Rev Proc 2015-28 provides a "9-1/2 month rule" for Elective Deferral Failures associated with missed elective deferrals for eligible employees who are subject to automatic contribution features under a 401(k) or 403(b) -- including employees who made affirmative elections in lieu of automatic contributions but whose elections were not implemented correctly.

Question: Does the affirmative election "in lieu of" automatic contributions include only a participant's initial affirmative election opting out of auto-enrollment, or would it include the initial election and any subsequent affirmative election a participant makes if that participant is in the class of participants covered by the automatic enrollment feature?

Proposed Answer: It includes the initial affirmative election as well as any subsequent affirmative elections. This is true regardless of whether the plan contains an automatic escalation feature. (Assumes an EACA continues to cover participants who make an affirmative election -- i.e., annual notice continues to be provided to participants who make an affirmative election.)

Rationale: Consistent with the objective of encouraging automatic contribution features, nothing in the new rule specifically limits application to a participant's initial affirmative election. Section 4 of Rev Proc 2015-28 adds new section .05(8) of Rev. Proc. 2013-12 Appendix A that says in part: "If the failure to implement an automatic contribution feature for an affected eligible employee or the failure to implement an affirmative election of an eligible employee who is otherwise subject to an automatic contribution feature does not extend beyond the end of the 9-1/2 month period after the end of the plan year of the failure..." Further, a participant who makes an affirmative election is continued to be covered by an EACA (if the plan provides) so it does not make sense to limit the correction only to an initial election.

Example: Calendar year plan with auto-enrollment at 3%. Participant becomes eligible at 1/1/2015 and immediately opts out by affirmative election. Participant subsequently elects to defer 5% as of 7/1/2015, but the election is not implemented. The Participant does not notify the Employer, and the Employer implements the correction no later than the first payroll made on or after 10/15/2016. The Employer gives appropriate 45-day notice after deferrals begin and makes up the match with earnings within the "SCP correction window" for significant operational failures. No QNEC is required for the missed deferrals because the correction is appropriate under the "9-1/2 month rule" of Rev. Proc. 2015-28.

Agree? Disagree?

I appreciate any comments on the following scenario:

A 401(k) plan is established for calendar year 2014 with a safe harbor match and operates throughout the year as such.

Prior to the start of the 2015 plan year the plan is amended to remove the safe harbor match.

The employer does not provide any notification to the participants that the plan will no longer be a safe harbor plan for 2015.

Question:

Does the fact that the participants were not provided notice that the plan will not be a safe harbor for the start of the new plan year (2015) mean that the employer must still make the safe harbor match for 2015?

If so, I'm assuming this would be a corrective contribution?

The participants were not provided a new SPD or SMM either.

Thank you.

The client really likes immediate entry for recruiting purposes, but doesn't like it for the interns and other part-timers (even though I tell them these are exactly the employees that help our (a)(4) testing). Has anyone used the exclusion that is part of the Relius documents that allow the plan to exclude those employees who are not regularly scheduled to work 1,000 hours in a year?

I can think of a couple of pitfalls on this, like:

1) What if they end up working 1,000 hours and you didn't allow them to defer.

2) If you do like them and they don't work 1,000 hours in that first year, but you hire them later ... would they need to wait until the year after they work 1,000 hours or do we say they are now "regularly scheduled" to work 1,000 hours and let them enter immediately??? That doesn't seem to be the way it reads. It sounds like we would need to wait until they work the 1,000 hours and then let them in the next entry date.

Just wondering if anyone has other pros and cons to using that language.

My company provides health insurance for all employees. We have several employees who have declined our insurance but, have elected coverage on their spouse's group health plan due to better coverage options. Are we able to reimburse the spouse's employer directly for this coverage as it is a group health coverage, not individual coverage?

A Safe Harbor 401k plan had a 12 month eligibility requirement, then mid-year amended the plan to reduce the eligibility to 3 months. Was this permissible, and if not, how is this corrected?

New to the forum but long-time reader, great information on this board. I have the following situation:

Company has a retiree whose benefit is limited by 415. There was a delay of 4 months before benefit payments commenced. Company wants to pay interest for the months the payment was delayed. Would this interest for the 4 months of delay be subject to the 415 limit?

