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Well, SBJPA repealed IRC401(a)(26) for DC Plans and every prototype today has ability for "every employee in their own Rate Group".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?

We have a client that would like to add a triple stack match for 2016. We are having difficulty with filling out the AA so that it generates language for the SPD which provides flexibility in the way the triple stack match is calculated. We are using a Relius prototype. Does anyone have any suggestions? The language generated in the SPD makes the ACP safe harbor match look as if is a fixed amount. It is our understanding that the triple stack match is fully discretionary within the confines of the compensation limits set for each piece of the match.

If you include the ACP safe harbor provisions in the AA, can you chose to make the triple stack match one year and not the next without having to amend the plan?

Two W-2 employees terminated from employer X profit sharing plan.

These two are also 50/50 owners of their own corp, which does not have a qualified plan.

Life insurance agent (of course) wants them to establish a profit sharing plan, take the rollover money to purchase ten- pay life insurance policies and make the plan the owner and beneficiary.

This just doesn't smell kosher.

Any thoughts?

I am assisting a client with current and all prior years ADP ACP testing back to 2007. Unfortunately, all prior years are failing so they are looking at having to make QNECS. They just informed me this morning that they are also working with ERISA counsel on filing a VCP for correcting late deferral remittances as well as eligibility /enrollment issues and will be remitting lost earnings for the late remittances as well as 50% of deferral plus the match for all prior years' eligible to enroll but not enrolled/not informed. The question is: do the current remittances by the Employer to correct the prior years' eligibility/enrollment issues impact the ADP/ACP testing and if so, which year? Is it the year the corrective contribution is made?

I met with a prospect yesterday who is using an unnamed payroll provider for administration of their plan. The prospect started their plan on 1/1/2015. It is a QACA Safe Harbor Match(100 on 1% and 50% up to 6%) with automatic enrollment at 3% and auto escalation of 1% up to the level of 6%. Two Owners, 10 Employees. Prospect was told by unnamed payroll company that they must stop their deferrals because the plan is top heavy. My understanding is that the QACA SH Match works like the Basic Safe Harbor Match and Non-Elective in that the plan is deemed to pass top heavy unless the client makes additional discretionary contributions. I am still completely confused as to why the payroll company notified the client that they had to stop deferrals(10,000 each). I just want to make sure I am not missing something here. Thoughts on how to advise the prospect on how to communicate with the payroll company? We will be taking over administration in 2016, I am pretty certain of that.

My client has a PBGC covered 412(e)(3) plan currently. They neither want to make further contribution nor surrender the annuity contracts.

Can the 412(e)(3) plan be frozen? If yes, does it mean no contribution liability any more? Is the plan still subject to the 410(b) testing and the 401(a)(26) testing?

Thanks!

Employer would like to amend the employer base allocation of profit sharing plan so the current year allocation is based on whether or not a participant worked 1000 hours in the prior year. The allocation is flat 4% of comp. The purpose is so contributions can be made on a pay period basis of the current year. No other requirements for allocation other than meeting initial plan eligibility which is 3 months of service. Would this amendment result in the allocation being considered non-uniform and therefore need general testing under 410(b) and 401(a)(4) or could it be treated as a provision like a last day requirement and therefore only be subject to basic 70% coverage testing under 410(b)? Thanks.

I have a doctor client that has six corporate entities. Five of the entities have adopted the 401(k) plan of the main entity. The doctor also has a nanny that is paid through personal funds, not through any of the corporate entities. Does the nanny need to be included in the 401(k) plan?

If the DOL no longer required employer associations to be bona fide (AKA have commonality and control over the plan), what entities would qualify as MEWA under the phrase "any other arrangement"?

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People are correct in that the commonality requirement for pensions is not explicitly stated in ERISA. My thought, is congress may have ratified the DOL's position requiring employer associations to possess commonality and control by adopting the 1983 amendment defining a MEWA:

"The term 'multiple employer welfare arrangement' means an employee welfare benefit plan, or any other arrangement (other than an employee welfare benefit plan), [...] to the employees of two or more employers" ERISA 3(40).

Essentially, unless some entities would still be considered to be a non-EWBP MEWA without the commonality and control requirements, then the definition of employer association must require some form of commonality and control, otherwise part of the statute would be superfluous.

Thoughts?

Due to a merger Plan A is merging into Plan B before 12-31-15. Plan A offers brokerage accounts while plan B does not.

Plan A has a few employees who are over 70.5 and have been deferring their MRD's. The merger requires either the liquidation of the brokerage account or transferring it in-kind to an IRA, which is permissible under Plan A.

Question is do these folks have to take a 2015 MRD from the newly transferred IRA? They want to put this off to 2016 but Plan B wants Plan A merged before the close of 2015.

Any replies would be appreciated.

Employer is terminating the plan. They want to give the match for the people say through 11/15/2015. The match is discretionary with a 1000 hour last day requirement. Any problem with amending the plan to remove the 1000 hour last day requirement? For business reasons they do not want to wait until the end of the plan year, but want to give employees the match they told them that they would do.

Just want to make sure that I have all the questions that might come up in a meeting I have.

Thanks

This plan has insurance for three employees (1 HCE, 2 NHCEs). They are claiming that they were advised (by someone who is now conveniently deceased) that because they haven't offered this option to new employees in over a decade, it is "grandfathered" in and is not a problem.

This does not smell right to me at all. There are 2 HCEs who don't have insurance and 10 NHCEs who don't; (2/12) / (1/3) < 70%. Is there any way that this can be OK?

Thanks.

I am a retired engineer. I have a traditional rollover IRA. I am currently living off IRA distributions, which of course are considered ordinary income. Back in 2013 I had made a sizable withdrawal to cover the fourth quarter of that year. Then my father's estate cleared probate and I received a sizable check. I didn't need the money I'd withdrawn from my IRA and wished I'd not withdrawn it. Not realizing that I can only contribute earned income (i.e. W2 income), I made a contribution of $6500 back into my IRA. This was a mistake on my part.

I recently received a Notice CP2000 from the IRS. They take exception to that IRA contribution from 2013 as they should. They want me to pay now the amount I failed to pay with my 2013 taxes, but didn't because of the (erroneous) IRA contribution which I'd deducted from my 2013 income.

I don't have a problem with this. Once I send them this payment, then I will have paid the income tax for withdrawing that $6500 back in 2013. However, the money will still be in the account.

I understand that I need to withdraw not just the $6500 but also any earnings it made. I have requested the form to withdraw an excess contribution from my brokerage firm (where my IRA is). Their form states clearly that they (the brokerage firm) will calculate the earnings for me. When I make the withrawal of the excess contribution plus earnings, I wlil have to file a Form 5329 which will calculate the penalty taxes (something like 6% of the contribution) along with payment. At that point I will have paid both the income tax due me and the penalty tax.

However, when I make the excess contribution withdrawal, won't that withdrawal be reported to the IRS as taxable income? And if so, wouldn't that be double taxation?

Thanks for reading this. I've tried to be as clear and precise as I can.

metalmagpie

Does anyone know a good source for a 412(e)(3) document?

In order to comply with the 6055 and 6056 reporting requirements, certain employers/plans must generally make reasonable efforts to obtain the social security number or TIN of participating spouses and dependents.

In order to properly solicit this information, can an employer/plan send an e-mail request (in accordance with the ERISA electronic notification rules) or must it send the solicitation via snail mail (except for those who affirmatively consent to electronic delivery)?

Thanks.

Does this require a QMAC or just a Match?

Vesting is not an issue as I am just boosting employees who are 100% vested anyway.

I am increasing from a 10 years of service rate to a 12 years of service rate.

Thank you