What are your thoughts on providing the following annual participant notices to the entire employee population (everyone in the employer's census) regardless of whether they are yet eligible to participate in the plan?

-QDIA

-Safe Harbor

-Automatic Enrollment (ACA/EACA/QACA)

My thought is that there might be some legal risk for the employer (in that it could be providing misleading information to someone who is not yet eligible) and it could also be confusing for the employee who has no idea whether the notice even applies to them. Beyond these concerns, are there technical issues as well?

In the LRM language for an integrated allocation, the third step reads as follows:

© Third, any remaining contributions or forfeitures will be allocated in the ratio that

the sum of each eligible Participant’s Plan Compensation for the Plan Year and Plan Compensation for the Plan Year in excess of the Integration Level (as defined in the Adoption Agreement) bears to the sum of all such Participants’ Plan Compensation and Plan Compensation in excess of the Integration Level, but for each eligible Participant, not in excess of the Maximum Profit Sharing Disparity Rate (defined below). For purposes of this step, in the case of any Participant who has exceeded the cumulative permitted disparity limit, two times such Participant’s total Plan Compensation for the Plan Year shall be taken into account.

I do not fully understand the last sentence in this step. Can anyone explain what this means? Does this have to do with a situation when there is more than one plan? If so, is it if there is a DB plan?

Thanks in advance.

Hi - We are about to receive a DRO directing our client's plan to pay child support to a state agency that (lawfully) represents the children of a Participant. We've never processed a QDRO for anyone other than former spouses. Can you please share your insights on the following:

1. Can the check be paid to a state agency? I think yes; it seems akin to paying to an IRA custodian.

2. Should the 1099 be issued to the Participant? I think yes, because child support payments are generally made with non-deductible income of the participant.

Thank you very much.

I think Jim Holland may have opined on this at the ASPA 1999 Q & A Session ---

A 401(k) Plan complies with the nondiscrimination rules for one or more years by using a safe harbor matching formula. Prior to beginning of next year, it elects to not use the safe harbor rules. The employer adopts a discretionary matching formula and informs participants accordingly. May the employer use a graded vesting schedule with respect to matching contributions made after the change to a non-safe harbor plan (giving credit for all prior service) or must the participants who were covered by the safe harbor formula continue to be fully vested in future discretionary contributions?

The mutual fund company states the employees who were in the Safe Harbor Plan must all now be fully vested in the new discretionary matching accounts…..their record keeping system keeps all these in different source buckets, so there's no co-mingle issue.

what?????

Is this correct????

I either want to laugh or cry.

Plan sponsor is a sole proprietor with a DB plan that has not been restated for EGTRRA. The sponsor's 2012 1040 is being audited by the IRS. No exam of the plan - so far. Is this sponsor eligible for VCP? Section 4.02 of RP 2013-12 says:

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.02 Effect of examination. If the plan or Plan Sponsor is Under Examination, VCP is not available and SCP is only available as follows: while the plan or Plan Sponsor is Under Examination, insignificant Operational Failures can be corrected under SCP; and, if correction of significant operational failures has been completed or substantially completed (as described in section 9.04) before the plan or Plan Sponsor is Under Examination, correction of those failures can be completed under SCP.

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"Under Examination" is capitalized, so looking to the definition of this phrase in Section 5.09, (posted below) it seems to me that a 1040 audit does not create any of the situations that fit the definition of "Under Examination". The sponsor is not under an EO audit, just a tax audit, so VCP should be available.

What say the BL brain trust? Thanks.

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.09 Under Examination. (1) The term "Under Examination" means: (a) a plan that is under an Employee Plans examination (that is, an examination of a Form 5500 series or other Employee Plans examination); (b) a Plan Sponsor that is under an Exempt Organizations examination (that is, an examination of a Form 990 series or other Exempt Organizations examination); or © a plan that is under investigation by the Criminal Investigation Division of the Service.

