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.

1. I haven't seen anything about changes to the per-participant cap on the variable rate premiums. Is that just going to be next year's $500 as indexed after 2016?

2. Reading some of the material in today's BenefitsLink news, it has finally sunk in that PBGC premium increases count as increases in Treasury revenue and are not just there to increase the PBGC's financial soundness. Is an enrolled actuary making a suggestion that a sponsor should consider making larger than necessary employer contributions to a defined benefit plan to lessen the impact of the premium increases now considered "tax advice" subject to Circular 230, to a greater extent than enrolled actuarial communications concerning minimum required contributions, quarterly contributions, etc.?

So I have a plan sponsor that wants to draft their profit sharing allocation formula to allow them to decide on an annual basis if they’re going to make either a pro-rata based on comp contribution, a contribution using permitted disparity (two tiered), or both.

Seems to me, with all this discretion this “formula” with all its flexibility would violate the definitely determinable allocation formula requirements. In my mind, I’ve always thought discretion meant a sponsor could determine the amount they will contribute each year, and a participant should be able to determine from the formula how that amount would be allocated. That said, you can put each participant in their own allocation group, so does “definitely determinable” really mean anything anymore?

Since an allocation using any of the possibilities this sponsor is contemplating (pro-rata, integrated, or both) would meet the permitted disparity rules, seems like they would still have a safe harbor allocation formula. Agree?

They also are expecting us to jam this formula onto our VS document…a long describe line! What prevents a sponsor from selecting all the allocation options in a VS document and saying they’ll choose one at the end of each plan year?

Maybe I just don’t like stuff that is out of the box, but this doesn’t smell right to me.

Anyone care to share their thoughts?

Hello, looking for some clarity or clarification if you please. Is there a change related to the ACA in which fully voluntary benefits that have to do with health benefits, paid 100% by employees, but paid as pre-tax premiums are now considered to be 'group health plans' which are treated as ERISA benefits no longer accessible to the voluntary plan safe harbor?

I'm having a tough time reconciling the top heavy vesting schedule requirements to a 401(k) profit sharing plan (contributions include elective deferral, Roth, safe harbor, and employer discretionary non-elective) in a situation where all plan contributions are 100% vested. The plan document calls for a 3-year cliff vesting if it becomes top heavy.

Reg. 1.416-1 Q&A V-3 provides that "all accrued benefits within the meaning of section 411(a)(7) [the entire balance of an employee's account] must be subject to the minimum vesting schedule.

In that scenario, it seems to indicate that my otherwise 100% vested plan account balances would become subject to the 3-year cliff vesting schedule after becoming top heavy (until the plan ceases to be top heavy).

Clearly the top heavy vesting regulations from 1984 are far outdated, particularly now that vesting schedules have been basically aligned and many plans offer better vesting than the top heavy requirement (see language calling top heavy a "minimum" vesting).

So, what is the best answer or what are others doing about this? Is there some other IRS guidance that helps clarify best practices? Any chance of the IRS issueing updated TH regs?

My most reasonable solution is to make the 3-year cliff vesting only apply to the top heavy minimum contribution (not the entire participant's account)....but it appears that I risk violating an old Reg if I do that.

Thanks in advance for any tips!!

Please help me understand the rule for Funding and Deductibility.

The October 13, 2015 IRC 415(b) Examining Guidelines states, "Benefits in excess of the IRC 415 limits for any year may not be taken into account in determining the deductible limits under IRC 404 for that year.

https://www.irs.gov/irm/part4/irm_04-072-006.html

If the calculated Max. contribution is a little over $300,000 and correctly applying the above statement means the deduction is limited to $210,000 for the 2015 plan year.

Please include any section of the Code or the Regs. that go over with examples in handling the situation.

A participant received one of these letters in June 2015 - but we e-filed an SSA for this client in 2012 and included this participant as a D...

Anyone have this happen before? That's ridiculous!

Anyone have a sample plan amendment or corporate resolution to change plan year to co-ordinate with fiscal?

My document service does not have one.

Would appreciate a copy.

Thanks.

Employer has 2 plans, one for union employees and the other for administration. A participant in the union plan changes positions and is no longer eligible for that plan. How can he transfer his funds to the other plan. Can it be done through an in-service withdrawal from the union plan and rollover to the other plan? He is 50 years old.

