12/31/15 PYE: Test was run and corrected by 3/15

We discovered an error which resulted in rerunning the test. Unfortunately, the test failed an additional $462 in ROEs is necessary. It is approximately, $51 per HCE.

Is there a de minimis amount that would permit the plan not to make an additional correction?

Does anyone know of a good resource that gives detailed statistical data regarding participation in 401(k) plans - perhaps participation in micro market 401k plans vs. large market plans or 401k participation by industry - i.e. x% of participants on average in manufacturing make 401k contributions while y% of participants on average in medical make 401k contributions...

it seems like these statistics s/b somewhere, but i'm just not unearthing them... i've checked our Bureau of Labor Statistics, DOL, PSCA (which has some but not quite the detail i was looking for)

Any suggestions would be appreciated... trying to see how participation rates in the plans our firm manages stack up again national averages - but comparable ones.... not so generic that it's not really an apples to apples comparison

Thank you!

A 401k client has Paychex do their payroll.

Their plan document does not exclude bonuses or any irregular pay from withholding deferrals.

A participant got a small bonus check of about $30 - Paychex withheld his medical insurance premium first - and this resulted in a zero net check. (the premium is obviously more than $30)

Should they have withheld his deferral first and deducted the remainder for insurance premium? Is this something the employer can dictate? Paychex told them that was how their system did it. If the check has been large enough to deduct both - then that would have happened. Is there a pecking order by law?

Thoughts? Thanks!

Multiemployer defined contribution plan qualified under 401(a). Unmarried participant dies. A proper beneficiary designation form was completed naming the participant's sister as beneficiary.

Can the plan have provision stating that the beneficiary can leave the money in the plan and elect any distribution (other than a QJSA) that the participant could have chosen? For example, lump sum, periodic installments, non-periodic installments.

Or, does ERISA or the Code require that the plan state that the beneficiary must receive a lump sum or roll the money over to his/her own IRA?

I have recently heard conflicting advice on this. One very large investment house remains adamant that the plan MUST distribute the money in a lump sum to the beneficiary. They said that the plan is there for participants and alternate payees only.

I had another person say that, no, the beneficiary can leave the money in the plan.

Have any of you ever dealt with this?

Thanks.

Service provider failed to file an extension for a calendar year plan. Plan sponsor is a fiscal year taxpayer (3/31 year end). Can plan sponsor still rely on the corporate tax extension to extend 5500 deadline to 10/17?

Thanks for any guidance.

Hi,

I have a 12/31 plan that has 2 match formulas. 50% to 6% and 100% to 6%. The 100% to 6% is failing BRF.

This match was "grandfathered" to a group of 4 participants (1 HCE, 3 NHCEs) back in 2004. They were part of a larger group and the formula worked for a bit. The plan spun out in 2013 and is now a much smaller plan. It is failed BRF that year (never corrected). For 2014, the usual HCE fell below threshold therefore was considered NHCE. Now 2015, they are failing again. By the way the plan was restated in 2013 and again in 2016.

Is there any way this would be permissible since it was a "grandfather" closed group? Or do they need to expand the group receiving the match?

Thanks for any help...We are up against the 9 1/2 month deadline which is Saturday/Monday.

I'm surprised there is no relief yet or did I miss something?

Folks can anyone point me to clear defining regulations that say a maximum amount of a new loan request has to be determined by reducing the maximum permitted loan by the highest outstanding balance in the last 12 months?

I have a situation that Ascensus is refusing to permit any loan over what they say is a 12 month look back period. I had a loan that was completely repaid on June 29, 2016. The loan since June is not outstanding.

By the Ascensus Calcs: now 95K is vested. So a maximum allowed is 8616$.

50,000-(maximum outstanding in last 12 months)=50,000-41383.71=8,616.29$ is what Ascensus says is my maximum new borrowing allowance.

From everything I read in the CFR indicates that look back should only apply when there are prior existing loans that are outstanding in that all loans cannot exceed the maximum 50K.

In my case I currently do not have any outstanding loans.

Thanks for your reply.

Ken

Our plan has quarterly enrollments. A participant wanted to begin catch-ups with the quarterly enrollment. She adjusted her deferral to accommodate for the amount, but due to some miscommunication did not realize she had to also fill out a separate form to elect that she wanted to sign up for catchups.

I feel that we can self correct this and begin her catch ups now since it only a single situation and caught right away, rather than wait until the next enrollment period in January. Is my thinking correct?

We have a new plan that has come to us. It is a one-participant plan (1 owner covered, no other eligible employees). The plan has a real estate investment as part of its assets. I say it is still eligible to file a Form 5500-EZ or one participant Form 5500-SF. A colleague thinks we need to file a Form 5500 with a Schedule I due to real estate investment.

Any thoughts?

