I have a non-ERISA DB plan with a participant that completed a beneficiary designation prior to passing away. His designation identifies multiple beneficiaries all at 100%. One of those beneficiaries has submitted a claim form stating that he believes he is entitled to a 100% benefit. What guidance is there on beneficiary designation for a non-ERISA plan when the designated beneficiary is unclear? Any additional thoughts would be appreciated.

A very tight reading of EGTRRA shows that if a plan is hard-frozen (so that no further benefits accrue for any plan participants, necessarily resulting in there being no key employees benefiting under the plan), no further service need be recognized for top-heavy minimum benefit purposes. Many practitioners have been operating under the idea that the intent behind the EGTRRA changes was to permit even top-heavy plans to adopt hard freezes.

In accordance with the language of EGTRRA, subsequent plan restatements have talked about years of service not counting if no key employee benefits.

Would either of the following be considered unacceptable? If not, why not?

1. A non-frozen plan that is top-heavy is amended as of a current date to freeze accruals (service and average compensation), explicitly stating in the amendment that neither credited service nor compensation after the end of the plan year containing the freeze date will be recognized in determining any individual's top-heavy minimum benefit.

2. A previously hard-frozen top-heavy plan adopts an amendment explicitly recognizing compensation increases (but not service) between the original freeze date and the end of the plan year containing the new amendment's effective date, solely for purposes of determination as of that date of each non-key employee's top-heavy minimum benefit (either in formal recognition of legal necessity or to render the issue moot), and explicitly provides that compensation after the end of that plan year would not be taken into account in the determination of any participant's top-heavy minimum benefit. Assume for this that Section 436 would not prevent the adoption of such an amendment.

Our Company became an ESOP several years ago. A DOJ review found that the company overvalued the shares sold to the ESOP.

To satisfy the DOJ the partners of the company, who sold the shares to the ESOPS ,purchased back 80% of the shares from the ESOP. This made the DOJ satisfied.

So the employees now only own 20% of the company. Something that has never been disclosed to the employees since it occurred several years ago. All our company documentation still lists us as employee owned. Though not partially employee owned

Now the owners of the majority are marketing the company to third party buyers.

My question is about what is owed to the employee stock owners as far as disclosure in the original stock purchase being nullified as well as when or if we must be notified that the company is being sold.

We have an ESOP representative on the board. We have never met him. He has never conveyed anything to us. I was told it is his job to represent our interests. It seems informing us of all these sales and legal matter WOULD be in the employee interests?

All of this information was told to be by a very close friend in accounting. The company has never acknowledged it to any of us.

Hi. I have a participant that was paid out in error. Luckily, she never cashed the check, so the distribution was reversed, and her account made whole. How do I figure any gain/loss associated with her account while her money was gone?

She was paid out 9/28/15 and the money went back into her account 1/22/2016. Luckily, she has only 1 fund and I have the unit values for said fund for each day from 9/28/15 - 1/22/2016.

Thanks in advance!

We received a 401(k) Plan QDRO that assigns to the Alternate Payee (a former spouse) 50% of the Participant's account balance, to come from the Roth portion of the Participant's account balance. The Participant has both Roth and pre-tax contributions in his account.

72(m)(10) provides that if the Alternate Payee is a former spouse, the "investment in contract" must be allocated pro-rata between the Alternate Payee and the Participant. "Investment in contract" is defined in other subsections of Section 72, but only for those specific subsections.

Would 72(m)(10) require that the Roth and pre-tax money types be allocated pro-rata between the Participant and the Alternate Payee? Or can I allow the account to be divided to give the Alternate Payee money exclusively from the Roth portion of the Participant's account?

Thank you!

Two employers in a "closed MEP" calendar year 401(k) plan (they have a business relationship that is neither a CG nor ASG.) Call them Company L and Company M. Company L sponsors the plan, and M signs a joinder agreement.

Late in 2015, as of 11/1, Company M leaves the MEP and starts its own plan. The doc was written with a short plan year 11/1 to 12/31.

Is this a spin-off? From my very quick search of the topic, a spin-off retains the plan year of the original. But if this is considered a new plan, it can have any plan year it wants.

Again? Is this a spin-off? Company M was/is its own employer, so that is not changing. Participants were not given an option to cash out or do direct rollovers.

Our TPA firm just took over a book of business from an advisor. He had life insurance in every defined contribution plan, even though it seems that only the owners have the policies. (Why that is so is still to be determined.) We only had a handful of plans with life insurance up to this point. Now we, as a TPA firm, are trying to set policy for how life insurance is handled in our clients' plans.

