It is my understanding that a sole prop's or a partners earned income is determined as of the last day of their tax year - does his/her deferral $$$$ have to be in by that last day or do they get any kind of a grace period (beyond 7 business days) is it just the election that has to be made by 12/31 (or whatever) and then $$$ can go in as soon as possible or is there a hard and fast guideline on the deposit date.

Does a tested 401K have to be amended by October 1st to be a safe harbor plan for that year?

I have a non profit school for special needs children that currently has a 401-k plan and are wanting to switch it to a 403-B. Is there any benefit to doing this? Are all 403 B plans required to file a 5500 each year and maintain a legal plan document. If there is an advantage what are the rules with regard to when can it be done and what kind of notification has to be provided to participants, IRS, etc.? Any help is appreciated....

Hello!

Plan has a minimum deferral limit of 3% based on plan year compensation (just a plain-Jane 401(k) PSP, not a QACA or EACA).

I am currently reviewing the 2015 census (10/31 pye) and there are multiple participants deferring less than 3%. Some are close but are not hitting 3% because they did not have deferrals taken from a bonus (even though plan does not exclude bonus compensation). Others are deferring a set dollar amount every pay, and on a plan year basis these amounts are not adding up to 3% of comp.

And if I am interpreting the terms of the plan document correctly, the participants entering during the year, while they may be deferring 3% or more on a per-pay basis once they start, they are not technically at 3% because of the plan year compensation provision.

Does anyone have any experience with this issue and how to address? This would be an operational failure, correct (plan operations not conforming to plan document)? And so would need to be corrected?

Is retroactive amendment an option at this point? Either to eliminate/reduce the minimum deferral percentage and/or change to per-pay basis? (Although that still leaves the folks who are putting in a set $/pay.)

Any advice would be appreciated...I've scoured the boards here and researched elsewhere without a light to shine on this.

Thanks!

I have a client with 3 seperate companies. I won't get into the weeds but here are the facts:

Company A is FSO with Company C as the A-Org

Company B is FSO with Company C as the A-Org

Company A & B are not related through ownership, however employees for both A & B do the billing for A & B making them B-Orgs for eachother

My question is, since A if affiliated with C (A-Org), B is affiliated with C (A-Org) and A is affiliated with B (B-Org), Are all three related or...

Should A be tested with C, B tested with C, and A tested with B?

Is it possible to combine all three for testing?

Anyone know of a cheap way to get some ethics CPE? I am aware of ASPPA's webinars but I am thinking there must be someone else out there? I am looking for something for the QPA/QKA ethics CPE requirements.

Saw the blurb in Friday's BenefitsLink and looked at their web site, a company called Custodia Financial. Does anyone know how this product works and what exactly it is? Just curious. Web site didn't have any details.

Hello,

If the employee is 65 and enrolled in Medicare Part A and can't any longer contribute to his HSA, can his younger non-employee spouse who is covered by the HDHP now open and fund her own separate HSA?

If yes, can she only contribute the individual maximum if the HDHP covers both spouses or is the family contribution an option (no dependents are covered, just the two spouses)?

Thank you!

Frank

Is there any rule that prevents a 401k plan from having a discretionary escalating match? If not, do I need to simply pass the ACP test? Or do I also need to pass 401(a)(4) nondiscrimination testing?

Plan with about 700 participants had a 404a5 disclosure go to participants and has since realized that some information was incorrect. The plan has managed models and in the performance section the Since Inception date was incorrect, the performance was correct.

What would corrective action need to be? Re-mail to everyone? Email to active employee's and mail to termed?

I know the plan has to allow for in-service distributions and the participant has to eligible. lets say they are over 701/2 but a non owner. can they do an in-plan roth transfer?

Happy 11/13/15.

It's the last "consecutive odd number" date this century.

[i agree that I'm straining to make something significant out of the date. Kind of like the useless statistics that announcers and commentators now spout before, during, and after sporting events.]

Have a great day, and May the oddness be with you.

Client informs me payroll company took out too many deductions from employees' pay so employer has been calculating co. match on incorrect salaries for about 6 months. Company contribution made at the same time employee contribution.

If I am reading the IRS methods of correction correctly, there would be no corrective contribution of 50%, but obvious the company must recalculate the match on the correct incomes and make the contributions to the employees' accounts plus missed investment income from date match was actually made?

As far as rate of earnings, is there some sort of "safe harbor" like 5%??

And, the payroll company is marketing 401K administration!!

recently, we have received two types of notices from the DOL. One states: hey, no audit was attached. Amend the plan and get us the audit post haste or bad stuff will ahppen.

The other is a bit odder. It's "Tips for Selecting and Mnitoring a Plan Auditor" and starts off with:

I am sending you this email because you may be in the process of selecting or working with a CPA firm to audit the XYZ 401(k) Plan's 2015 financial satements that will be submitted to the DOL as part fo the Plan's Form 5500 filing.

The notice goes on to talk about the importance of getting an good audit and choosing a good auditor. It seems to be merely informational and no futher action or penalties will ensue.