Thanks

Please don't waste any time doing research if you don't know this off the top of your head, as I don't work with these forms and my question is purely for my own general information.

For a small (<50) employer who has an INSURED plan - does the insurance company file both the 1094-B transmittal and 1095-B forms, so that the employer has no filing responsibility, or does the insurance company just PREPARE the 1095-B forms, and the employer still has the responsibility to actually prepare and submit the 1094-B transmittal and the 1095-B forms that the insurance company prepared?

Same basic question for a large (ALE) employer?

In other words, what responsibilities does the EMPLOYER have for insured plans?

Thanks for any information - or do you know of a good, concise source/summary on this?

I generally try to leave my emotions out of my postings, but this time I'm stunned.

Brand new client finally sends listing of plan investments (2 weeks before 5500 is due) and included is an apparent mortgage loan by the plan to his residence, with the assurance that the loan was made in spouse's name before they were married. That is all the info I have at this time, along with the balance of the loan (no loan docs, date of loan, etc.). Husband/wife are only employees/participants. Trying to figure out what to do.....

Successor Plan Question

Related question

http://benefitslink.com/boards/index.php/topic/56926-401k-plan-termination-and-startup/?hl=successor#entry249499

First Question:

401(k) with Safe harbor: Plan terminated end of 2014, no distributions have been made while awaiting final deposits / admin/ testing for 2014.

Less than a dozen participants.

Employer has decided they want to keep having a plan.

Don't care if it is a new plan or the old plan reopened.

Since no distributions have been made, I don't see doing either 1. establishing a new plan, or 2. reopening the old,

would violate the distirbution rules.

Am I missing something in that regard?

Second Question:

Is there a cut-back issue for the right to distirbution for the participants? They would have an expectation/right to a distribution due to the plan termination. The fact that none have been taken seems immaterial.

Under either option, I don't see how it can preserve that distribution right for the deferral/safe harbor money sources, given the standard - not before age 59.5 rule.

Any ideas?

Client is a partnership (CPA firm) that is dissolving 12/1/15 and the business is being sold. Their plan is a 401k safe harbor non elective. Normally all 401k contributions have to be made before the plan terminates. Since I can't determine the partners self employed income until after 12/1/15, can they deposit their 401k and safe harbor contributions after the plan terminates? If another firm is buying their business, does the 401k plan need to be terminated before the sale date?

Can a DB plan base eligibility to participate on the employee exceeding a specified level of compensation? (The plan is aggregated with a DC plan and will pass coverage and nondiscrimination testing on an aggregated basis.)

I have notified all of my clients that I am retiring and closing my TPA business by the end of this year. However, I have one client, with a 401k Safe Harbor plan who is also retiring and closing his practice as of January or February next year. I do not want to have to restate his plan for only two months of operation in 2016 because of the cost to him and the time/effort by me. Is there a tack-on amendment I can use for my EGTRRA prototype plan that will pass if the plan assets do not get 100% distributed before the April 2016 restatement deadline. Or is this cutting it too close for comfort?

We have clients who participate in minimum premium arrangements with insurers (which, in a nutshell, offer insured coverage but with cash-flow advantages of self-funding). At least one of the insurers has taken the position that a minimum premium arrangement is self-funded, rather than fully-insured, and as such, the insurer will not be reporting on Form 1095-B. Instead, the employer, as self-funded sponsor, should report on Part III of Form 1095-C. This was a surprise to clients and to me. I checked the final instructions and they don't appear to call out filing obligations for minimum premium arrangements or any "partial self-funding" situations. I would like to push back on the insurers so they do the reporting, but I'm not finding any clear authority. Thanks in advance if you have anything to share.

I saw where jpod asked a similar question back in 2013 (I was hoping he may have found an answer to it). My question is how to set up a 457f defined benefit that mimics a pension; multiplier x years of service x final pay. From what I have read, after the benefit is vested you would have to calculate the value of the future stream of income and the employee pay taxes on that amount. Each year this would be updated with the new accrual (e.g. The year applied to the multiplier and the increased salary the new multiplier is applied against) and the employee would pay taxes on the difference from the previous year?