In doing some research, I have read conflicting approaches on how the life insurance is to be reported OR NOT reported as assets on the financials and the Form 5500. We have always reported the cash surrender value in our assets and on the Form 5500. Interestingly we don't have any audited plans with insurance but in reviewing the lines of the Schedule H I was not able to see where you would include the CSV. I do have to say what research I did find was very limited.

I would like to start a dialogue here to learn how other TPAs handle life insurance in the retirement plans that they administer. If you have recommendations for reading matters that would be appreciated as well.

Besides the CSV issue, we would also like to know what actions you take regarding terminated participants who have life insurance polices as part of their investment lineup. Must something be done with the policy when a distributable event occurs such as termination or retirement?

Thanks in advance for any guidance that comes this way.

Typically employees pay back 401(k) loans via payroll deduction, but if they are on unpaid leave they must keep up on the payments by sending in checks. I'd like some feedback on how other employers are handling this - for example, do you have the employee send the checks directly to the vendor or do you have them submit to you and then do something on the payroll side to send the payments on the next file feed to your vendor?

Sending checks directly to the vendor is the easiest, but if the employee does not notify us our system will take arrears to catch them up and overdeduct when they return.

If they give the checks to us it seems more accurate, but would involve more work on the payroll side to potentially enter payments on every biweekly payroll.

The same issue exists at the end of a loan, when the employee pays off a remaining balance via check to the vendor. In that case, we end up over-deducting by one payment due to the timing of when the vendor notifies us which we have to refund to the employee. Not ideal.

Let me know how your company does this - and if you handle it differently for employees on leave vs. loan payoffs at end of loan. LOA = I'm aware of special rules for long LOA >6 months, this question is addressing shorter leaves where they do not qualify for anything special so must keep up.

Thanks!

I saw the recent ASPPA article about the optional questions on the Form 5500, it also had a few paragraphs about the recent flurry of Form 945 notices that the IRS has sent out.

Sorry I don't have the link handy.

I actually had a conference call with a client and an IRS person this morning who claimed that for years where there is Zero withholding, the Form 945 was still required. In lieu of filing showing a Zero, the IRS would accept a statement saying no filing was being submitted because there was zero withholding.

We have been inundated with client questions regarding these stupid notices. In every instance it is related to a year where there was no filing because there was no withholding (usually a very small plan that didn't even had a distribution that year).

the 2015 Form 945 Instructions:

https://www.irs.gov/pub/irs-pdf/i945.pdf

Page 2, "Who Must File"

"You don't have to file Form 945 for thoses years in which you don't have a nonpayroll tax liability"

There is no reference to notifying the plans in lieu of non-filing.

Is there something I'm missing or is the IRS just being stupid?

The IRS person insisted that either a filing showing Zero, or a statement was required.

For what its worth, this particular call was regarding as 2013 form, but we have had clients received the notices for multiple/variety of years.

I don't recall the rules changing.

I've been researching Money Market Reform issues, and my initial research was centered around trying to figure out if Health & Welfare plans are eligible for "Retail Money Market Funds (MMFs)", but as I read through multiple articles I have become more confused.

Questions:

• Are trustee directed defined contribution plans eligible to invest in Retail MMFs?
  • Most of the articles refer only to defined contribution plans, but at least one article said only "participant directed defined contribution plans" are eligible to invest in Retail MMFs
• Are Health & Welfare plans (pooled funding/non-participant directed plans) eligible to invest in Retail MMFs?
  • What about Health & Welfare plans where participants do get to choose how their accounts are invested (eg. HSA plans)?

Based on what I've read so far, the ability to invest in Retail MMFs is limited to "Natural Persons", which includes omnibus accounts where the "beneficial owners" are natural persons. It seems to me in reading SEC Release No. 33-9616, Beneficial Ownership means having voting and or investment powers, which would not be the case in trustee directed plans, which would be consistent with not allowing DB plans to invest in Retail MMFs.

Any guidance would be appreciated.

I have a client who has a nongovernmental Section 457(b) plan. Under the special "last 3-year catch-up" contribution rule for Section 457(b) plans, a particpant in the last three years before the plan's normal retirement age (age 65), the annual deferral amount is increased to the lesser of (i) twice the annual 457(b) limit ($18,000 for 2016 or $36,000) or (ii) the annual limit ($18,00 for 2016) plus amounts allowed in prior years that weren't utilized.

My cllient would like to add the special catch up rule, but is concenred that it can't accurately recordkeep deferral amounts over participants' careers.

The catch-up rule is permissive; an employer doesn't have to add it to a plan. Is it possible to include a lesser catch up rule? For example, allow particpants to make up amounts that were not utilized only in the 5, 7, or 10-year period prior to normal retirement age (instead of their entire careers).

One part of me feels that since it is permissive, you should be able to do something less than the maximum permitted by law. The other part feels that the IRS may not be flexible -- you other adopt the rule as is or not at all.

