Client has a QACA which includes an intial deferral percentage of 3%, and subsequent annual increases at 1% to a maximum of 6%.

It's now considering changing the QACA formula effective 1/1/16 but only for new hires. The initial deferral pecentage will be 6%, with 1% annual increases to a maximum of 10%. It does not want to apply this new formula to anyone hired before 1/1/16.

The regulations require that the deferral percentage be uniform for all employees, except that it may vary based on the number of years (or portions of years) since the beginning of the initial period for an eligible employee. The initial period begins when the employee first has contributions made pursuant to a default election under an arrangement that is intended to be a qualified automatic contribution arrangement for a plan year and ends on the last day of the following plan year.

The regulations would seem to preclude maintaining the two differnt formulas. Has anyone seen informal guidance from the IRS that would allow different formulas for different groups?

Could the different formula's be used if the group covered by each formula passes 410(b)?

Can a 401k plan that has insurance still use the 5500-SF form?

Can anyone point to me the code that states that an SAR is not required for a one participant plan?

Also, does this still apply if the one-participant plan is filing a Form 5500-SF instead of the Form 5500-EZ.

I have a quick question regarding Control Groups. Here's the scenario: Company A did an asset purchase of Company B. They now form a control group. Company A has a SEP IRA and Company B has a 401k. Can both of these plans be maintained under this scenario?

Hi. I have a plan that is terminating. One of the participants had a few stokes and cannot think. He does not have a power of atty. Do we just transfer his account to a default IRA?

Would appreciate any input on the following:

Employer maintains an NQDC plan that allows elective deferrals and other employer contributions. (Every participant in the NQDC plan is an HCE.) The NQDC plan allow employees to defer up to 100% of their salary remaining after all payroll deductions.

Employer's 401(k) plan says any 401(k) participant who defers into the NQDC plan for the plan year may only defer a maximum of 4% of compensation into the 401(k) plan.

Read literally, this only violates the contingent benefit rule if the NQDC plan deferrals are restricted based on the employee's 401(k) deferrals (or lack of deferrals). Here, the NQDC plan is silent on the issue, but the employee's 401(k) deferrals are limited.

Permissible? Or "indirect" condition on NQDC participation?

We've received a favorable DL with the plan language, but with reliance running out fairly soon, I'm interested in hearing input.

I have an interesting question: can a defined benefit plan be merged into a 401(k) plan? I learned early on that the conversion of a defined benefit plan into a 401(k) plan would result in a termination of the defined benefit plan. However, I was not able to locate anything definitive which stands for this proposition in IRS guidance. There is a citation in the 414(l) that the merger of the two constitutes the conversion of one type of the plan into the other prior to the merger. Any helpful suggestions would be greatly appreciated.

We have a participant who exceeded the 402(g) limit by about $4,000 for 2015. Now, we want to process the corrective distribution for him. He's had a net loss for the year. I have 2 questions in regards to this distribution:

1) I believe the IRS allows for any reasonable method to calculate the gain/loss. I'm trying to figure out what's best to use as the "beginning date" of the failure for gain/loss calculation purposes. Would setting the beginning date as the date on which the participant first exceeded the 402(g) limit be reasonable, or must the whole year be used (until the date of distribution) for gain/loss calculation purposes?

2) Do we simply send out the check and 1099-R that's adjusted for the loss? Would the IRS know that there was a loss when they see that the 1099-R amount is less than the amount by which the participant exceeded the 402(g) limit?

Facts:

Owners of company X are selling the assets of the company on October 31, 2015. They will be paid over a three year period for the sale.The tax year ends 12/31/2015.

Would there be any issues setting up a cash balance plan starting Novermber 1, 2015, ending October 31, 2016?

My concerns are:

1. Combinig with the existing PS plan which has a plan year of 1/1-12/31

2. There will be no employees after the sale, but there are employees until 10/31/15.

3. Would they be able to deduct the contribution for the 11/1/15-10/31/16 plan year in the 2015 tax year?

A large record-keeper that most of us know and love has a funny policy. If you are 59.5 and want an in-service distribution of your entire non-loan account, but you have a loan outstanding, then you are not permitted to do so. You are not permitted to a take distribution that will reduce your non-loan account balance below your participant loan balance. Their opinion is that you are violating the collateral requirements.

The EOB is perfectly clear on this, the 50% limit is determined on the date of the loan only.

The recordkeeper went on to tell me that this rule does not apply to a hardship because the hardship rules require you to take loans first. I explained that this completely negates all logic and reason that might otherwise have supported the position.

Esteemed pension gurus, what say you?

I have a potential client that has 3 owners and no employees. They would like to set up a plan to defer some of the taxes.

Is there any benefit to setting up a cash balance plan vs. a defined benefit plan? Or does it not matter since there are no employees and therefore no discrimination testing? Note - there will never be any employees.

