Have a Profit Sharing Plan with three participants, Husband, Wife and Employee. Employee terminated and received a distribution. As a result of the distribution, there is a forfeiture of $5,000. Plan calls for forfeiture to reduce employer contribution.

Plan Sponsor had bad year and received no compensation. What can we do with the forfeiture?

401(k) participant whose account included after-tax and pre-tax dollars received an otherwise-proper hardship distribution (i.e., authorized by plan, procedures followed, right amount was paid, etc.), but which was paid entirely out of pre-tax deferrals (i.e., the distribution was paid without regard to the ordering rule requiring it to have been paid first out of after-tax dollars). To pluck some numbers out of thin air, let's say that a $10,000 hardship distribution was paid entirely out of pre-tax dollars, rather than $1,000 after-tax (representing the full after-tax account balance) and $9,000 pre-tax. As a result, the administrator treated the entire $10,000 distribution as taxable and subject to the 10% early withdrawal penalty. But if the first $1,000 had properly come out of the after-tax account, the amount of P's basis in the after-tax account shouldn't have been reduced. So the plan isn't out any money, but the tax hit to the participant was a bit larger than it should have been.

To me, it seems reasonable under the general correction principles to fix this by cutting P a check for the amount of the improper tax hit (plus interest), and moving the remaining after-tax dollars into P's pre-tax account. But EPCRS doesn't seem to directly address this scenario.

Anyone encountered this before? Thoughts?

E: I suppose one might argue that this is, really, a failure to have initially required P to withdraw the after-tax amounts before receiving the hardship, which could be corrected by requiring repayment of the portion that shouldn't have been distributed in the first place. But from the plan's perspective, the right amount (in absolute terms, anyway) was paid out. Any repayment would presumably be made with after-tax money anyway, so requiring that additional steps seems like an overly complex means of reaching the same result you'd get by recharacterizing the remaining after-tax dollars already in the plan as pre-tax...

I have wealthy participant that has two individual accounts in the 401k plan. He wants to designate a beneficiary for each account instead of using one form and inputting percentages. Is this allowed?

Does a contribution for the tax year 2014 that is made in 2015 added to the actual 2014 account balance when calculating RMD's?

Business owner taking RMDs has scheduled automatic checks to come from the plan's record keeper. Business owner dies, 10 days later record keeper issues the annual check.

Should the check be returned and reissued to the beneficiary, or deposited to the estate?

While it is well documented that you can't amend the profit-sharing allocation methodology retroactive to the beginning of the year if a person has accrued a benefit (e.g. no last day requirement), does anyone have a problem with changing the allocation group definitions in a cross-tested plan if the language in the plan states that the determination of the appropriate group takes place on the last day of the plan year.

Example: Since it is a partnership, we aren't using the "everyone in his or her own rate group" method. There is no last day requirement to receive an allocation. We want to add a couple more allocation groups to allow more flexibility. Group determination is as of the last day of the plan year. Can we make this amendment effective January 1, 2015 or do we need to make it effective January 1, 2016?

To me, the language that says your group determination is as of the last day is critical, but my concern would be that adding a group would cast some doubt as to whether a person has already accrued a benefit based on the groups that were in place prior to the amendment.

Thanks.

We have a client that established a new DB plan effective 1/1/2015. The plan will be adopted this month. The only employee is the owner and she turned 70 1/2 in 2014. Vesting is 100% since she has another qualified plan.

Her required beginning date is April 1, 2015 but she has no accrued benefit on that date.

When must she receive her first RMD as an annuity? I couldn't find anything in the RMD regs. I can't imagine it would start in 2015 since her benefit won't be calculated until the end of the plan year when we get her final salary (although since she is the owner we probably already can calculate her exact accrued benefit on 12/31/2015).

Would her benefit start 1/1/2016?

The 403(b) plan excludes those who work less than 20 hours/week. But when an individual is hired full-time and then is later a part-time individual (less than 20 hours/week), is it acceptable to automatically no longer permit that individual to make 403(b) contributions to the plan? The employer has been doing this and our question is whether this is a violation.

Thanks

Partners have ordinary income and Guaranteed Payments. Can we amend the Plan to exclude from the calculation of earned income Ordinary Income (but NOT Losses)? The situation is that the CEO is a 10% owner and does NOT want the extra match attributable to his ordinary income. I know I cannot exclude the losses because if I did their match rate would be higher than the rank and file and that would not pass nondiscrimination.

They want the match to be based exclusively on guaranteed payments.

