This is another mutual client of same lawyer we discussed on another earlier post who is paranoid re CODA.

So here is the procedure for a Plan with 70 docs and 650 employees…

FACTS:

Thru 12/31/2015 they are a 401(k)/PSP SH 3% Non-elective – last day requirement for non-SH $$, allocation method was Integrated at TWB. No matching –just PS contributions.

PS contribution for 2015 will be about 17% of pay for docs and 15% of pay for staff, limited by 415 and catchup, depending on their deferral.

We know we could have fired up a new 2015 PS Plan and made new-comp contributions over there, but they elected to just move on and leave 2015 alone.

For the last 25 years they have always contributed 15% of staff pay – IOW, a very generous employer.

Effective 1/1/2016, docs no longer make deferrals except for $6k catchup…no longer have Safe Harbor, Safe Harbor discontinuance notice sent on 12/1.

Every participant in their own rate group.

We are Named Fiduciary of Plan under a 3(16) agreement crafted by our attys in concert with their atty.

Procedure for Setting the amount of Individual Doc PS New-comp contribution for 1/1/2016-12/31/2016:

We will calc the estimated 2016 equivalent PS amount that approximates the 2015 deferral+Integrated ps contribution - $6,000 catch-up, if applicable, IOW, the $xx amount per doc.

We will craft a recommendation to the Board Benefit committee[there is no Plan Level Committee since we are the Named Fid.] with a list of docs and the $xx amounts per doc.

We will send an email to the docs saying that $xx is the amount that will be credited to your account in 2016 and $yy is maximum permissible amount assuming your comp stays at $zz.

The doc notice will say that if they want to petition the Benefit Committee for a different amount, they must do so in 30 days. They need give no reason or rationale for such a petition.

Once the 30 days elapses, the Benefit committee will review all estimated contributions and petitions, if any, approve or deny them[we have no say in this matter].

The Benefit Committee will then send the gross amount of the expected employer contributions to the board for approval[no individual numbers].The benefit committee will then notify us of the amounts [which are an approximation].

We will communicate the doc amounts to the client’s accounting/payroll department.

We are done until end-of-year.

Does anyone believe this procedure will tag our client as being a CODA?

We are setting up 2 separate plans for a particular 401(k) because to leave as one, the required contribution for the union employees, will now make their former safe harbor match only plan subject to Top Heavy requirements. Council and I decided best to separate.

Question comes up from the advisor and this is where I need some guidance. Currently the funds are on one of the mutual fund platforms. The advisor wants to set up a separate division under the same contract in order to for cost to participants to remain down rather than a completely separate contract. Obviously, I'm not a financial advisor but my question is, is that okay? Can the funds of two separate plans be under the same contract at the financial institution but set up as a separate division basically. What questions do I need to ask to make sure my asset accounts are in compliance with 2 separate plans.

Have a client that has signed up with a PEO. They are transferring their single employer 401k to the PEO's multiple employer plan. As this is my first PEO transfer, what paperwork is required? Is there some type of amendment that is required?

Thanks in advance.

Do you have to apply coverage testing to a Top heavy calc if is just the NON HCE particpants are suposed to be receiving the Top Heavy Minimum?

I had 2 HCE. One terminated during the year one is still there and DEFERRING.

Husband and wife each own 100% of their own companies. His company has 10 employees and hers has about 20.

Since they are married each is deemed to own 100% of the others stock. So we have a controlled group.

If each sponsors its own cross-tested 401(k) plan, I would think both plans must be aggregated for the following:

401(a)4

410(b)

ADP / ACP tests

If any of the above do not require aggregation can they be permissively aggregated?

In this case, 401(a)4 and the ADP test will be helped by aggregation.

Thanks.

New safe harbor plan was executed timely to begin deferrals and safe harbor on October 1, 2015, plan is a December 31 year-end. They failed to offer deferrals until sometime in November.