Employer M maintains a 401(k) plan for its employees. Under the plan, an employee can request an in-service distribution upon a showing of financial hardship, which is defined by reference to the safe harbor standards outlined in the IRS regulations. Employee A requested a hardship withdrawal, which was granted. However, the plan failed to implement the 6-month suspension period required under the regulations. How should the plan correct this error? (1) Refund all deferrals for the period in which the suspension would have otherwise applied and forfeit any related matching contributions and earnings during what should have been the suspension period? or (2) Impose a prospective 6-month suspension period?

Employer X maintains a 401(k) plan for its employees. On October 22, Employee G terminated his/her employment with X and started working for Employer Y. On October 23, G requested a loan on his/her 401(k) account balance under the Employer X 401(k) plan. Since G was no longer an employee of X at the time s/he requested it, there is an operational violation under the X 401(k) plan. What can X do to correct this error? For example, should it pay off the loan with its own funds and enter into a loan arrangement with G so that G repays X for the amount of the erroneously granted loan (but this gives G a windfall by restoring his/her pre-loan account balance)? Should X immediately subject G to tax on the amount of the loan and inform G that the amount cannot be rolled over? Would it make a difference if G is a highly compensated employee?

Two employees were hired some time ago (maybe a year ago). They started part-time and, therefore, were considered ineligible to participate in the match. It turns out that they both were, in fact, eligible. Therefore, the company will be correcting the failure. One of the employees is truly a new hire and the other is a rehire. The new hire wants to start her match at 8% and the rehire wants to start it at 15% (which is what he was doing before he left the company two years ago). The question is whether the company’s correction must be based upon the 8% and 15% or can it be based upon the 3% match which is part of their automatic enrollment.

Thanks for any responses!

Just a Plan design question. A client is putting in a Profit Sharing Contribution, but they don't want to allow participants to take a loan from that source (only from the current 401(k)/Safe Harbor Contribution).

Has anyone ever come across that before? Is it allowed?

I've been struggling with the following issue for some time now; what do others think about this?

Can an Employer reserve in the ESOP plan document discretion to change, from year-to-year, the form of benefit from lump sum to installment? For example, could the Plan document be drafted to provide that benefits will be distributed in either a lump sum or in installment payments over a period not to exceed 5 years, and further provide that the Employer reserves the discretion to decide both (1) lump sum or installment, and (2) if installment, over how many years.

I don't think so.

I know it's okay for the Plan document to reserve to the Employer the discretion to eliminate the lump sum option (i.e., formally amend the Plan document to eliminate the lump sum option), but I understand from a few TPAs that ESOP plan documents are being drafted by some attorneys to reserve to the Employer discretion to decide lump sum or installment.

Is this right? Thanks for your help.

Small business (20 people) had a 412(e)(3) plan from 1999 to 2009, at which point the owner didn't have enough money to keep funding - so the plan was frozen as of 11/1/09 (Plan Year 11/1 - 10/31).

Business has picked up, and the owner would like to start making contributions again. Thoughts on what to do with the service between 11/1/09 and 11/1/15? Am I correct in assuming that the amendment could be written to exclude benefit service between those dates if he doesn't want a huge contribution this year? Am I also correct in assuming that if he wants to grant retroactive service, that would be allowed (at the risk of having to fund 6 years worth of benefits)?

Formula is 100% of final 3 at 25 years of service; prorated for service <25.

Thank you!

My client terminated its cash balance plan effective December 31, 2014 and received a favorable IRS determination letter. The Plan provides that the applicable interest rate and the applicable mortality table under Section 417(e) are used to convert the participant's cash balance account to his or her accrued benefit (annuity) at normal retirment or the determination date. The mortality table is variable.

Only 1 insurance company was willing to bid on annuities for the few participants who did not elect lump sums. That insurance company will bid but only if it can used the 417(e) mortality table for 2015. This is odd since the variable mortality table likely will result in lower payouts -- absent a pandemic or nuclear disaster life expectancy will continue to increase. However, they claim they can't administer the variable mortality table.

My concerns are: (i) the annuity K must reflect the Plan and (ii) changing the plan mortality table could result in a Section 411(d)(6) violation. I have considered an amendment using the table that produces the greatest benefit, but I am not sure if the insurer will accept this. I am aware of Treas. Reg. Section 1.411(b)(5)-(e)(ii), which will become effective 1/1/2016. Any ideas on how to complete the termination?