The form was filed in early October and included the audited financials.

So, why did we get this? Is this something that maybe should have gone out in the summer but was sent out late?

Anyone else get these?

Did the Age 70.5 Required Minimum Distribution count as the in-service distributions when we are doing the top heavy testing?

Also, what kind of distributions we treated as the in-service distributions?

I had a client meeting today – 40 owner docs , 300 non-highly comp employees…they wanted to adopt a New comp 401(k) plan and allow employees to make deferrals but they themselves would make only catchup and profit sharing contributions at the end of the year, no match. They have had an integrated Plan and will contribute around 8% of pay to nHCEs under the NewComp Plan. Passes all testing. Each employee is in his own rate group.

In the meeting the docs asked if they could vary their contributions from year to year. I said , of course, as long as they pass a(4) testing.

Well the atty went ballistic saying absolutely not --- that they had to agree to a certain amount for 3 years and the board made the contribution decisions and the individual docs[all of whom are on the Board] and the docs could make no decision about amounts….he said the suggested arrangement was a CODA. He finally agreed that the board could set the contribution at $53,000 for all owners and if an owner could not make the contribution, he would contact the benefit committee and request a reduction for a particular year, but he still said they must stick to that for 3 years.

Well, SBJPA repealed IRC401(a)(26) for DC Plans and every prototype today has ability for "every employee in their own Rate Group". Each Doc could have their own standalone PSP in which they would make contribution decisions. So what's the difference.

I reminded him that the board WAS the docs. He was adamant re the CODA and said the contributions must not change more than every 3 years and the individual docs could have NO say in the amount of the contributions [which I find ridiculous].

Does anyone know of any documentation, perhaps a Grey Book Q&A, or anything that speaks to this issue. I have dozens of New Comp plans and the docs/owners make annual decisions about their contributions….never has an atty raised a question about it.

I’d appreciate some insight here.

I think I have the correct answer to this, but getting it wrong would be costly, so I'd appreciate other opinions.

Is a cycle E restatement and submission for the following plan timely if complete by 1/31/16 (cycle E)?

For EGTRRA, Plan X was Cycle E plan based on employer EIN. Plan X applied for and received Cycle E letter for EGTRRA.

MERGER #1

In 2012, sponsor merged into another organization with EIN ending in "4". So post-change, applicable cycle is D. (Not sure of the merger date within 2012, but this shouldn't matter because neither D nor E was open or expired at any time in 2012).

MERGER #2

1/1/15, sponsor merged into another organization with EIN ending in "0".

Pre-change cycle is D

Post-change cycle is E

Unless one of the exceptions in section 11.03 of Rev. Proc. 2007-44 applies, then the post-change cycle (E) will be the applicable cycle.

Consideration of 11.03 exceptions...

(1) N/A Post-change cycle is not open

(2) N/A Post-change cycle has not expired

(3) Post-change cycle (E) ends later than the pre-change cycle (D) and and pre-change cycle (D) is open (yes), the plan is permitted to treat the pre-change cycle as the applicable cycle. This sounds optional to me - meaning there is also an option to use the post-change cycle.

(4) N/A pre-change cycle is not expired

(5) N/A one of the cycles is currently open

I think the plan is now cycle E plan again and will be in compliance if restated by 1/31/16 in accordance with the 2014 cumulative list. We intend to file for a letter. The plan could have elected to use Cycle D, but wasn't required to.

Anyone disagree?

Input appreciated!

TP and spouse earn too much to make Roth contributions to IRAs, but have for past 7 years. New accountant discovers the problem when preparing their tax return, when they ask about making Roth contributions to IRAs for the 8th tax year. New accountant explains to them that they should not have been making such contributions. TP and spouse want to do whatever is necessary to correct it per IRS guidelines.

Is amending their tax returns to take into account the Roth IRA investment earnings each year as additional taxable income in those 7 years, and putting the balance in a regular investment account (not an IRA of any sort) sufficient correction? Would they need to go back more than 3 years in amending returns to pick up the investment income, given the investment income in any of these years is much, much less than 25% of the reported taxable income?

Do they have early distributions from a "Roth IRA" for those investment earnings, for which Forms 5329 are required?

After the plan year has ended we, the TPA, begin compliance work and learn that Employee A was not given the opportunity to defer. Under EPCRS, we have calculated the missed deferral opportunity and missed matching for the employee. Client will be making a QNEC contribution to the plan in the amount of the missed deferral. Client will be making a matching contribution to the plan.

Plan uses prior year testing. My question is: do I run the ADP Test with the QNEC included to determine the level of deferrals allowed for the HCEs for the next plan year? Or is the employee in the test with a 0% deferral or not in the test at all?

Employer X is offering to provide medical coverage to its part-time employees. Does it have to be affordable for purposes of health care reform? I am inclined to say no since the employer responsibility provisions and taxes apply solely with respect to full-time employees of the employer. Am I missing anything?