I work on a plan that has been frozen for 20+ years.

- The plan does not have an unlimited lump sum provision

- They would like to offer a lump sum window (unlimited) to its vested terminated participants

- They are less than 80% funded

- No restrictions on lump sums since they were frozen prior to PPA

Can they still offer a window since the AFTAP percentage does not impact their ability to offer lump sums

-OR-

Since it would is a new provision/amendment, does the 80% come into play?

From a practical standpoint, it doesn't seem to be necessary to have a separate plan tax ID number when the assets are held with an investment provider/recordkeeper (i.e. John Hancock, American Funds, etc) who uses their own tax payor ID for tax reporting and distribution purposes. That being said, is there a legal precedent for applying for a separate plan tax ID number in this type of situation? We always apply for a separate number with assets in brokerage accounts or other arrangements that need it for tax reporting purposes. Some practitioners take the approach that it is needed to separate employer assets from plan assets in all situations. Not sure how this has been dealt with in the legal arena or how the IRS views this issue. Looking for some further guidance on this topic.

Here's a doozy for you...

Calendar year plan. Fiscal year of employer ends 9/30/2015. 12/31/14 contributions are deducted on the 9/30/15 return. They are amending the fiscal year to 12/31 and there will be a short fiscal year from 10/1/2015 to 12/31/2015.

How do I determine the max deductibe for that short fiscal year?

The owners will have more than 66,250 of comp in Q4 ($265,000 x 3/12). But I have 12 months of allocations to allocate out. Do they just get hosed on the 2015 plan year? Or is there a way to use the calendar year for the max deductible, especially since otherwise the comp for those 9 months will never get to be used?

It is discovered in checking the 2014 vaulation work for a DC plan that there were a few employees who should have entered the plan in the 2013 plan year.

In calculating lost opportunity, can we rely on Rev Proc 2015-28 with the reduced QNEC of 25% of missed salary deferral for the 2013 and 2014 failures?

What if the employee was missed in 2012 and 2013 and 2014? Are we required to calculate the full QNEC (half of missed salary deferral) for all years missed? Or does Rev Proc 2015-28 give us the ability to reduce the 2013 and 2014 QNEC and we only need to give the full QNEC for 2012?

Any guidance would be helpful.

A participating employer under a 401k plan is sold. How does that affect the employees in that participating? They haven't terminated their employment nor has the plan that they were under terminated. Can they set up a new plan of their own if the new employer doesn't want to merge them into their own plan? If so, are the assets just moved over into the new plan?

Thank you.

Would removal of asbestos qualify as a casualty loss for a hardship withdrawal?

Client would like to have one match formula for executives & office staff and a second match formula for warehouse staff. We are told that the match for the warehouse staff will be a better formula than the formula for executives & office staff (which is where we are told HCEs are). We don't have a breakdown by group yet.

If we do this in the FT William document, we were told to use the discretionary match of D.6.a "A discretionary amount and percentage of Matched Employee Contributions". The Note in document states "The discretionary formula in D.6.a. must meet the nondiscrimination requirements regarding benefits, rights or features described in Treas. Reg. section 1.401(a)(4)-4.

While I understand that if you have different match formulas for different groups of people, you must do BRF testing, I'm not convinced that it is o.k. to use a discretionary match option in the document. Using discretionary in the document should mean having one discretionary formula for everyone in the plan, shouldn't it?

And, I understand that while the client is telling us that the match formula for the warehouse staff is better than the one for executives & office staff, we wouldn't know that until we actually saw what formulas they are thinking of using. And who knows what they would think up for the match formulas for future years.

Anyone else run into a formula like this or have any idea where/if it will fit into the FT William document?

I'm not looking forward to this at all as the BRF will be something we have to calculate manually as the testing software doesn't do that test for any match formulas.

Any thoughts? (maybe I should say useful thoughts )

Background Information: 4 Plans in a Controlled Group. Plans 1, 2 and 3 are traditional 401(k) Plans, with a Match. Plan 4 is a Safe Harbor Match Plan. We had to utilize the ABPT and the Non-discriminatory Classification Tests to pass coverage.

Question: Can Plans 1, 2 and 3 be aggregated for the ADP/ACP testing?

Dr. Smith was an owner/employee of DOG Clinic until 6/30/2014.

He became an employee of CAT Clinic on 7/2/2014.

