We love doctors, right? Always want a million and one ways to lose their money! I digress...

One of the docs my wife works with at a local hospital mentioned to her about some changes to their plan, she referred me and I spoke briefly with him. Then the CEO called me. Physician's group, a couple dozen docs and another 40 or so EEs. They currently have a SH-k with PS (not a new comparability) on an insurance company RK/custodian, self-trustees with a producing TPA also giving investment advice but hiding under the (soon to be much more restrictive) 5-part ERISA fiduciary investment advice exemption.

They were approached by a competitor advisor who is recommending they move to a self-directed custodian so the docs can invest in whatever they want, including non-publically traded securities, real estate, etc. I do not even know of any such custodians for a plan with non-owner participants.

I am an RIA only, 3(21)(A)(ii) IA or 3(38) IM depending on the plan. Just so everyone is clear, my advice began with "NOTORIOUSLY BAD IDEA!!!"

While I am very familiar with SDBA options with custodians (I don't recommend them), but none I know of allow anything other than publically traded securities. I've only seen the door opened to alt investments with solo-k plans. My question is this: Are there even any custodians that will custody assets for non-solo 401(k)'s that permit alt investments, like real estate, non publically traded securities, etc???

Not to worry, I would NEVER recommend it, but I'm simply curious if anyone has come across a custodian like this.

Thanks!

A participant just discovered that her 401(k) deferrals have not been deducted from her paycheck since 2012. Our client has reviewed their files and agrees that they mistakenly did not deduct from her paycheck for that year. They are willing to make up and fund a missed deferral opp. from 2012. However she believes that they should be making up for all year since.

The client stated that they will not fund for 13,14,15 and 16 because they email employees every year requesting a new salary deferral form. This is part of their administrative procedures. Our client said that they have emails that clearly state that if they do not receive a new salary deferral form on Jan 1 of each year they will stop deducting and that the prior years form is no longer valid.

Questions:

1. Is there a statute of limitation of how long a participant has to bring up a missed deferral opp? Do they have to fund a QNEC for the missed deferral opp from 2012?

2. Aren't salary deferral forms, etc. administrative procedures? In other words, they can argue the fact that the emails they sent out clearly state that prior years form will not be valid and therefore will not need to fund a QNEC for 2013-2016?

3. Finally would we have to submit to VCP? I know there's a 2 year window for SCP, however isn't this considered a insignificant error so we can still self correct?

Thanks

This seems redundant to me, but maybe I'm missing something?

Base definitions. Plan defines comp as W-2. And of course as earned income for self-employed.

Plan also specifically (separately) includes "taxable welfare benefits."

Now, while I don't think this causes any harm, isn't it purely redundant? If it is a taxable welfare benefit for a W-2 employee, then it shows up on the W-2. If it is a sole prop, then it is earned income, which is what the plan uses anyway.

Is there any good reason to have this as a separate inclusion that I'm missing?

A participant is asking for a hardship of $20,000 although the recent tuition and related costs are being paid by Sallie Mae draws. The document says hardships are allowed for costs for the upcoming 12 months. She is needing help keeping up with the existing payments (and apparently other things would be my guess).

If she can document that she will be needing $20,000 of tuition and costs in the next 12 months (even though they will be covered by new loans) can the employer authorize the distribution? My thought is no, but if she has $20,000 in costs in the next 12 months, does what she actually does with the money matter to the employer sponsor?

I hate hardship distributions!!!

Thanks.

Is it possible to design a plan using a Safe Harbor basic match for anyone who is contributing and also simultaneously use a Safe Harbor non-elective for anyone who does not contribute?

Plan design is this: Participants are able to choose between a cash bonus today, or an Elective Deferral to the Plan in the same amount as the bonus PLUS a matching contribution.

The idea is that if people would prefer the cash in their pocket they can take it, but if someone is comfortable with a 3 year rolling vesting schedule they will get the extra match as a kicker.

Anyone have a problem with the participant signing this election form on or before the date the contribution is funded? 1.409A-2(a)(5) seems to suggest that this is ok.

Now I also have a provision that the participant will vest upon termination without cause. I believe in order to comply with the above, I have to "insist" that the termination without case take place greater than 12 months after the initial deferral election.

Thoughts?

My understanding is that the pension deduction for a partner should be reported on that partner's 1040, but the partner's accountant thinks that it should be reported on the K-1. Does anyone have a citation that states how it should be reported?

Thanks for any responses!

Sharing a sad story involving a local church in case it might help your clients avoid the "trap".

Its generally understood that the Medicare Secondary Payer (MSP)rules don't apply to small employers under 20 employees.

Small church (5 employees) thought they were exempt from MSP and reimbursed age 65 employee for premiums for Medicare Part B and D and Medicare Supplement.

Turns out their group health plan is a self-funded multiple-employer plan sponsored by the national church and they've now learned that since the plan covers at least 1 employer who has over 20 employees they are not considered a small employer exempt from MSP.

Lesson learned: small employers participating in a multiple-employer health plan are very likely subject to MSP.

A small non-electing Church DB has been frozen for several years. The plan will be terminated at some point, but that is still a few years off. They have a couple of ministers who will be retiring in a couple of years and are discussing designating the retired minister's monthly payments as housing allowance so they can claim it on their tax returns. That's not a problem while the plan continues, but what happens when the plan terminates? Does anyone know if monthly payments from an annuity purchased by the plan when the plan terminates would be treated the same as payments from the plan for purposes of the minister's housing allowance? I haven't been able to find anything that mentions this situation.