Any thoughts are welcome

Is it possible for a group of 1099 contractors to set up a VEBA for medical benefits? I have a group of truck drivers for a moving company looking to obtain benefits. Company has 30 employees and 80 1099 contractors.

I posted a slightly different version of this a couple of years ago, and I'm wondering if there are any new responses/thoughts that anyone cares to share? I'm just wondering if there is any "typical" procedure followed by either the funding companies or the Plan Administrators.

Suppose you have a non-profit, who uses a salary-deferral only adoption agreement, and specifically elects to not have ERISA apply. But, the plan also allows loans, and has QDRO procedures.

The DOL "safe harbor" is rather unforgiving, in terms of any employer discretion. So, the employer can't make QDRO determinations, or determine eligibility for distributions, loans, QDRO's, withdrawals, etc...

What I'm wondering is this: it is all fine and wonderful for the employer to say, "I'm not going to make these determinations. That will be up to the vendor."

In real life, how many vendors actually do this? Won't most vendors send a form to the employer, saying "you need to authorize this distribution/QDRO/whatever" and this action on the part of the Administrator, if taken, makes you lose the non-ERISA status.

How do you see this handled in real life?

When a participant is receiving a rollover distribution of both Roth and Non-Roth monies (match and profit sharing) are there two 1099R's required? (one for Roth rollover and one for non-roth)...Thanks!

The final 415 regs go on ad nauseum about how post severance comp cannot be included for 415 comp definition. I'm looking for the connection that it can't be used for benefit accruals, such as 401k deductions?

I know that it cannot, but where does it say there is a connection between the two?

So what is to stop me from making post-severance comp eligible for allocations, and then using a 415/414s compliant definition for nondiscrimination testing? I know there is something, but again, what is that something?

Company X is publicly traded and maintains Plan A, a 401(k) plan. Company Y is not public traded and maintains Plan B, a 401(k) plan. Company Y is merged into Company X in January, 2015. Assume that both plans have calendar plan years and that Plan B is merged into Plan A effective December 1, 2015. Plan B uses the look-back rule for purposes of the ADP test and applies the top-paid group election in determining HCEs. For testing Plan B for ADP compliance purposes, would the employees of Company X be taken into account in applying the top-paid group rule since Company Y was merged into Company X effective in January 2015? Could Company X apply the transition rule in delaying the application of Plan B's top-paid group rule in determining highly compensated employees? I would be most interested in your observations on these questions.

401(k) plan has terminated participant, age 28 with two years of participation, who elected a lump sum distribution. Monies are Roth, safe harbor match and discretionary profit sharing.

Will two 1099-R forms be needed to report her distribution because of the distribution codes?

First 1099-R for the Roth portion of the distribution:

• Gross Distribution = Roth deferrals plus earnings
• Taxable Distribution = Earnings only
• Federal Income Tax = 20% on Earnings (Taxable Distribution)
• Box 5 = Roth deferrals only
• Distribution code = 1B
• Box 11 = first yr of Roth deferrals

Second 1099-R for Employer monies (SH Match and Disc PS)

• Gross Distribution = SH Match plus Disc PS plus earnings on both
• Taxable Distribution = Gross Distribution
• Federal Income Tax = 20% of Taxable Distribution
• Distribution code = 1

Or should the reporting of this distribution be handled on one 1099-R?

I appreciate any comments.

Employer filed a Form 5310 to terminate its 401(k) plan effective September 2014. Form 5310 was filed April 2015.

During the review process, IRS agent analyzed the data in question 16 (6 year turnover rate / non vested participants). Agent now takes the position that there was a partial plan termination in 2009 and 2010 and is requesting that all partially vested, terminated participants in those years be retroactively fully vested.

Assuming agent is correct that there was a partial plan termination in 2009 and 2010, would asserting a statute of limitations defense be viable? The 2009 and 2010 Form 5500s were both filed more than 3 years before the Form 5310 application. There is no question on the Form 5500-SFs that were filed asking about partial plan termination (i.e., the returns are accurate as filed).

One of our clients made a mistake with an elective deferral for one of their participants. This participant wanted to put in a rather large (a few thousand dollar) contribution at the end of the year, but somehow the request was not processed due to payroll company error. It's now past the end of the year and the participant missed out on maxing out their elective deferrals for 2015. They also did not receive the match that was attributable to that contribution. What should be the correct correction method?

I realize that there was recently a revenue procedure from the IRS stating that if the error is corrected within the first 3 months, the QNEC is not required to replace the missed deferrals. However, the match that would have been attributable to the deferrals is still required, correct?

Thank you.

A DC plan has a dual vesting schedule (result of a merger). Would this trigger availability testing? Thanks.