CAT Clinic's 401k PSP, which has a 1 year eligibility, with dual entry, recognizes prior service with DOG Clinic for all plan purposes.

Dr. Smith became a shareholder of CAT Clinic on 8/14/2015.

In determining whether Dr. Smith is key or not, would I consider his ownership of DOG Clinic and therefore he would be Key in the CAT Clinic Plan for both 2014 and 2015?

Or, since he was just a regular employee at CAT Clinic for 2014, would he be non-key for both 2014 and 2015, then become key for 2016?

Thank you!

Reposted to correct 401(k) message board. Haven't posted in forever and didn't watch what I was doing

Client would like to have one match formula for executives & office staff and a second match formula for warehouse staff. We are told that the match for the warehouse staff will be a better formula than the formula for executives & office staff (which is where we are told HCEs are). We don't have the breakdown by group yet.

We were told that if we did this in the FT William document, we were to use the discretionary match of D.6.a "A discretionary amount and percentage of Matched Employee Contributions". The Note in document states "The discretionary formula in D.6a must meet the nondiscrimination requirements regarding benefits, right or features described in Treas. Reg. section 1.401(a)(4)-4..

While I understand that if you have different match formulas for different groups of people, you must do BRF testing, I'm not convinced that it is o.k. to use a discretionary match option in the document, Using that option should mean having one discretionary formula for everyone in the plan, shouldn't it?

And, I understand that while the client is telling us that the match formula for the warehouse staff will be better than the executives & office staff, we wouldn't know that until we actually saw what formulas they are thinking of using. And who knows what they would think up for the match formulas for future years.

Anyone else run into a formula like this or have any idea if it will fit into the FT William document?

I'm not looking forward to allowing this at all as the BRF will be something that we have to calculate manually as the testing software doesn't do that test.

Any thoughts?

.

X, owner of company A (with no employees) has maintained a defined benefit plan P for 4 years. Exempt from PBGC coverage as plan that exclusively benefits substantial owners. Plan P is substantially overfunded.

X also owns (enough of) Company B so that A and B are under common control. Company B was established 7 years ago, but first had employees in 2013. in 2014, total of 6 employees with at least one year of service.

After looking at controlled group, X is informed by his actuary that Plan P fails 401(a)(26) for 2014 and 2015. Surprise!

I am expecting that an 11(g) amendment to extend eligibility to three employees of company B will be the correction for 2014 failure. Coverage and nondiscrimination will be tested based on controlled group assuming retro amendment was effective 1/1/14. Required contribution and max deduction will not be changed to reflect amendment.

Along with the thousand other questions running through my head on how to best help X with this issue, What happens with regard to PBGC coverage for 2014? Plan P will no longer be exempt. Do they need to pay premium for 2014 based on retro amendment?

Other facts: Plan P frozen effective mid year 2014. X would like to terminate Plan P and possibly establish a qualified replacement plan (DC) to which it would transfer excess assets and avoid reversion. So bringing more people into the DB will likely result in accrual of small benefits that would end up being fully vested.

Non profit has 403b plan with universal availability

Company has contract workers who work < 8 hours/wk (< 500 hrs/yr)

For tax purposes unrelated to plan, IRS has determined these contract workers s/b classified as ee's

For plan purposes can these contract workers remain contract workers not eligible for the plan under universal availability?

If you are still working at a company with a 401(k) plan but your account has money rolled over from either a prior unrelated employer or an IRA would that rolled-over portion of your account be subject to RMDs at age 70-!/2?

Ignoring the wisdom or folly of starting a DB plan for a start-up company...

A question came up as to whether a new business - started up on 9/3/15, and has a 9/30/fiscal year end - can install a defined benefit plan, and participants accrue a full year's benefit for 2015? Is there a minimum hours/service requirement?

Also, and I believe this is debatable, can the plan effective date predate the existence of the corporation? I've seen this done a lot in DC plans, to avoid short plan/limitation years, but I'm not sure if this is common in DB plans? I've not heard of the IRS challenging this in a DC plan - but I don't know what the actuaries of the world think about this on DB plans? (debatable in DC plans as well, but that's a different subject)


Thanks.

