I believe the answer to this question is going to be broader than I'd like it to be, however here goes.   At the highest level, my question is "does a pending subsequent deferral election for a separation from service distribution event expire upon separation from service"?

Example:

The plan document allows for the following:   Time of Distribution as a lump sum or annual installments either a) stated month and year; or b) following separation from service.  For a separation from service, the payments commence the first of the month following the one-year anniversary of the date of separation of service.  

Participant submits a subsequent deferral election to change from lump sum to installments 1 month prior to separating from service.

What's the right answer?

A. Separation from service is the payment event, and since it is not a fixed date, the pending election is not honored.

B. The plan does define when the payment would be made, so the participant knew the date would be over a year away, thus the subsequent election stays pending and becomes effective before the actual payment, at which time the payment schedule is pushed 5 years and changed to installments.

I appreciate any thoughts on this, as well as items to consider if this might be a plan by plan decision.

Employer is terminating 403b and profit sharing plan effective 10/31.  Last payroll runs from 10/20 to 11/2.  My understanding is that only compensation paid prior to plan termination can be used to calculate deferrals and employer matching.  Payroll provider is telling me they cannot split the last payroll check between 10/20-10/31 and 11/1-11/2.  Is this a situation where we have to find a solution or is there another way?  I thought maybe we could put language in the termination amendment that the last payroll to be included will be the payroll period ending 10/19, but its my understanding that because employees have elected to have deferrals withheld we have to withhold those deferrals until the plan is terminated (10/31).  Is there an exception to this rule (if I'm correct) for terminations?  Any thoughts/guidance is appreciated!!

Given sparsity of guidance applying IRC 414 controlled group, affiliated service group rules to 501(c)(3) organizations, in this case, specifically as it pertains to employer eligibility to offer QSEHRA for ACA purposes given 50 FTE cut-off,  I'm looking for reactions to the following situation:   employer currently offers QSEHRA, has under 50 FTEs but is nearing that mark.   The employer is a 501(c)(3) corporation so no stock ownership.   The employer runs a school for troubled youth as well as a thrift store (all within the same corporation).   Proceeds from the thrift store support school operations.   The 501(c)(3) can't afford offering ACA compliant health coverage so it is looking for ways to stay under the 50 FTE, including separating the thrift store into separate entity.   Boards would be under 80% commonality/control to avoid Treas. Reg. 1.414(c)-5 (imposing 80% board overlap/control test on 501(c)(3) orgs).  However, even if thrift store is spun off in this way, all the thrift store revenues would continue to be distributed to the school.   I need to trace through the 501(c)(3) supporting organization requirements if the thrift store were to be spun off into a separate org, but assuming we can structure and meet those requirements and stay under 80% common board overlap/control, I'm concerned with applicable of the "anti-abuse rule" for ACA purposes, which reads as follows:   

"Anti-abuse rule.—

In any case in which the Commissioner determines that the structure of one or more exempt organizations (which may include an exempt organization and an entity that is not exempt from income tax) or the positions taken by those organizations has the effect of avoiding or evading any requirements imposed under section 401(a), 403(b), or 457(b), or any applicable section (as defined in section 414(t)), or any other provision for which section 414(c) applies, the Commissioner may treat an entity as under common control with the exempt organization."

Any thoughts or reactions to this fact pattern for ACA purposes?  Or any ideas for 501(c)(3) ACA-compliant health plan options that might be affordable?   

Currently doing the follow up after surviving the 15th and just found a typo in a participant name on an 8955-SSA.  Her social is correct.  We have found no guidance and can't come to a consensus in the office on whether this needs an amended form or we just leave it till she is filed as a D on next year's forms.  opinions?

Here is the plan information:

Plan has a prevailing wage contribution that is NOT an offset contribution, but a straight QNEC.

Plan also has a 4% PS contribution:  It excludes participants who "receive" the PW contribution from the Profit Sharing.  In reality, they excluded all hourly employees from the PS contribution. 

Of course, the plan does not pass coverage testing on the ratio basis.  Additionally, I believe the plan needs rate group testing as they have different levels of ER contribution.    

Question:  Can the plan be tested on an accural rate for the ABPT for coverage, then on an allocation basis for the rate group testing?

1. If a plan sponsor wants to undo a plan termination, is the 100% vesting that was stated in the resolution to terminate also reversible?
2. The resolution is not a plan amendment and hence the plan document has not been modified. I am thinking that if the termination resolution stated that all benefits were vested as of the termination date and subsequently a resolution is executed to nullify the plan termination the 100% vesting could be reversed as well.  The plan vesting schedule was never amended. I would think certainly benefits accrued after the termination date could be subject to the vesting schedule going forward. Any thoughts on this?

the eligibility requirements in DC and DB plans are different, so NHCE A is eligible in the DB plan but ineligible in the 401(k) plan. when running combo 401a4 test, do we need to prepare an amendment to bring A into the 401k plan so that he/she will be able to get the GW min in 401(k) plan? OR A is not required to get the gateway minimum as he/she is ineligible in 401(k) plan? 