I also recognize for nondiscrimination testing, I would still use the statutory definition of earnings.

A plan has a 6-month service requirement for 401(k) purposes and a 1-Year service requirement for matching contribution purposes.

The plan is considering adding automatic enrollment of 5% for newly hired employees only. Further, the Plan wants to be considered an Eligible Automatic Contribution Arrangement (EACA).

Can the 5% default contributions be delayed until the participant is eligible for the match (1 Year) or must the 5% automatic enrollment be applied once employees become eligible for the 401(k) (6-Months)?

In other words, would waiting to automatically enroll participants until 1-Year of Service violate the uniformity requirement of Treas Reg 1.414(w)-1(b)(2)(i)?

A 401(k) Profit Sharing Plan was terminated and paid out over 2-years ago.

The Trustees just received information from the former custodian that they would receive a payment as part of some class action settlement because the Plan was charged "too much."

Questions:

1. How should this money be accounted for? We are thinking it should be paid out to the participants pro-rata (to the extent the charges affected each participant's account balance).

2. A final 5500 filing was already done over 2 years ago. Do we simply do another final 5500 filing in the year of asset recovery?

3. One consideration here is to try to minimize audit risk, will the filing of a final 5500 filing 2 plus years subsequant to the execution of a plan termination amendment and resolution trigger it for audit, or make this an "ongoing plan."

Thanks

client uses prior year testing. one owner over age 50. testing will pass for 2015 based on lower group average from 2014.

no one is contributing in the lower group for 2015. So....can the owner contribute the catchup of $6,000 next year (2016) with the lower group average at 0% for 2015?

I know this should be easy but believe I am overthinking it....

do they apply to VEBA organizations? I know nothing about 501©(9) so forgive my ignorance if this is a silly question.

Possible new client wants to set up a 401k before year-end. The goal is to maximize the 3 equal owners. That's fine.

I just found out that the same 3 owners own another company equally as well. They don't want to set up a plan for this company at this time.

Shouldn't the employees of the second company be eligible to participate in the plan of the first?

They will have to be included in the coverage testing, correct?

I have very little experience working with control groups so I'm uncertain how to proceed.

Thank for for any insight, anyone can give me.

Does anyone have a good checklist for determining exactly what notices and disclosures have to be sent out before year end? I know there is safe harbor notice and several others, but need a good guide to make sure I don't miss something and cause a client to get penalized.

thanks.

The Opinion Letters that PBGC issued for many years (but now appears to have discontinued) often include useful information. Unfortunately, they aren't very well indexed. To help remedy that, we have put together a summary of PBGC Opinion Letters related to multiemployer issues. This report includes a brief summary of the Opinion Letters related to multiemployer plans along with the text of the Opinion Letters. See http://www.dexhof.com/PBGCOpinionLetterSummary.pdf

Have a Dr. Client with 5 eligible participants and a calendar year safe harbor 401(k) plan.

They have maintained the plan for about 8 years.

They make a Safe Harbor NEC.

Question: could they terminate the plan now (before year end) and not make the Safe Harbor 3% contribution? In this case, no salary deferrals or other allocations were made to any HCE or Key employee this year.

I would think there will not be an ADP test problem or a top heavy minimum problem.

Thanks.

in 2010, company filed a 5500 for a fully insured plan with 1 employee. in as much as there were other errors in the 5500 as it was, it simply did not need to be filed. it was also the only year with that insurance company. is there a way to delete it (take it back)? otherwise best approach to amend (correct and add code 4R) and then final?

A terminating employee wanted to cash out all of his company stock retirement to an IRA.

After the employee’s request, the company changed the rules on distribution of company stock. This change did not allow for the complete liquidation of a person’s company stock.

The terminating employee protested stating that what the company was doing was illegal.

The company decided to allow the terminating employee to cash out all of his company stock only if he would sign a non-disclosure/non-disparagement agreement.

The employee signed this agreement and cashed out his company stock.

The company was later investigated by the DOL. The findings of DOL state that what the company tried to do was illegal.

The only reason the ex-employee signed this agreement was to get his retirement funds that were illegally being held by the company.

There would have been no non-disclosure/non-disparagement agreement if the company did not illegally stop the liquidation of the ex-employee’s retirement account.

Is the non-disclosure/non-disparagement agreement still valid?

Is as loan used to acquire stock for a leveraged ESOP reflected on Form 5500, Schedule I under total plan liabilities?

From what I could find my conclusion would be "no." But, I don't see anything definitive in the Form 5500 instructions.

Thanks.