(2) A plan that is under an Employee Plans examination includes any plan for which the Plan Sponsor, or a representative, has received verbal or written notification from Employee Plans of an impending Employee Plans examination, or of an impending referral for an Employee Plans examination, and also includes any plan that has been under an Employee Plans examination and is in Appeals or in litigation for issues raised 26 in an Employee Plans examination. A plan is considered to be Under Examination if it is aggregated for purposes of satisfying the nondiscrimination requirements of § 401(a)(4), the minimum participation requirements of § 401(a)(26), the minimum coverage requirements of § 410(b), or the requirements of § 403(b)(12)(A)(i), with any plan that is Under Examination. In addition, a plan is considered to be Under Examination with respect to a failure of a qualification requirement (other than those described in the preceding sentence) if the plan is aggregated with another plan for purposes of satisfying that qualification requirement (for example, § 401(a)(30), 415, or 416) and that other plan is Under Examination. For example, assume Plan A has a § 415 failure, Plan A is aggregated with Plan B only for purposes of § 415, and Plan B is Under Examination. In this case, Plan A is considered to be Under Examination with respect to the § 415 failure. However, if Plan A has a failure relating to the spousal consent rules under § 417 or the vesting rules of § 411, Plan A is not considered to be Under Examination with respect to the § 417 or 411 failure. For purposes of this revenue procedure, the term aggregation does not include consideration of benefits provided by various plans for purposes of the average benefits test set forth in § 410(b)(2).

(3) An Employee Plans examination also includes a case in which a Plan Sponsor has submitted any Form 5300, 5307, or 5310 and the Employee Plans agent notifies the Plan Sponsor, or a representative, of possible failures, whether or not the Plan Sponsor is officially notified of an "examination." This would include a case where, for example, a Plan Sponsor has applied for a determination letter on plan termination, and an Employee Plans agent notifies the Plan Sponsor that there are partial termination concerns. In addition, if, during the review process, the agent requests additional information that indicates the existence of a failure not previously identified by the Plan Sponsor, the plan is considered to be under an Employee Plans examination. If, in such a case, the determination letter request under review is subsequently withdrawn, the plan is nevertheless considered to be under an Employee Plans examination for purposes of eligibility under SCP and VCP with respect to those issues raised by the agent reviewing the determination letter application. The fact that a Plan Sponsor voluntarily submits a determination letter application does not constitute a voluntary identification of a failure to the Service. In order to be eligible for VCP, the Plan Sponsor (or the authorized representative) must identify each failure, in writing, to the reviewing agent before the agent recognizes the existence of the failure or addresses the failure in communications with the Plan Sponsor (or the authorized representative).

(4) A Plan Sponsor that is under an Exempt Organizations examination includes any Plan Sponsor that has received (or whose representative has received) verbal or written notification from Exempt Organizations of an impending Exempt Organizations examination or of an impending referral for an Exempt Organizations examination and also includes any Plan Sponsor that has been under an Exempt Organizations examination and is now in Appeals or in litigation for issues raised in an Exempt Organizations examination.

This is a voluntary 403b investment plan. It is run by the NJ Division of Pensions. The Trustees have never adopted an investment menu. All employee contributions are invested in a common stock portfolio invested by the Division of Investment.

Q.: I feel a lack of an investment menu is a breach of prudence. Would a Class Action to compel the Trustees to adopt an investment menu succeed?

What happens in the event a company has not filed 5500 for the last few years and is charged penalties for not filing, but the company has gone bankrupt in that time? Who is liabile for the penalties if the company cannot pay?

What is the IRS requirement to fully correct for mistakenly missing one eligible employee out of about 200 and not allowing him to defer into the 401(k) plan?

I want to know where I can list the Personal Choice Retirement Account (PCRA) gains on the Part II Income and Expense Statement on Schedule H. Should I post it as unrealized appreciation of assets which is on 2(5)(B) Other?

Thanks,

A participant is 75 and retireing. She has not taken any RMDs to date as she has not been required to because she is a simple rank and file employee. When she leaves she wants to rollover her complete balance to an IRA.

When we pay this employee out and roll her money into an IRA must we process an "RMD" , withhold taxes, and generate a 1099R for the RMD from the plan... then rollover her balance to her IRA? Or can we pay her out in full as a rollover and code the 1099R as such and be done? Dont go through the whole RMD exercize?

Employer has a SIMPLE IRA plan for him and employees. Company ceases to exist in 2015. New Company/new name/new EIN with same owner and employees. Can this employer set up a 401(k) under the "new" Company?