The plan requires the following Vesting Years of Service  1-yr 0%; 1 yr - 50% and 2 yrs 100% on PS and Match.   Years are based on Anniversary Year and there is no hour requirement for vesting.  Plan as immediate eligibility as background. 

Example: DOH 3/1/2023; DOT 9/30/2024. The plan record keeper has their distribution set at 50% vesting because according to them the participant did not complete the second full 12-month anniversary year.  The participant did complete 1000+ hours in the first anniversary year and in the second short year. 

I realize a Year of Service for vesting cannot require more than 1000 hours but can it require a full 12-month Year of Service?  As I write this I'm thinking this person perhaps should have been 100% vested.  The record keeper directly mentioned they did not make it to their second anniversary date for full vesting.  I realize this plan is much more liberal over vesting than allowable.  One alarm in the plan document system (FIS) I cannot get rid of the mention of 1000 hour for a Year of Vesting Service even though that is not checked.

As a side note FIS users when I choose elapsed time for vesting, I cannot select Anniversary Year instead of Plan Year for vesting service determination.

Comments are greatly appreciated.

Tom

We have several 401k plans with Schawb and Fidelity all in brokerage accounts.  Neither prepares the 404(a)(5) disclosure notice.  Should they?  If not Fidelity or Schwab, who would prepare that?  The financial company that set up the accounts?  The TPA?  Someone else?

Thank you

Would appreciate if anyone has recent experience here they can share.

Plan sponsor filed its 2021 Form 5500 late. They did not use DFVCP. IRS (but not DOL) sent a notice of proposed penalty. By phone, IRS tells me that, if we re-file the 2021 5500 now using DFVCP, IRS will waive the proposed penalty. I understand that the IRS's proposed penalty notice does not disqualify the plan from using DFVCP. From IRS's perspective, this is all fine.

My understanding from DOL, however, is that plans are ineligible from using DFVCP once they have already filed a 5500. In other words, once a 5500 is filed, it's no longer "delinquent" so cannot use DFVCP. I've been told by DOL in that situation that an amended return can be filed, but it cannot be filed using DFVCP. (This has been a few years now so may be stale info.) No information would be changing on the new filing; its sole purpose would be to use DFVCP. 

Does anyone know whether DOL will accept a DFVCP filing in that situation? 

Hello, We have a group that is a MEWA and has 15 employer contribute. They are not under a trust. Is 4T to be used under 8b? It has over 10 employers but when I read up on its definition: 10 or more employer plan under Code section 419A(f)(6) and then read on 419, 419A and 419A(f)(6), it talks about a funded plan. However when I called the Efast Customer Service and the Office of Chief Accountant they did not know. They referred me to the Office of Regulations and Interpretations. This office does not call back consistently. Does anyone have any insight to help? 

Many thanks

We have a client that gives about 100 employees varying gift cards throughout the year.  They do not want the gift card included in compensation for employer contribution purposes.  Total gift cards provided might be $10,000 on NHCE wages of $15,000,000.  

This will certainly pass the generally accepted 3% spread for compensation testing.  But I see one IRS requirement that says the definition "does not by design favor highly compensated employees."  This clearly does because the HCEs do not get gift cards so they have no comp reduction (but which is irrelevant since they earn well over $345,000.) It would probably be ok to exclude but then we'd have to get reduced compensation from the client.  

My question is- we can reduce plan comp by the gift cards for contribution allocation purposes but can we use the same reduced compensation definition for testing purposes (this is K/DB combination.)  I wouldn't want a small inadvertent error to cause a testing problem, minimum gateway or top-heavy minimum violation. 

Comments?

Thank you, Tom

I left the company few years ago and holds the ESOP stocks (not cash) in my ESOP account per yearly certificates issues by the previous employer. The company sent out a new letter mentioning they are allowing one time lump-sum distribution for terminated employees at the last years valuation otherwise they will convert the shares to cash next year per recently made plan amendment and distribute the cash in future per plan.

I suspect company is planning to get acquired and this is the way to get as much stock back as they can to sell it at higher when get acquired.

My question is can the employer change the plan terms like this and can they segregate the terminated employees to cash before company sale ?

What happens if the ESOP stocks and cash accounts  gets closed by the buyer of the company ?

My concern is I don't want to miss the upside (appreciation due to suspected sale) especially after company not letting the terminated employees cash segregated and have forced invested in company ESOP stocks for many years.

