which this bank holding company is) is a permissible IRA asset. However, there are numerous “self-dealing” prohibited transactions as it relates to owning privately held stock in situations such as I describe above. Thus, my ultimate question is whether or not I can make a rollover (trustee-to-trustee transfer) SDIRA contribution of my ESOP assets already owned (shares of stock in the bank holding company) should the ESOP be terminated, all based on the facts and circumstances as I outline to you above?

FACTS:

- The Plan is a 401kPSP with 3% Safe Harbor NEC

- It's the 2015 Plan Year

- Employer business and 5500 returns were on extension to 9/15/2016 and 10/15/2016 respectively

- Business returns were filed in June, deducting the Employer SH contribution

In August, the Employer decided to contribute PS for the 2015 plan year

QUESTIONS:

1. Is there any reason the PS can not count as a 2015 Annual Addition? It was deposited timely (before due date of tax return) for 415 and therefore seems it should count as a 2015 Annual Addition even though the employer failed to take the deduction for it on the 2015 employer return

2. Since the 2015 Business Returns were actually filed PRIOR to (the deadline to file and) the employer's decision to make this 2015 PS contribution, no deduction was taken on the 2015 returns -- Other than the 25% deduction limitation for 2016, is there any reason the employer can not deduct the 2015 PS on his 2016 business return (along with any other 2016 employer contributions)? The employer does not want to amend its 2015 tax return if it can be avoided.

3. If for some reason the deduction of the 2105 PS can not be taken on the 2016 return, can the 2015 PS be recharacterized as 2016 PS?

Thank you

I have read all the threads on this board that I can find regarding change in vesting as well as the EOB, 411(a)(10). My confusion is regarding comments that state future accurals are subject to the prior vesting schedule.

Plan sponsor decides to be generous and make everyone 100% immediately vested in a discretionary match. This has been the case for a few years. New CEO questions why this was done and wants to change vesting to a 4 year graded schedule.

Can the plan sponsor amend the vesting schedule to keep all current match 100% vested and have future discretionary match accruals subject to a 4 year graded schedule? (regardless of the record keeping struggles).

Thank you

A small non-pbgc cash balance plan will terminate as of December 31, 2016. Can voluntary correction be part of the determination letter request?

Thanks!

Someone is pitching to our CEO a 162 bonus with restrictive endorsement. CEO is all excited about this. But details presented by broker are somewhat lacking so I have some concerns.

I understand the endorsement limits access to policy values etc. But:

1. Broker indicated that we can include a vesting schedule, and made it sound like we can still take a current tax deduction. Is that correct? With a vesting schedule, does the employee have current taxable income, or only when vested? What about payroll tax?

2. It seems clean enough if the employee stays until restrictive endorsement is lifted, but what if they don't and have to repay the company? Do we (the company) have taxable income for amount of repayment? If the employee paid tax all along, are they just SOL or can they deduct the amount repaid? If so, I assume the are out the payroll taxes, if those were paid all along? What about company - are we also out the payroll taxes?

3. This seems to be moving pretty fast in our C-Suite and I also have concerns about administration. Broker is a small 3 or 4 employee company. Our CEO is considering this plan for 100-150 employees. What kind of administrative support will we need from the broker? This seems like a long term plan and putting it in the hands of a small mom/pop company concerns me.

Thank you

DB/DC combination. Eligible Employee (HCE, but not key) enters both plans 1-1-2016. They accrue benefits for 2016.

Now, both plans are amended to exclude this HCE (but not key) by classification effective 1-1-2017. Not eligible for deferrals, match, PS or anything, and not eligible for DB.

The plans are not frozen. Owners and NHCEs and other HCEs are still eligible and accruing in both plans.

A colleague is arguing that continuing additional top-heavy minimums must be accrued even after 2016 by this HCE even though they are fully excluded, assuming they meet the top heavy accrual requirement (1000 hours for DB or last day for DC). Based on grey book 2001-35.

The written plan language appears to require the participant be an eligible employee to earn a TH minimum accrual. Essentially meaning they must earn a top-heavy year of participation to accrue additional top heavy minimum accruals. If they are now excluded by class, they can't earn any more years of top-heavy participation.

My colleague states that this HCE became a "participant" on 1-1-2016 and that fact requires the plan to provide top-heavy minimums to comply with the law/guidance, since they are still a "participant" with accounts and/or benefit accruals from the 2016 plan year. The document might not have a formula for them for any more normal accruals, but the plan would not meet the law’s requirements if the top-heavy minimum was not provided, causing a qualification issue.

Your thoughts on this?

If you're assembling a plan's rule 404a-5 disclosure to participants ...

Do you include or omit a money-market fund's seven-day yield?

If you include it, what is your reasoning for showing it?

(I assume there is no one inarguably right or wrong answer. Rather, I hope to get some sense of customs of recordkeepers and TPAs.)

Non Owner Participant dob 6/28/46, terminated from company in 2015. Wants to roll over his entire balance to new employer plan before attaining age 70.5 to avoid RMD. Is entire balance eligible for rollover since he will turn 70.5 in 2016 but after the distribution? Or do we have to process an RMD and rollover the balance? Thanks in advance for any direction.