I don't work with SIMPLES but this sounds to me like the owner needs to wait until 01/01/2016 to start the 401(k).

Thank you in advance.

Since I rarely see a governmental plan, I was just curious if it is a common provision in a governmental profit sharing plan, to offer a matching contribution, which is based solely upon deferrals to the 457 plan?

A small S-Corp has one employee who does not work in the state where the corporation is located. Since he was out of state, the company health insurance policy did not cover him, so the employee obtained his own policy and had the premiums paid with after-tax dollars. In addition, one in-state employee was paying her family portion of the health insurance with after-tax dollars as well.

The company wants to adopt a premium only plan. The in-state employee family coverage payment is easy, but my question deals with the out-of-state employee. How is the payment of his policy, which he pays for on his own, handled through the POP plan? Does the company increase his salary by the amount of the premium, and then run the premium payment through the plan? The company prepares its own payroll so there is no payroll service to ask this question of, and my knowledge of the POP payment rules is limited.

Thanks for any replies.

Just found out that the out of state policy is an individual policy, so the POP plan is not an option.

I have a client who wants to exclude both "taxable medical and disability benefits"

and "excess group term life insurance in excess of $50,000" from the definition of compensation.

Is there a way to do this under a safe harbor?

Are taxable medical and disability benefits excludable under the first modification under 414(s) safe harbor compensation? Are they fringe benefits? Are they welfare benefits? Thanks.

One year ago I received ESOP distribution from my former employer that I rolled over to a traditional IRA. Today I received a phone call from the company that maintains my IRA saying that the employer overpaid, and that want $6000 back.

If the error is correct, I have no problem giving back the money, but I obviously I do not want to pay tax penalties for making an early withdrawal from IRA.

Will there be tax penalties, and if so, who would be responsible for paying the penalties? Were does the law stand in this unusual case?

Is the law different in different states? I live in Oregon.

401k Plan includes ONLY SH Match. The document provider compelted an amendment in November 2014 (effective 1/1/2015) to exclude bonus from calculating the match (calendar year plan). The Safe Harbor Notice correctly disclosed that bonus would be excluded.

Come to find out that instead of checking the box in the Safe Harbor Match column, they check it in the Discretionary Match column. As noted there is no Discretionary match.

I'm curious to know what the thoughts are in terms of issuing a clarifying amendment. I am struck by the notion that this is a discretionary amendment, so perhaps I have until the end of the year to perfect the amendment (i.e., move the checkmark)?

If there was ever a case for a scriverner's error positon, I would have to assume this is it.

Deceased participant named 1 beneficiary for his 401k account balance.

The beneficiary wishes to have the account balance split evenly with another individual (her niece) who is not named as a beneficiary

Is this permissible?

Both distributions will be to IRA's so there will be no tax implications

My thought is that if the beneficiary is signing off on the instructions for distribution, she can divide the distribution as she chooses....

Thanks in advance.

My employer advised me Friday (5/19/15) that excess contributions were made to my Vanguard SEP-IRA through the company's SARSEP plan for the years 2012, 2013 and 2014, and that I will have to amend my tax returns for those years. The excess contributions are on the order of $7500, $8333, $8333 for those years. My total income deferrals in each year were more than 25% of my pay. I was over 59-1/2 years of age when the contributions were made and was planning to retire at age 65 at the end of this year. Contributions are deducted from my pay and sent to Vanguard by the company's CPA. I have not been provided with corrected W2s or with written Notices of Excess Contribution. I have never been provided with a copy of the Form 5305A or other SARSEP plan document. The employer's SARSEP is being audited by the IRS, and I am fearful that the plan may be disqualified. What do I do?

Client opened a SEP with bank in 2009. Client does not have original paperwork and claims to not have prepared SEP plan doc. She funded in 2009 - 2013 (in 09-10 based on schedule c, from 2011 on she incorporated and based contributions on w-2).

She hired an employee in 2014 who earned $65,000.

Files taxes on 1120s and is on extension.

Wants to fund for 2014 but wants to exclude employee.

Can client exclude the employee from the plan? If not, can client start a new and separate SEP for employees other than owner?

how far back will the IRS make you go if you can't locate any plan docs since the 80's? the plan sponsor does have a determination letter on the 80's document.