The sole participant of the PS Plan passed away and all Plan assets have been distributed except for one. The Plan held a survivorship (2nd to die) life insurance policy insuring the sole Participant and Spouse (who as of 2012 became ex-spouse). The policy was to be transferred to the ex-spouse (who is still a Trustee of The Pan) at the participants death. 

Upon transfer the ex-spouse would owe income tax on the cash value of the policy. That cash value is approximately $200,000. The ex-spouse doesn't want to, or can't pay the income tax and proposes an alternative:

1. Leave the policy in the Plan Trust so the ex pays no income tax.

2 The ex pays the annual premiums each year to keep the policy in effect. 

The ex desires to keep the the policy because, besides being a life insurance policy, it also pays Long-Term-Care benefits of up to $17,000 per month for life. 

Can the Plan Trust remain in existence. Can the ex pay the premiums.  The ex is still a Trustee of The Plan because the couple remained on good terms as friends following their divorce.

I had a case not dissimilar a while ago. A client had a a piece of investment real estate in his Plan for many years. After death, it was determined that plot of land was toxic because a paint factory once operated there. No one would buy it because the cost of environmental clean-up far exceeded the value of the land. The land could not even be transferred to a new owner under environmental law unless it was cleaned up. I actually don't know the end of that story but I know the Plan Trust sat there a long time. 

Anyone else having issues with the EFAST system?  I had a client that has been trying to sign this 5500 since late yesterday afternoon but continues to receive a message saying

"ERISA Filing - Technical Difficulties - We're sorry but we are experiencing technical difficulties.  Please try back later."

I'm trying to determine whether stock held by an IRA is attributable to the owner for purposes of the controlled group rules.  So, for example, if I own 100% of Company A, and my IRA owns 100% of Company B, am I deemed to own 100% of Company B, such that A and B are in a brother/sister controlled group?

I know the answer is "yes" in the context of a qualified plan (based upon the language in 414(b) stating that 1563(e)(3)(C) doesn't apply).  However, I have not been able to find a discussion of the application of these rules to IRAs anywhere.  From a policy standpoint, the case for attribution would seem to be even more compelling in the IRA context, given that there's always going to be a single individual who owns the entire account.

I find it hard to believe that this issue hasn't been addressed, and I assume I'm missing something obvious.   

Employer has self-insured health plan administered by large national insurer providing administrative services only. Plan document contains very broad, expansive "latest and greatest" subrogation provisions provided by ASO provider.  Employee / participant was injured in auto accident more than a year ago.  About a year ago, participant's lawyer wrote employer inquiring about plan sponsor / employer's willingness to waive subrogation rights under the plan or possibly agree to reduced subrogation amounts.  Lawyer also requested usual host of plan documents per ERISA.  Employer / Plan Sponsor did not respond or provide any plan documents.  Participant's lawyer has surfaced again noting they have negotiated settlement and are ready to disburse proceeds.  Lawyer reminded employer of its failure to provide documents per ERISA and the potential penalties that have now accrued.  Lawyer is pushing for immediate answer from employer on follow-up request to waive all subrogation rights (or settling for about 1/15th of value) in exchange for agreeing not to report plan's failures to provide plan documents.  The overall subrogation amounts at issue here are not that great. 

Employer freely admits it ignored all requests to provide documents.  Can the employer (as plan sponsor and ultimate ERISA plan administrator) agree to simply waive pursuing subrogation here without giving rise to a possible fiduciary breach or other potential exposure?  Any suggestions on how to negotiate and limit possible exposure to employer?

Client initiated a standard termination of a 403b then filed for bankruptcy last week.  NOPBs were sent out earlier and many participants chose lump sum payments.  Some were paid out before the filing, others made requests (8 requests) but no payouts have been made on those yet prior to the bankruptcy filing. 

Do the lump sum payouts have to end on bankruptcy filing? or can the lump sum payouts still be made if over 80% funded?

A small company just started a 401-k last year and has less than $10,000 in assets as of the end of the plan year.  Are they required to file a form 5500?  (is there a minimum asset level)?

So, Employer A acquires Employer B mid-year. Employer A sponsors a safe harbor 3% 401(k) plan. Employer A credits all service with Employer B for all purposes. The result is that all employees of Employer B are immediately eligible.

What gets strange is that Employer A calculates and deposits the 3% SH each payroll (not by document provision, just by administrative choice). But for the former Employer B employees, not intentionally but through administrative error, the 3% was not deposited until after the end of 2023. (They corrected this for 2024, and everybody gets the deposit each payroll.)

The difference, due to the relative number of employees, would easily pass either a 70% test, or a benefits/rights/features test. Document doesn't specify a particular timing requirement. Yet I can't shake the feeling I'm missing something. Any thoughts on this?