Plan sponsor currently maintains a 403(b) plan, deferrals only. Plan Sponsor wants to adopt safe harbor provisions. Is it permissible for plan sponsor to terminate the 403(b) and adopt a new safe harbor 401(k) mid-year? I'm not clear enough on 403(b) rules to know if I am going to run into issues.

Thanks in advance for any guidance.

I am interested in others' interpretations of the IRS regulations and guidance on potential penalties for incorrect SSNs on Form 1095-C.

Specifically, if an employer receives a TIN Validation Error when filing a 1095-C electronically, indicating there is a mismatch between an employee's SSN and Name in the IRS database (either a mismatch or no record), is the employer required to verify the SSN with the employee and make an attempt to correct the return, in order to demonstrate a good faith effort to comply (and thus avoid a penalty for failure to file a correct return)? Or is documentation of the initial receipt of the incorrect SSN from the employee enough to demonstrate good faith effort (i.e. a Form W-4)?

Does the 2015 relief from penalties for filing incomplete or inaccurate information based on a "good faith effort" to comply mean that the regulations under 26 CFR 301.6724-1 pertaining to a waiver of penalties due to reasonable cause don't apply for 2015?

Should an employer receiving a mismatch error notice thru the efile system verify the SSN with employee now, or wait until a formal penalty notice is received?

I'm setting aside the myriad of immigration and discrimination issues this presents for purposes of this discussion.

Any input or discussion would be greatly appreciated!!

One of my clients is in the process of terminating their DB plan in standard termination using Alternative treatment of majority owner's benefit.

Can the father who has large sum of benefit in the plan forgo receipt his benefit to the extent necessary to enable the plan to satisfy all other plan benefits?

Long ago the father inherited his business to his son.

However, the son (who is 100% owner) has very little benefit in the plan.

I read some of the discussion about Majority Owners and attribution rules (IRC 1563) on this forum particularly Mike Preston excellent explanations.

I also researched some DB Plan Termination notes including 2015 ASPPA conference - Workshop 20: Plan Termination, Course 55441 – EP CPE Winter FY14 Plan Terminations, 29 CFR 4041.21 - Requirements for a standard termination, 26 U. Code sec. 1563 - Definitions and special rules, etc....

Hello,

Maybe someone could help?

My ex-wife recently passed away but her attorney never sent the Qdro to my 401k PA. The only thing that was sent was the divorce decree, which has frozen my account until December.

What happens to the money awarded to her?

Thanks, robb

I am pretty sure I know that the following is a prohibited cutback of a protected benefit under 411(d)(6). Do you agree?

Plan allowed in-service distributions of vested profit sharing amounts at age 59.5. Sponsor wants to amend so as to require participants be 100% fully vested before they can take an in-service distribution.

The sponsor cannot do this; agreed?

The 2015 5500 updated the definition of line 4l on the Schedule H to

Line 4l.

You must check “Yes” if any benefits due under the plan were not timely paid or not paid in full.

This would include minimum required distributions to 5% owners who have attained 70½ whether or not retired and/or non-5% owners who have attained 70½ and have retired or separated from service, see section 401(a)(9) of the Code. Include in this amount the total of any outstanding amounts that were not paid when due in previous years that have continued to remain unpaid.

Does anyone know why this was not included in the "Changes to Note" in the 2015 instructions? It does not appear to be optional.

Mandatory employee contributions to a governmental 401(a) DB are after-tax. If an employee separates from service prior to becoming fully vested, they may elect to take an ERD of after-tax employee contributions (no employer contributions or earnings). Is the employee permitted to initiate a direct rollover to another eligible plan or IRA of these solely after-tax employee contributions?

Controlled Group: 1 plan is safe harbor and 1 plan is not.

Plans do not pass coverage separately. Can I permissive aggregate the SH and non-SH plan for to pass coverage? If I can, I understand I now have to run an ADP/ACP test on a combined basis.

In other words, for SH plans you are deemed to pass ADP and do not have to run a test. But am I 1) "allowed" to run a test 2) run a test on an aggregated basis with a non-SH plan. (Assume same plan year end and testing method)

Any thought would be greatly appreciated.

Other than through a rabbi trust, is there any way a company can be prohibited from using their nonqualified plan assets as collateral for loans?

I'm not aware of any. Does non-assignment play into this?

I am the TPA on a 401(k) Plan that has life insurance policies and the premium payments are paid directly from the life insurance policy holders 401(k) participant account.

How should these premium payments be reflected on the 5500?

The Plan Auditor is telling me the change in value is netted against the premiums paid and is reported on line 2b(5)(b) on the Schedule H.

