Many practitioners had suggested (including at the February 2015 Baltimore conference) that some kinds of mid-year changes should be recognized as sufficiently benign that the change ought not to disrupt an otherwise good safe-harbor treatment.

So what do you think of Notice 2016-16?

https://www.irs.gov/pub/irs-drop/n-16-16.pdf

Does this do enough to meet the concerns practitioners had expressed?

I got a response from the IRS on a Plan Document restatement saying that I need to include Top Heavy provisions on a Multiemployer DB Plan. I just want to make sure what exactly needs to be put into the document? I'm more familiar with DC Plans, but am picking up work.

Thanks in advance!

Remember this? I'm getting some disagreement on something, and I wanted to make sure I'm not crazy.

Money purchase plan had NRA of 59-1/2. Plan provided for an allocation upon termination of employment if you had reached NRA, regardless of hours.

Plan was timely amended to change NRA to age 62.

A participant has now reached age 59-1/2 this year (2016), and is terminating employment. I say that participant is not entitled to an allocation, because participant hasn't reached NRA. I don't see any anti-cutback issues, because participant had not attained previous NRA of 59-1/2 prior to the effective date of the required amendment.

Agree/disagree?

I have a prospective client who wants a Profit Sharing plan so they can roll IRAs into in and borrow. I am sure that I have read that this practice is frowned upon and the IRS can claim the plan is not qualified since the intent never existed to make contributions. I can not find anything that states this now. Is this just early dementia or does anyone recall where this position may have been published?

Is there anything that prevents a plan from submitting a VCP for an operational error while a VCP for a nonamender failure is pending?

The plan isn't "under examination" according to the definition in EPCRS.

It was nice of them to put this all down in one place. Great example of how regulations can destroy something that's supposed to be a nice benefit.

https://www.irs.gov/pub/irs-tege/irs_reporting_disclosure_guide.pdf

A back to basics question: Does the 401(a)(17) compensation limit apply to elective deferrals under a 403(b) plan? For example, if an employee's compensation is $350k and he has elected to defer 5% of compensation, can he defer 5% of $350k up to the 402(g) limit ($18k), or can he only defer 5% of $265k ($13,250) because of 401(a)(17)?

I assumed 401(a)(17) did apply to 403(b) plan deferrals, but I've been pointed to some regulations under 1.403(b)-5 that suggest universal availability trumps such that 401(a)(17) does not apply. Thanks in advance for any thoughts.

At 1/1/2015 two active participants.

One participant terminates in 2015 and is fully paid out in 2015 so that there is one remaining participant as of 12/31/2015.

A couple of years ago I was attending the annual conference of the IFEBP. I attended a public employer session and the speaker was from the federal government. At that time we were told that they were currently reviewing a question regarding DROP's and "pick-up" arrangements. Plans that included a DROP provision and an IRC 414(h)(2) "pick-up" arrangement, whereby when a DROP provision mandated that those electing to participate in the DROP would no longer contribute to the plan, may be running afoul of the 'pick-up" and/or CODA rules. Since those electing to participate in the DROP would no longer contribute to the pension plan, the question was being reviewed because participating in the DROP was considered optional and may not comply with the "mandatory" requirement of a "pick-up" arrangement.

Since then, I have not seen an answer to this question. Does anybody know the outcome of this review?

Well, clearly I am questioning my years of experience. I have a situation where the participant died and the children are the beneficiary, no spouse. The CPA instructed a distribution be made to cover some expenses with no withholding or they completed a W-4 to delay withholding until the personal returns are done. I believe they then deposited to a Trust for whatever reason. Not sure. They actually may have made the check to the Trust even. I haven't found that out yet. Regardless it's not an IRA of any kind.

Can someone please provide me the mandatory taxation rules for distribution to a non-spouse beneficiary. I have read the code, seems to indicate that if it's a non-spouse it's not considered an eligible rollover distribution and therefore not subject to the mandatory 20%. However when I look at every single financial institution distribution instructions, our own that have been used and many other things, they state 20%.

Help, and provide me a something to print for the correct answer meaning a code section. I must be missing something.

Thanks.

I'm just taking a stab in the dark in hopes I am missing something.

Plan is a safe harbor 401(k) utilizing the match to meet safe harbor. Plan is top-heavy, but has been getting the pass because the only contributions have been deferrals and safe harbor match.

All the key employees defer up to the 402(g) limits plus catch-up if applicable. Plan sponsor wants to make a 1% profit sharing contribution for each employee, but it is not interested in bumping contributions up to 3% for those that require a top heavy minimum.

I don't see that they have that flexibility. If plan sponsor makes any profit sharing contribution they lose the pass. We are aware that matching contributions can count towards top heavy & mitigate some of the minimum contributions, but that won't solve the entire issue.

Am I missing anything here? I don't think so, but I am hoping. Plan sponsor wants to mke a contribution, but wants a level profit sharing contribution for all employees and isn't willing to pony up additional funds to get employees to 3%.

Thanks in advance

I have an ERISA 403(b) plan where the plan sponsor wants to allow hardship distributions on all money, including amounts rolled into the plan (as opposed to in-service distributions for any reason). Is there anything in particular that disallows hardships from rollovers in 403(b) plans?