Strange scenario. Employer really goofed and did not withhold from employee pay any elective deferrals for 2014. Participants did complete deferral election forms. The Employer, however, did go ahead and make a deposit of those deferral amounts. We have treated this as missed deferrals under the EPCRS Rev Proc. The amounts deposited are now treated as QNECS. Does this now trigger TH and eliminate the exemption so anyone who did not have a missed deferral and therefore, no qnec, now needs TH minimum? I believe it is "yes", but am hoping for an alternative.

The beneficiary form was completed indicating that the participant was not married. He named his son as beneficiary. After the participant's death, information surfaced that would indicate that the participant was still married, but probably estranged from his wife. She did sign a waiver after the participant's death. Her signature was not notarized. Something like 6 years have gone by since the participant's death. At some point during these intervening years, the spouse returned to her native country. After all this time, the ER would like to distribute the assets to the son. I'm hoping that there is an exception to the spousal beneficiary rule in cases like this. Any thoughts or guidance you can offer?

I'm dealing with a retiree health veba that's fully insured. There is a separate insurer for medical and prescription drug. Both the medical insurer and prescription insurer provide SPDs to the participants. What information is the veba obligated to include in its own spd? The TPA has prepared a SPD that essentially copies and pastes information from the insurers about coverage levels into the SPD. It seems odd to me for the veba to recycle the insurer's information in this manner. Should I be okay with this?

Does anyone understand why having a different time and form of payment for each annual deferral election doesn't violate "one time and form of payment per plan" rule under 1.409A-3(I)(1)(i)?

I'm confused by IRS answer to Q #13 in 2015 ABA Section of Taxation, Committee on Employee Benefits May 8, 2015 meeting:

"13. Section 409A - One Time and Form of Payment

Treasury Regulation Section 1.409A Section 1.409A-3(c ) provides that a plan may designate only on time and form of payment upon the occurrence of events such as a separation from service, with a limited exception if the event occurs before a specified date, such as a retirement age. How does this rule apply if participants are allowed to designate for each year's deferral a different post-retirement starting date and form? For example, what if a participant designates that 2014 salary deferrals be paid 5 years after retirement in a lump sum, and that 2016 deferrals start at retirement date in a 10-year installment form? Has the plan violated the requirement that only one time and form of payment may be offered after separation from service?

Proposed Response: Although Treasury Regulations Section 1.409A-3© refers to a limit per plan, it was not meant to provide that all deferrals under the plan be so limited, provided that the payment of each yearly deferral, with deemed investment earnings on that amount, can be objectively determined under Treasury Regulation Section 1.409A-3(i(1)(i.

IRS Response: The Service representative agrees with the proposed response. Deferrals for each year are separate deferred amounts to which the time and form of payment rules apply separately."

Can anyone explain why? If the deferrals are all in an account balance plan, aren't they aggregated, within the plan and with other account balance plans, for purposes of this rule? Can we rely on this IRS answer? Thanks.

who dreams up these silly things?

http://blogs.haynesboone.com/index.php/2015/08/firm/benefits/recent-legislation-extends-form-5500-filing-deadline-for-tax-years-beginning-in-2016/

Recent Legislation Extends Form 5500 Filing Deadline for Tax Years Beginning in 2016

Posted on August 13, 2015 by Haynes and Boone Benefits Group in Practical Benefits Lawyer

The recently enacted Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the Act) extends the filing deadline for certain Form 5500 filers for plan years beginning after December 31, 2015. Specifically, for plan sponsors who have obtained an extension to file the Form 5500, the Act increases the extension from 2½ months to 3½ months from the initial deadline. Accordingly, for 2016, a plan sponsors deadline for filing the Form 5500 for a calendar year plan, assuming the plan sponsor obtained an extension, would be November 15, 2017 (rather than October 15, 2017). At this point, it is unclear whether a similar extension will apply to direct filing entities, such as master trusts, and to the deadline for filing the Form 8955-SSA. However, the extension has the effect of extending the deadline by which Summary Annual Reports (SARs) must be provided, since SARs must be provided within two months of the extended deadline for filing the Form 5500.

The August CPI-U figure was released today at 238.316.

coupled with the July rate of 238.654 (awaiting the Sept value which is released Oct 15, it appears there will be no change in any limits next year. if the Sept value was 239.7 the DB limit would increase to 215,000, but I'm pretty confident that is not about to happen. And it requires a lot bigger jump for the other limits to reach the next level.

so, next year, same as this year.