IS THIS ALLOWABLE?

An on-going calendar year 401k plan (no employer contributions) with ordinary eligibility = Age 21 and 1 YOS with Quarterly Entry Dates -

Plan waived the eligibility requirements as follows:

If you are an employee on 11/1 (regardless of age or service) you may enter the plan and begin 401k deferrals as of 11/6. Your opportunity to begin 401k deferrals expires on 12/6.

If you have not signed up to begin 401k deferrals by 12/6, and you have otherwise not satisfied the plan's eligibility requirements, you must then wait until you satisfy the ordinary eligibility requirements and may begin 401k deferrals on the entry date coincident/next following satisfaction of the eligibility requirements.

If you elect to begin 401k deferrals during this special/open period you will be considered an eligible employee and a participant in the plan. If you do not elect to begin 401k deferrals during this special/open period you will not be considered eligible and will not become a participant until you satisfy the eligibility requirements.

Have you ever seen a plan with eligibility of "the earlier of 12 consecutive months of service, or 1,000 hours of service within any plan year." ???

7/31 plan year for medical plan 5500 filing did not file form 5558 by 7-month due date (2/28). Filing itself will be filed as 'Final' with no Schedule A's. Employer's fiscal year is not 7/31. Filing itself will be filed by extended due date of 5/15, even though there is no extension.

Question is: Any chance the late penalty can be waived, in light of this being essentially a blank 5500? (Would not be asking this question regarding a regular ongoing 5500 that missed filing form 5558)

I have an active 401k participant who divorced (respondent). No QDRO. In the judgment of dissolution of marriage, respondent is required to pay the petitioner $xx. Petitioner was not awarded any portion of the respondent's 401k. Respondent is wanting to withdrawal such amount from respondent's 401k. Respondent is not eligible for an in-service distribution (under 59.5) or hardship. Loans are not allowed. I have informed the respondent that the respondent is not eligible for any distributions from the plan. The participant had an attorney draft a petition to allow the respondent to invade the 401k account. The petition is not a QDRO. Would this petition be enforceable?

Employer has 1 HCE (the owner) and 75 eligible NHCEs. Wants to adopt a 3% safe harbor 401(k) plan.

Owner's compensation is normally paid as $120,000 base pay and $150,000 year-end bonus.

The NHCEs receive tips amounting to about 50% of their compensation.

If the plan excludes bonuses and tips for purposes of all allocations, would this still retain its safe harbor status?

If so, it seems like the employer is getting away with a safe harbor contribution of only 1.5% of compensation. We understand that it might eventually become top heavy with all the turnover they have, but that could take several years.

Employer's has a QACA Plan and makes the SH Match each payroll period. The SH Notice states the SH Match is made each payroll period.

Effective 6/15/2016 the Employer would like to make the SH Match at year end.

any issues with this?

employer will provide 30 day notice and an updated SH Notice with this change.

Thoughts

An employer maintains an ERISA-governed group health plan. An employee pays a cafeteria plan’s salary-reduction contribution toward the employer’s cost for the employee’s health coverage. There is no trust. The plan uses no group health insurance contract; every benefit is paid from the employer’s general assets. The employer uses an “ASO” service provider to serve as the plan’s claims administrator. An affiliate of that service provider provides a stop-loss insurance contract.

The employer pays upfront amounts described as its maximum liability. If the experience for a year (after some set-asides, including fees, stop-loss premium, an incurred-but-not-received reserve, and some further margins) is more favorable to the employer than what invokes the maximum liability, the service provider returns money to the employer.

The people who advise the employer are familiar with ERISA Technical Release 2011-04, which includes a little guidance about whether employees might be entitled to some portion of a health insurer’s rebate.

Those advisors disagree about whether employees are entitled to a portion of this “rebate” from an arrangement that involves no group health insurance.

• One believes the employees should get a portion that approximates the ratio of the participant contributions to the whole “cost” of the health coverage.

• Another believes the self-funding adjustment is wholly the employer’s property, and nothing should be allocated to participants or employees.

Who is right? And what reasoning supports the conclusion?

Employer with FSA wants to amend their plan year to match the insurance coverage year. This would result in a short plan year. What implications does this have for participant salary reduction elections? Should the election be pro-rated to match the short year? Should salary reductions be decreased? Thoughts?

Line 9 on PBGC Form 500 asks for the percentages of the active participants who will be covered by other plans. I assume that this refers to other plans sponsored by the same employer who sponsors the terminating DB plan - correct?

Thanks for any responses!

Employer allowed an HCE (owner's son) to begin deferrals sooner than the employee met the eligibility requirements and reached an entry date. Plan is Safe Harbor Match and such matching contributions were provided.

A retroactive corrective amendment seems available if the affected employees are predominately NHCEs. However in this this case the only affected employee is HCE.

How to correct?

I understand that if a safe harbor 401(k) plan limits the safe harbor contribution to only the statutory employees and disaggregates the otherwise excludable employees, then the plan cannot use the special rule deeming the plan to not be top heavy as it no longer is solely a safe harbor 401(k) plan.

Does the same thing apply if the plan does not provide safe harbor contributions to union employees.

An employer with a top heavy safe harbor 401(k) plan is considering allowing union employees to participate. If the union employees do not receive the safe harbor contributions is the plan no longer deemed to be not top heavy?

Thanks.