Under Revenue Procedure 2015-28, if the problem is found and deferrals start in the 3 month period, no QNEC is needed for the missed deferrals assuming the proper notice is provided?

Seems like that's the case since an Employee Elective Deferral Failure includes a failure to afford an employee the opportunity to make an election.

Agree?

Employer A maintains 401k Plan A

Employer B maintains 401k Plan B

Employers A and B are controlled

Employer A wishes to merge Employer B's plan into the Employer A plan effective

1/1/2016 (streamlining processes and reducing cost of maintaining multiple plans and annual CPA audits).

Employer B will adopt Employer A's plan effective 1/1/16 by supplemental participation agreement. And merger documentation will be completed to merge Plan B into Plan A 1/1/16.

Item 1: Since A and B are controlled and Plan B is merging into Plan A - can the 401k elective contribution elections (i.e. Jane does 4%, Jim does 6%, etc.) continue to be withheld and deposited into Plan A effective 1/1/16 based on forms completed for Plan B - my feeling is yes, this is OK since this is a merger.

Item 2: Plan A's assets are with Custodian X while Plan B's are with Custodian Y. Due to requirements of Custodian Y, plan assets cannot be liquidated and reinvested until 2/1/16 from Plan B to Plan A. Is simply considering, Plan B's assets as part of Plan A based on merger documentation as of 1/1/16 acceptable? (Proper blackout notice would be completed based on liquidation and reinvestment timing)

Item 3: Based on liquidation and reinvestment date of 2/1/16, we'd chose which payroll withholding would be the last to be sent to Custodian Y (for Plan B which is technically part of Plan A as of 1/1/16) - i.e. we'd have the last withholding for January '16 to Custodian Y and then the first withholding for Feb '16 to Custodian X.

Any thoughts or suggestions or comments or citations would be appreciated - I've attempted to research a few items and have found some helpful checklists, but not anything that directly covers these issues... thanks, much appreciated

Controlled group member participates in a single employer plan with other members but wants to fly the coop and set up their own plan.

Is the new plan eligible to elect Prior Year testing and use the special first year testing rule that permits the highly compensated to defer 5% irrespective of NHCE deferral rates?

Client has a cash balance plan as well as 401k profit sharing plan, the cash balance plan is not PBGC covered.

Covered payroll is $2.3M, PPA minimum in the DB plan is $350k.

Am I correct in calculating the overall combined deductibility limit as the greater of $575k (25% of comp) or $350k, PLUS 6% of DC compensation ($138k)? So the grand total is $713k? They'd like to put 420k into the DB, and $235k into the DC, for a total of $655k, but others that I work with disagreed about the 6% DC piece on top of the 25%.

Thanks for any help -

Just curious as to whether you commonly see this - I don't.

Plan document names the Employer as Plan Administrator. Presumably, the Employer can designate anyone they wish to sign as Administrator on behalf of the Employer. Do you commonly see the CPA sign in this capacity, assuming so authorized by the Employer?

Married couple divorce and one participates in DB plan. Divorce agreement specifies pension is split 50/50. Not much else specified.

Plan provides for REA-only QPSA 50% death benefits.

QDRO is drafted by attorney to assign 50% of accrued benefit to AP, to start whenever each wants and in any form permitted by the plan without the consent of the other (i.e. separate interest design). Assume for discussion that they are the same age and the total accrued benefit is $100/month at NRD, so each gets $50.

Draft QDRO also says that if the participant dies before either pension has started, the AP is treated as the spouse and gets the QPSA (approximately $40) in lieu of the assigned retirement benefit of $50. Spouse does not like this and wants to know what alternatives are possible.

Can the QDRO instead be drafted to say that each party gets their own 50%, plus is treated as the beneficiary (spouse) for purposes of the other's pre-retirement QPSA death benefit? So in that case the spouse would get their 50% plus 20% (50% x 40%) death benefit. And also each party would have the right to name their own post-retirement beneficiary if they survive to their start date,

Anything wrong with this assuming written QDRO procedures don't prohibit it?

