Controlled Group 1 401k Plan Sponsored by Company A includes Company B as a particpating Employer. Company A was Sold and Plan will be terminating. Company B ownership changed so that it is now a part of a different Controlled Group 2, which has its own plan.

They want Company B to become a Part of Contolled Group 2 401k plan ASAP.

So I am looking at this as a spinoff and transfer into the other plan. Participating Employer Agreements, Board Resolutions checking new plan for protected benefits etc. They want to try to not have any payroll withholding missed. Not sure if that is possible.

Assume both plans definition of Compensation is Total Compensation and that this Spin off and merger takes place in December. How do you handle ADP testing and what compensation is used? I do not have any details yet, but want to know what questions I should be asking besides dates etc. I know the end desire is that they want Company B moved to the Controlled Group 2 401k plan before the end of the year. I know that the test may fail and will have refunds.

Thanks, just want my list of quesions before I go into a meeting with the client.

Thanks

Does anyone know if/what specific section in the code that it states all employees, both HCE and non-HCE, must be awarded the same investment opportunities?

Taking over a case and they are saying based on 404© HCE can investment their money elsewhere, despite no one else having the same opportunity

Thanks!.

Have a covered DB plan that will terminate with insufficient assets. The plan sponsor has two 50% shareholders (both deemed majority owners) who will forgo a portion of their accrued benefits rather than fund the difference to have a standard termination.

Since the two owners are Key and HCEs, does it matter that they do not want to reduce their benefits proportionately? For example, is there any problem with shareholder A absorbing almost all of the shortfall and shareholder B absorbing almost none of the shortfall. Both shareholders are ok with this.

Is a disproportionate reduction possible?

What about a non-covered DB plan with insufficient assets that only has 10 key employee participants. Must there be an ERISA 4044 allocation? I would think any allocation would be fine as any allocation would be nondiscriminatory. Does anyone agree or disagree?

Thanks.

What are people's thoughts about starting a new 401(k) plan (or adding a CODA to a PS only plan) , when the deferral effective date occurs late in the year, after October 1.

Clearly it is permissible until October 1(for a calendar year plan), as evidenced by the 3 month rule written into the SH regulations.

What about for non-safe harbor plans? Effective availability for benefits, rights, and features?

I'm not concerned about an employer that is 100% highly compensated, nor am I concern about an employer with zero highly compensated. I'm concerned about a classic small employer with a mix of highly and non-highly compensated employees who would be eligible to participate in the plan.

I have my thoughts on the subject, but I'm curious to hear others' thoughts.

Participant terminates with a 401k loan. The principal balance is $5,000. They have a default and offset. Plan allows grace period of 90 days to repay the loan in full. They do not pay off the loan during the grace period and they do not take a termination withdrawal. My question is whether you would report $5,000 on the 1099R or would the 1099R also include accrued interest income?

Appreciate it.

does a profit sharing plan (not 401k) that allows for participant self -direction need to provide a QDIA and the notice?

Company A sponsors a 401k plan. Company Be sponsors a 401k plan. It is learned that Company A is a control group with Company B. There is a common employee X between Company A and Company B and he is one of the owners (who because of an ownership percentage change caused the two companies to become a controlled group.).

The ownership change occurred in 2012 which means that for the 2014 plan year, the coverage test has to include all the employees and we now need to determine if each plan passes coverage on its own.

My question is: when I run the coverage test, how do I treat employee X? He is benefitting under Plan A (as an employee of Company A ) and not benefitting under Plan A (as an employee of Company B). Do I count owner twice?

Our PT Formatted VS document does NOT allow me to exclude catch-up contribtions from the ACP Safe Harbor Match. What is the basis of that prohibition? I am familiar w/ the preamble to final 401k regulations where they explained why catch-ups could not be excluded from the ADP basic safe harbor match. Is there anything else out there that ties in the ACP Safe Harbor Match as well, perhaps an LRM or something?

From the Preamble:
https://www.irs.gov/irb/2005-05_IRB/ar06.html
The proposed regulations did not include any exception to the requirements for safe harbor matching contributions with respect to catch-up contributions. As part of the proposed regulations the IRS and Treasury solicited comments on the specific circumstances under which elective contributions by an NHCE to a safe harbor plan would be less than the amount required to be matched, e.g., less than 5% of safe harbor compensation, but would be treated by the plan as catch-up contributions, and on the extent to which a safe harbor plan should be required to match catch-up contributions under such circumstances. After reviewing the comments and the applicable statutory provisions (including the amendments to section 414(v)(3)(B) made by the Job Creation and Worker Assistance Act of 2002, (JCWAA) (Public Law 107-147)), the IRS and Treasury have determined that no such exception is appropriate.

Can a nonprofit maintain both a SIMPLE IRA and a 457(b) plan in the same year?

Plan excludes taxable fringe benefits from compensation. What say you regarding whether or not a sign-on bonus might be considered a taxable fringe? Perhaps along the same lines as moving expenses?

We have a potential client who has separate plans for the statutorily-excludable employees, and the non-excludable employees (who are eligible for SH Match). They automatically process involuntary transfers to the 2nd plan for all employees who shift eligibility. I originally couldn't imagine that the IRS intended transfers for anything besides spin-offs or mergers, but Reg. 1.411(d)-4 Q&A 3 provides an exception to preserving 411(d)(6) protected benefits in the case of voluntary transfers between plans in exactly such a situation. This seems to imply that the arrangement with the involuntary transfers is OK (assuming protected benefits are preserved)?