Thanks.

Hi,

Profit Sharing only plan. 12/31 Plan Year End.

Allocation formula is new comparability where each individual is in its own

class.

There is no allocation condition to receive a profit sharing contribution.

The compensation used for the profit sharing allocation is full year

compensation.

There will be one new participant who will enter the plan as of 7/1/2016 (entry dates are 1/1 and 7/1).

Can I amend the Plan effective 1/1/2016 (retroactively) to change the

compensation used for the profit sharing allocation purpose? I'd like to

amend the plan to include the wording - Exclude compensation paid during

determination period while not a Participant.

Or, is this considered a cutback and therefore can only be amended for

future years? Maybe it is okay as long as the amendment is adopted before 7/1/2016?

I was thinking maybe it is a cutback because current document has no

allocation condition. However, the current formula is "each individual in

its own class", which means no one actually earned any right/benefit until

the individual percentage is determined by the employer.

Thank you for your help.

Prior ESOP was individually designed but will use Pre-approved document instead for next restatement. Where does the IRS state that a sponsor can now use a Prototype and delay the restatement of their document?

Also, is there a list of regulatory amendments required for ESOPS the past 5 years?

An unprecedented number of deaths are going unreported by the SSA. In fact, almost 50% less deaths! This is due a re-interpretation of Section 205® of the Social Security Act that took place in November of 2011 that prohibits the SSA from reporting "State Death Records" in the Public Death Master File (DMF).

The SSA is still reporting deaths from every State in the country but these deaths were reported by a "First Party Source" (Family, Friends, Funeral Homes, Hospitals, Coroners, etc.) Below are the annual totals of deaths reported by the SSA from 2010 to 2015:

Annual Deaths Reported by the SSA DMF: 2010 to 2015

*2010: 2,450,902

*2011: 2,318,302 (5.4% Decrease - SSA changes took place in NOV 2011)

*2012: 1,150,663 (35.5% Decrease)

*2013: 1,474,973 (39.9% Decrease)

*2014: 1,284,624 (47.6% Decrease)

*2015: 1,259,106 (48.6% Decrease)

This has led to million of pension overpayments to deceased participants (fraud) and crippled many already underfunded pension plans. This is compounded by the fact that many Defined Benefit plan sponsors use direct deposit and these accounts are shared with a spouse, relative, and/or caretaker. It's the easiest fraud to get away with!

What's funny (or not funny) is that the Federal Government IS using these "State Death Records" for government agencies such as the IRS and Medicare but they won't share deaths with the Public including Local and State Government.

For more information, please contact Kyle McDonald at PBI at 415-299-8249 or at kylem@pbinfo.com.

Does anybody know why the IRS hasn't issued the Social Security covered comp tables for 2016 yet? I know the wage base didn't change, but that only affects the end-point of the 35-year average. Typically they issue the tables in a December Revenue Ruling, and we're almost to February.

Cheers.

We have one participant who was terminated during 2015 and received a large severance check. He had deferrals withheld on that check even though he was not allowed to (since he's no longer a participant). How do we handle the distribution of these excess deferrals in the plan? Should we simply use code "8" and have the amount distributed be taxable for 2016 or do we need to use code "P" for the amount contributed (taxable for 2015) and code "8" for any earnings (taxable in 2016)?

Is there any restriction in completing a mandatory cash-out for a participant with less than $5,000 in vested account if he does not live iin the US anymore?

The ACA requires non-grandfathered group health plans to provide the following preventive care services without cost sharing:

■ Evidenced-based items or services that have in effect a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force (USPSTF) with respect to the individual involved;
■ Immunizations for routine use in children, adolescents, and adults that have in effect a recommendation from the Advisory Committee on Immunization Practices (ACIP) of the Centers for Disease Control and Prevention (CDC) with respect to the individual involved;
■ With respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration (HRSA); and
■ With respect to women, evidence-informed preventive care and screening provided for in comprehensive guidelines supported by HRSA, to the extent not already included in certain recommendations of the USPSTF

I am looking for the specific primary source recommendations for each of these four categories. I have found three but cannot find any discussion of the third bullet. Can anyone provide any authority on what services need to be covered under that item? Thanks in advance.

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A plan was a Money Purchase plan until 2013, when it was amended and fully restated to a Profit Sharing Plan. When the plan was a MP plan, it allowed in-service distributions at age 62. The PS document changed in-service to age 40, particularly so one participant (age 41) could take a distribution. Unfortunately, the accounts were never split to separate out the MP monies from the new PS, and the EGTRRA Adoption Agreement did not mention that in-service distributions for the MP monies were only permitted at age 62. In 2013, the 41 year-old took an in-service distribution for $73,000 which was all MP monies since the 2013 PS contribution had not yet been made.

This has recently been discovered and we're wondering how to correct this. The $73k was taken in cash and the participant is in no position to pay it back to the plan. We would like to file through VCP but we're unsure what to propose as a correction. Can we file a VCP submission simply begging for forgiveness? Does anyone have any experience with this who could offer us some advice?

Thank you.