Thanks

Does anyone have an idea as to the earliest date that a participant can withdraw prevailing wage fringe benefits from a plan? I am thinking that the earliest date would be the 2 year rule (other than hardship). Does anyone believe they could be withdrawn earlier than that? Thanks!

A client attended a seminar where at least the client was given the impression that it is beneficial to wrap H&W benefits with the 401(k) plan into one document.

2 questions:

1. Are there document providers that provide a wrap document whereby the 401(k) provisions & the H&W provisions are incorparated into one document?

2. Even assuming that the answer to Question 1 is yes, what would be the benefit of wrapping a 401(k) plan wiht H&W plans? I understand why a plan sponsor might want to wrap all H&W benefits into a single plan, but I don't see why a plan sponsor would want to wrap a retirement plan with welfare plan.

Thank you for any guidance.

A participant in one of our plans contributed over the 402(g) limit for 2015. We're working on doing a distribution of the excess right now. How would you calculate the gain/loss? Would you consider the date when the deferral first exceeded the 402(g) limit as the start date and the date of distribution as the end date for gain/loss calculation purposes?

Also, there were SafeMatch contributions associated with these excess deferrals. Do you calculate the gain/loss for those as well?

We are trying to clean up a situation involving an S corporation that was hit hard by the recession. The S corporation has been 100% ESOP-owned since 2004.

Due to the reduction in payroll resulting from the recession, contributions to the ESOP to enable it to meet its debt service back to the S corporation have for several years been roughly double the 415 limitation.

We have considered treating the excess contributions as S corporation distributions, but the stock value has dropped so much that it's virtually impossible to allocate enough stock (at its fmv) to participant accounts to meet the dividend-make-whole requirements of IRC Section 4975(f)(7).

We are likely to recommend that the loan be refinanced. We would also like to increase the amount of the loan but feel that this can be done only if additional shares are purchased by the ESOP. Although it seems counter-intuitive, I believe I have read or heard somewhere that an ESOP that already owns 100% of an S corporation can still buy more shares (and borrow the purchase price from the company).

Any thoughts would be greatly appreciated.

Privately held corporation with stock split between the company, a father and a son as owners. Non-familial COO and CFO. Company is discussing options for a succession plan in the event both shareholders die. They are considering using an endorsement split dollar arrangement on the life of the shareholders with key employees (COO and CFO) listed as beneficiaries as a way to fund the key employees' purchase of the deceased shareholder's stock. Another option would be to bonus out shares of stock to those key employees.

Any thoughts on using split dollar versus bonusing shares?

A client missed allowing a few participants to defer and now owe lost salary deferral opportunity. I know that these funds should be classified as a QNEC. But what about the associated match? Are these funds deposited to the match account with vesting attached or are they a QNEC as well?

Thanks for any guidance you can provide.

I'm probably missing something, but I can't find anything in 414(q) or the 414(q) regs addressing this.

S-corporation, new leveraged ESOP has the two head honchos irrevocably waiving participation, as the plan would otherwise fail 409 testing.

The plan document utilizes the top 20% election to determine the HC. Question is this - when determining the top 20%, are these two INCLUDED or EXCLUDED from the determination process? Since I find nothing that says you can or must exclude them, it would seem that they should be included. On the other hand, this doesn't seem reasonable, similar to doing 401k testing where someone has zero comp for the year, so you exclude them entirely from the testing. Of course, following the coverage testing rules, these people are treated as non-excluded and not benefiting, so maybe that is the more reasonable interpretation, in fact, that's where I lean.

Anyone ever encountered this, or have an opinion?

We are working on the PPA restatement for a plan. Current plan is a safe harbor plan that uses a safe harbor definition of compensation (no exclusions to comp) for the deferral and safe harbor match portion of the plan. The definition of compensation for Profit Sharing allocation purposes excludes bonuses and overtime.

Is this ok? What happens if the Compensation Ratio Test fails? In this case, it is only affecting the Profit Sharing. Does this failure affect the safe harbor status of the plan with regards to SD and SH Match.

We want to suggest to the client to use the safe harbor definition of compensation for all sources. Do we have a case to suggest this?

We have a Profit Sharing/401(k) we have taken over from a prior TPA who we understand was doing some shady accounting. Plan is with American funds.

I ran AF reports and compared them to past 5500s, and there are gross discrepancies. For a trust with assets in the range of $300k-$400k, assets on 5500s have been misstated (both over and under) by more than $110,000.

The ending balance on the 2013 report is approx $444,000 when it actually should have been approx $551,000

How should I prepare the 5500 for 2014?

1. Use ending values from 2013 and calculate earnings to get to correct 2014 ending value.
2. Use correct beginning 2014 value, ignoring fact that 2013 report was wrong.
3. Use correct beginning 2014 value, and include an explanation of error as an OTHER attachment to the filing
4. Other ideas?