I'm trying to map a plan document for PPA. My current plan document has a cash or deferred profit sharing contribution where the participants can elect to either take in cash or defer up to 50% in to the plan. The document we are using does not have this as an option. I was told it's basically a bonus and that the plan has a special election for bonus and it would come under that.

The plan also has another employer contribution they call retirement contribution which is 5% of pay.

Would you agree that is is ok to not have the cash or deferred profit sharing mentioned in the plan document and to handle it like a special election on the bonus? It's on a volume submitter prototype format.

Is it possible for a participant to take a new loan 8 months after he defaulted on a previous loan?

Suppose he had a vested balance of $80,000, took a $10,000 loan and promptly defaulted. The $10,000 loan is deemed and he receives a 1099-R. But suppose he then repays the loan. My understanding is the repaid loan becomes basis and then he can take a new loan.

I think the requirement is that the loan on the books must be repaid before the participant qualifies for a new loan?

Agree? Disagree?

Thanks.

A calendar year plan (12/31 PYE) has paid the Basic Safe Harbor Match for a few years. Very recently the decision was made to implement auto enrollment; it will only be applied to employees hired on or after the amendment's effective date. Since there's not enough time to process an amendment and distribute ACA notices for a 1/1 effective date, the auto enroll would need to be implemented at some other time...probably February 1. But can a Safe Harbor plan do this?

Hi,

Plan uses prior year testing. In 2014, the ADP/ACP testing compensation was "net" comp for both HCEs & NHCEs. For 2015, the plan wants to use gross compensation for the ADP/ACP test. Is this allowed for plans using prior year testing method?

3% Nonelective, calendar year, safe harbor plan. ER has historically made the 3% nonelective in December of the following year. ER's tax year is calendar year.

For 2015 the ER would like to make a profit sharing contribution for the first time, in addition to the safe harbor.

Is the nonelective for 2014 which will be deposited in Dec, 2015, treated similarly to a QNEC in that the 2014 nonelective must be counted in the 2015 415 limit?

If that is true, are participants who receive the 2014 nonelective but also terminated in 2014 treated as benefitting under the plan for the 2015 plan year? Meaning would they need to share in any top heavy or gateway contributions for the 2015 plan year?

Thank you.

A couple of scenarios I'm wondering what people have opinions about:

A class action settles so checks are being doled out to those who participate in the class action:

Scenario 1: A plan of the employer's was terminated and fully paid out, there is a surviving plan into which many participants rolled funds - accepted to endorse that check into the surviving plan?

Here, I feel it would be acceptable to deposit the check into the surviving plan

Scenario 2: The employer (a doctor group) was absorbed into the nearby hospital, their plan was terminated and fully paid out - who or what entity is entitled to the settlement check

On this one, I'm not sure - can the check be cashed by any entity?

I had a participant ask me if she could add/get a Power of Attorney for her husband to call about her 401(k) account. Is that a possibility? I know he is encouraging her to take a loan of 50% of her vested balance. I know he encouraged her to stop contributing at all...

I have never had a participant ask me that before. Thoughts?

Note: FIRE Production system will be down from 6 p.m.(EST) Dec. 11, 2015, through Jan. 18, 2016 for yearly updates.

Question: Will the IRS accept paper 8955-SSA filings while the FIRE site is down during this time?

Medical care under 213(d) is defined as:

(1) The term “medical care” means amounts paid—
(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,

(B) for transportation primarily for and essential to medical care referred to in subparagraph (A),

© for qualified long-term care services (as defined in section 7702B ©), or

(D) for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B (b)).

So just to be clear because I have actually never come across this. An employee needs to pay premiums for a spouse's insurance policy (or perhaps to pay his or her own premiums while out on an unpaid leave). Is this eligible for hardship?

I seriously did not expect to ever learn anything new about hardship distributions!