What would be the best way to fund this type of DB plan? A Rabbi trust or just setting aside funds to payout a defined contribution on a vesting schedule while the employee is still employed seems fairly straight forward but how would that work for a DB plan? A rabbi trust seems questionable; what if it ran dry while the plan still had liabilities? Also, the organization would continue to have to pay to administer the plan long after the employee left. I guess this goes back to jpod's question back in 2013; could the organization purchase an unqualified annuity to pay out the defined benefit to the employee upon his retirement? Could that be setup in the original 457f agreement as an option? An annuity would seem like the best option for the employee that has left the organization (I.e. Change of heart; sticky fingers) and for the organization to remove the future liability.

Any good 457f plan administrators out there for a DB type of plan like this? The organization in question doesn't really have a lot of experience with 457f plans and would need to be as turn key as possible. Thanks for the help.

Employer knowing their plan would be top heavy for 2014, intended to implement safe harbor provisions for existing 401(k) starting 1/1/2015 providing instruction to service provider in early-December 2014. Document was restated and a 4% match with 100% vesting added in order to comply with Safe Harbor requirements. Many, but not all employees made changes to increase their deferrals before 1/1/2015. The plan has been operated according to Safe Harbor rules throughout 2015. However the prototype plan adoption agreement did not have the box for the Safe Harbor election checked when it was signed in 12/2014. How can the document be corrected to accurately show that it is a Safe Harbor plan? Much documented evidence of employer intent and instructions to document preparer going back over a year.

A 401k participant, who happens to also be a fiduciary, requested an in-service distribution after he turned 59 1/2. The plan administrator allowed the distribution, which the participant then rolled over to an IRA. The terms of the plan only allow in-service distributions upon turning 62 years of age.

Transaction occurred in 2014 and discovered in 2015. Amount was approximately $500,000, which represents about 25% of plan assets.

The operational failure seems easy enough to correct, but is this not also a prohibited transaction? Any suggestions for addressing the prohibited transaction? Apply for individual exemption? Would a retroactive plan amendment allowing the distribution be feasible? If the distribution was allowed under the terms of the plan, a statutory exemption appears to apply.

Has anyone reviewed the New Mexico Vaccine Purchasing Act? It purports to assess a fee upon ERISA group health plans, including self-funded plans for the cost of vaccines that the Department of Health purchases to have on hand for all children in New Mexico. The plans are invoiced for a proportionate cost of the vaccines provided to the health care providers. It seems to me that the law would be preempted with respect to such plans by ERISA but I'm hearing no discussion about it anywhere. The Act does not prevent the providers from then billing the plans for the immunizations, as well, creating duplicate payment scenario. In addition, there is a $500 per day penalty assessed for failing to pay an invoice.

Just curious if anyone has any thoughts...

Off ball question for anyone who has experienced this.

So we have a plan for the 12/31/2014 plan year that terminated paid out all of there assets. So a final Form 5500 is going to be filed. Sounds simple, here is where the tricky stuff happens.

1. Plan sponsor can no longer be located. How should the 5500 be handled to be filed with the DOL?

2. The counts in 2013 exceeded 120 for the first time. So technically they are going to need an audit. Once again keep in mind that the Plan Sponsor went AWOL and can not be located. So we are not sure how the Schedule H should be reflecting this accurately.

Any guidance or assistance would be greatly appreciated.

I hope BenefitsLink readers will help me crowdsource a little academic task.

The goal is to get a general sense, which at this stage may be anecdotal rather than scientific, of how many continuing-professional-education hours are required of each of several kinds of professionals.

Are actuaries, accountants, attorneys, enrolled agents, enrolled retirement plan agents, certified financial analysts, certified financial planners, and other professionals similar or different in what each license requires?

How many CPE hours? In what measurement period?

Is the CPE requirement a condition of a governmental license or privilege? Or is the CPE requirement a condition of using an association's trademark or certification mark?

I'll start: I must do 12 CLE hours a year. But this need not be evenly paced because there are three-year cycles, and there are limited carry-forwards of some credits not used in a previous cycle. This CLE requirement is a condition of my license to practice law in Pennsylvania.

So how many continuing-professional-education hours are required of you?

Is it possible to classify partners who retire early as terminated so that they may receive a distribution under their plan if they are receiving s-corp distributions but no w-2 wages?