My ex-husband lied during our divorce and said he did not have a 401k plan. He did. When we divorced after 25 years of marriage he took our 3/4 of a million dollars and dropped it off overseas two weeks before the divorce hearing, so I got nothing. I am now 62, and have no retirement funds. We divorced in Ohio-a community property state, so I was entitled to 50% of his 401k plan. How do I find out even the basics about the account? Do I contact his old employer and do they have any obligation to speak to me or provide information? What about the Department of Labor? How can I determine the existence of his 401k account so I can obtain my half? I cannot afford an attorney.

Client PC currently maintains a cross tested 401K profit sharing plan; adopting cash balance for 2016.

Accountant mentioned he should terminate existing 401k and roll over to IRAs for all and adopt new 401k in combination with cash balance DB. because sharing contributions rise dramatically each year as client only participant getting more than a money market ROR. Says the participants have chosen money market investments.

Does this make any sense?

Generally, I work on DB plans, so forgive a naive question.

A 401(k) plan with matching by pay period has turnover in their HR department and some match deposits get missed. Later the TPA notes the failed match, and wants to make corrections. The issue is not resolved until 20+ months after the due date, but finally paid, voluntarily without govt direction.

How does this get reported for IRS, DOL and 5500 purposes?

What happens to the excise tax (under $100), specifically as to paying it to IRS or to participants?

Any help would be appreciated.

I've gotten two letters in two days from the Boston Office regarding late deposits reported on the 5500. The letter specifically says "it appears that the correction was not completed before the date of the filing of this form."

That is false in both cases - the auditors schedule of late deposits disclosed that it was corrected outside of VFCP.

The letter indicates that "prior to commencing any enforcement actions, please let us know if you will be filing under VFCP."

By the way, did I mention that both plans have around $1MM of contributions a year and the late deposits disclosed were WELL below $1,000? One was just barely over $100.

Anyone getting similar letters? I think that when they pulled the query something went wrong and these were sent out in error.

I understand that SIMPLE plans are subject to the controlled group rules (i.e. all members of the controlled group are treated as a single employer for qualified plan requirements).

While as a parent company has SIMPLE 401K plan, can a subsidiary company have SIMPLE IRA in the same year? Contribution percentage will stay the same.

The most of the employees will be transferred to a subsidiary company, and parent company will be as a holding company.

I understand that filing Form 5500 begins the running of the statute of limitations for an ERISA Plan IRS audit. A governmental DB plan, however, is not subject to the Form 5500 filing requirement. Any leads on what starts the running of the SOL for a governmental DB plan?

Does anyone know of a good resource for how to apply the 409(p) test when the S-Corporation has subsidiaries and certain participants own stock in the subsidiaries?

The guidance is clear that an option to purchase the stock of a related entity should be counted as synthetic equity. But what if the participant owns the stock outright, rather than an option to purchase the stock? Is that included in the test? If so, is all of the stock in the subsidiary included in the denominator when determining a nonallocation year? I don't necessarily need someone to answer these questions, but if anyone knows of a good 409(p) resource that includes guidance on these kind of questions (even if it costs money), I'd be incredibly grateful.

Thanks everyone.

Hey - just wanted to say that if any of you are in the path, or on the fringes, best of luck. Not much to do except hope for the best, I guess.

Safe Harbor 401(k) Plan using 3% QNEC. Currently the only contribution sources are employee deferral (pre tax AND Roth) and Safe Harbor. (The plan document does permit discretionary profit sharing contributions, but thus far there have been no profit sharing contributions.)

Problem: There were partners that “deferred” and received safe harbor contributions on their “distributions” (as noted in Box 19 of K1) during the year. However, their SE earnings for 2015 were actually 0. This created excess annual additions for 2015.

It is my understanding that in order to correct excess annual additions: First the employee deferrals (adjusted for earnings) must be distributed to the participants. Then employer contribution (adjusted for earnings) must be forfeited and placed in an unallocated suspense account and used to reduce future employer contributions. No employer contributions may be made until the “suspense” account is used up.

First question: Does this mean that until the suspense account is used up, the employer may not make safe contribution to any participant? (non partner/staff)

Second question: Since we are not permitted to use forfeitures to reduce safe harbor contributions, what do we do with the amount in the suspense account? Since the contributions were fully vested when originally deposited are they technically considered a forfeiture? Can we still use them to “fund” future safe harbor contributions?

Or, should the plan sponsor declare a profit sharing contribution for 2016 and then use the suspense account to reduce the p/s contribution?

Thank you.

We have a plan that converted in 2015, so obviously this is time sensitive. The prior recordkeeper reported the 457 tax exempt plan assets with the 403(b) plan assets. Except by amending all prior filings (we don't have the asset breakdown for prior years), how can we correct this issue? Can the assets be shown as a transfer out? I also cannot find a plan number for the 457 plan.