The document has no special language authorizing this -- only generic language in the "Trustee" section, stating that the Administrator may direct the Trustee to transfer the Participant's account to another plan's trust, provided that the receiving trust permits.

I can't seem to find anything that specifically authorizes such transfers -- or prohibits them. Does anyone have any experience or information on this?

Of course, I think we would recommend instead that they have a single plan with a year-of-service requirement for SH matching contributions (aware that ADP/ACP testing and TH minimums applies to the excludable employees) - the current arrangement is overly complex and expensive.

Thanks

Okay legal boffins I could use a bit niche expertise...

Company I've worked at since February is in financial distress. Bank is in process of having a receiver appointed in Federal court. Draft of order of appointment does not explicitly grant power over the 401(k). Does that matter? We have a safe harbor match that I'm advising should be suspended (I'm working w/ TPA to be sure our annual notice includes paragraph that safe harbor match maybe suspended or reduced as per the 2013 final reg). Board and all officers have all resigned so it will fall to the receiver to make the decision and sign the necessary plan amendment(s).

Does a Federal receiver have power over the plan in general or should that power to be explicitly granted by the court? If there's a code section that pertains, that would be great to have.

Thanks for any input you might have!

Mike (masteff)

I am a 401k plan administrator. I'm being asked by a participant to allow her to continue to invest in a publically traded LP which *could generate UBTI (Fidelity has told us that the security is no longer allowed in their 401k plans, but will allow us to grandfather her in).

At any rate, I want to get some info to better advise the plan trustees on this issue.

Should there be more that $1000 of UBTI generated and the plan has to file a 990-T, how arduous is this filing?

Additionally, I assume that the participant would be responsible for the tax, paid out of her 401k, are there any issues with this?

And, Are there any issues that I am not seeing? Any liability for the other members of the plan or the plan itself?

Thanks

I have an owner who took a distribution from his 401k plan. The terms of the loan followed all the requirements of 72(p) thereby making it a permissible loan and was not a prohibited transaction upon the loan issuance.

Now the owner has defaulted on the loan. I've done extensive research regarding the ramifications of a disqualified person defaulting on a loan. I cannot find any direct information from code sections 72 or 4975 but I did find the following on two separate IRS communications (one was a phone forum, the link below is from a TEGE/EP Nationwide Tax Forum in 2013): a disqualified person defaulting on a loan results in a prohibited transaction.

https://www.irs.gov/pub/irs-tege/forum13_loans_hardship_distns.pdf

(the example is on page 22)

Has anyone declared a defaulted loan to an owner as a PT and is there some regulations or code sections that I'm missing? The example from the IRS in the above link is very cut and dry but I'm irritated that I can't find an official regulation somewhere.

In the draft version of the 2015 Form 5500, question 13 has been added to find out if the plan has been timely amended for all required tax law changes. Then the questions b, c, and d are asking for the date of the amendments and the serial numbers of the prototypes or vol submitters. Does anyone know if the 2015 SF will be asking for same?

I'm sure this has happened but I'm not finding any threads.

Safe harbor nonelective 3% 401(k) plan - individual accounts - newly eligible participant is refusing to complete an enrollment form.

What would others do? Set the participant up in a target fund based on his DOB?

I'm always amazed at people who don't want "free" money

I have an accounting client who seems to have received some bad advice from his financial advisor. He had a SIMPLE plan for a few years. His advisor recommended moving to a SH 401k. He only has 4 employees and he does not defer the maximum. He was not informed of the Form 5500 filing requirement. So now he has to go through DFVCP and file future forms. Can he terminate the SH 401k and just go back to a SIMPLE plan?

Thanks!

Employer A sponsors a 401(k) Safe Harbor Plan. Employer A is looking at aquiring Employer B. Employer B maintains a Cash Balance and Profit Sharing Plan.

1. Cash Balance Plan will be terminated prior to the acquisistion

Question - If Employer A wants to merge Employer B's Profit Sharing Plan into their Safe Harbor 401(k) Plan, can this be done at any time, or can the merger only take place on the first day of the plan year, since one is safe harbor and the other is not.

If they do merge the plans, am I correct in saying the Employer A's Trsutees and Plan Administrator will assume all fiduciary responsiblities for Employer B's Plan. Therefore, the s"sins" of Employer B's plan become Employer A's responsibility??

Sigh. Accountant tells me about a client that filed their 2013 5500 a couple of months ago and got a bill for $8800 or so from the IRS for late filing penalties.

Can they amend and file under DFVC? Might it be worthwhile to just beg forgiveness?

Suppose you have a public instrumentality that is considered "governmental" and therefore ineligible to sponsor a 401(k) plan.

Is there any reason that they can't use a 401(k) document, but simply not elect any of the 401(k) provisions? In other words, they only elect PS and rollover, and appropriately modify SPD to remove references to deferrals, etc., etc...

Or does the fact that the document is, according to the IRS Advisory letter, a "Profit Sharing Plan with CODA" preclude them from using it?

I can't see any sensible interpretation for the latter, but thought I'd see if anyone had a different opinion?