Any help is greatly appreciated.

We are the advisor on a bundled plan whose ADP/ACP testing was done incorrectly. The client questioned it and eventually was told that any further questions would result in a $200 per hour fee to answer. Then they came to us for assistance.

The explanation I received from from the provider when I was unable to duplicate their results was that the difference related to orphan match due to the ADP test refunds. According to my calculations, both of the people receiving ADP refunds had sufficient remaining deferrals to justify the full match remaining in their accounts.

When pressed for an explanation, I was told that because the plan requires a match per pay period and they refund the most recent deferrals first, the match associated with those pay periods must be forfeited. I had never heard of doing it that way, and told them so (hoping my ASPPA designations would carry at least some weight). They responded saying that they had never heard of refunding unmatched deferrals first as I suggested and they didn't believe it would be allowed.

A brief review of their basic plan document revealed language requiring that unmatched deferrals be refunded first. I referred them to that language and asked that the tests be corrected. In response, I was told that they would look into it.

Ignoring the language in this document, has anyone ever heard of refunding based on LIFO as a basis for determining orphan match to be forfeited?

How long would you wait for an answer?

Client currently offers variety of ERISA-covered welfare plans and wants to consolidate into single wrap plan. Plans include a self-insured health plan (with VEBA) and a combination 125/health FSA/dependent care plan (single plan document, single plan number). I have read conflicting opinions on whether including a health FSA in a wrap is advisable given the existence of the self-insured health plan/trust. Some advise against it because the trust requirement (which would not otherwise apply to the health FSA given DOL 92-01) will then apply to the FSA pre-tax contributions. Thoughts?

A small DB plan was merged into a larger one as of 12:01 a.m. on January 1, 2016. I have no idea why the documentation said this, but it was done intentionally with professional advice. Participants were told the merger was occurring as of 12/31.

Can/should I file a final return for 2015 for the smaller plan?

We have a prospective client that has 50% ownership in two entities. They do not have a controlled group but meet most of the criteria of being an affiliated service group.

They are in the lending business. They basically attract investors and then make loans to businesses in a specific industry. The prospect has a lot of knowledge in that industry.

Generally, a service organization is one in which capital is not a material income producing factor. In this case, capital is a material income producing factor. In every other respect, the entities resemble service organizations that together provide services. Would these be considered service organizations?

Thanks.

Recently won a client with 3 small DB plans (80, 20, and 5 participants). The prior actuary is refusing to release the data unless the client pays exit fees of $500 per plan (they are paid up otherwise).

Questions:

1) Are exit fees common? In over 15 years, I have not seen them (especially in the small market). $500 for a 5 person plan seems rather excessive.

2) In my view they are essentially holding the data for ransom. Based on IRS Circular 230 and actuarial code of conduct, I don't believe this is allowed. Plus, this fee was not previously disclosed to the client.

3) Coincidentally, a couple of years ago this firm took a client from us (with 3 DB plans). We transferred the data and answered follow-up questions (no fees charged). I asked for the same professional courtesy, and they are flat out refusing.

Options?

We have an S-Corp that owns a related entity. I know the synthetic equity of a related entity is included in the S-Corp's 409(p) testing.

Several participants have profits interests in the related entity. This gives them a right to share in the profits of the related entity, but it's not directly related to the value of the stock of the related entity.

Should we include these profits interests in our 409(p) test?

If so, how do we determine the number of shares the profits interests are equal to for purposes of the 409(p) test?

Well here's a new one (at least for me). Participant and spouse file for divorce, obtain a QDRO and submit it for processing. They subsequently reconcile and request that the QDRO not be processed -- but the transfer has already happened. Is any correction required/allowed?

Participant invests in a hedge fund set up as partnership. The partnership agreement provides that 20% of the income apportioned to the limited partners (participant) should be allocated to the general partner. The don't call this a fee, but rather an incentive allocation.

I understand the difference from a tax perspective, but for 5500 purposes do we call that incentive allocation a fee?

Thanks in advance for any guidance.

We have a Non-ERISA 403(b) Church Plan that is looking to add automatic enrollment. they want to apply it only to employees who will be eligible to receive the match (which has a stricter eligibility requirement than salary deferrals). Is this something they would be allowed to do?

Normal Retirement Age is later of 55 or 5 years participation. Participant directed 401(k) with a Profit Sharing Allocation. If there is no investment election on file, the Profit Sharing is invested in the Target Date Fund closes to NRA.

Question - According to the QDIA the Target Date Funds are based on the participant's 65th birthday. Since NRA is 55 do the Target Date age brackets need to be based on age 55 vs 65??

Thanks