Participant is deceased as of 2013. Beneficiary cannot be located. The plan document does not have any language about what happens in this instance. I've seen docs give a 3-year window for the plan sponsor to retain the payment obligation, but I'm not sure if there's a compliance reason for that. Does state law dictate this situation? Can the plan be amended to include language now? What is the proper way to handle this? Does the client report this as 'paid' to the IRS at some point?

Thanks!

Plan loan policy (that is incorporated into the plan document by reference) provides that a participant that has defaulted on a loan in the past is not eligible to receive another plan loan. Several such participants were allowed to have another plan loan in violation of this policy over several plan years. Is this an error that can be corrected through EPCRS? Is it a "plan loan failure" to be reported and corrected on Schedule 9 to Appendix C? The loans that were granted met the other requirements of the loan policy and Section 72(p). The plan sponsor wants to retroactively amend the loan policy to remove the "no loan if previous default" provision.

Code Section 409(h)(a)(1) requires distribution "in the form of employer securities," but it does not dictate whether a physical stock certificate must be issued. I believe it is ok for a company to note the issuance in book entry form rather than issuing the physical certificates. Can anyone comment on what other public companies are doing? Thanks.

If W2 does not have 401k or retirment benefits details does that mean there is no reitrement benefits paid by the company to that person?

I am preparing a submission for a failed 2010 ACP test.

I can request relief from excise tax under 4979 but need "the supporting rationale".

Any thoughts on any supporting rationale that I could present with a straight face?

Thanks for any thoughts.

I have an RSU agreement. Normally the RSUs are to be paid out on their vesting date. Pursuant to the agreement, the RSUs can be deferred past their vesting date so long as the election to defer them is made at least 12 months prior to the vesting date.

This doesn't sit right with me. Once they are vested, they are no longer subject to a substantial risk of forfeiture. Grantees will be able to defer past the short term deferral date. The RSUs are now deferred compensation. The compensation must be deferred before the year in which the services are performed. That means, to defer the RSUs, you would generally have to defer them prior to the date they are granted, since the services are the services performed during the restricted period (from grant to vest).

Normally I would push back, but this was drafted by a very intelligent executive compensation attorney. Further, I found the following in Melbinger's materials which also goes against my understanding, which makes me think I might be missing something:

Melbinger uses this as an example of how an RSU might be structured:

"Pursuant to the ABC Corporation Stock Incentive Plan, ABC awarded 10,000 RSUs to Executive D on July 1, 2008, vesting at 25% per year. The terms of the award agreement provide that D can elect to receive a distribution of a like number of shares of ABC stock (in increments of at least 1,000 shares) at any time after the RSUs become vested, by filing a written election with ABC at least 12 months before the designated distribution date."

Can somebody please let me know what I'm missing???

hi

I have employer sponsored 401k for almost two years now with Principal and I am not very impressed with the returns. I tried to keep it diversified between stocks (large cap, short/mid), bonds, real estate, international.. but the returns are way below the average market especially this year, the YTD is less than 2%. Not sure if I am doing anything wrong and like to get any tips to make my portfolio better.

Anyone else have 401 with principal who can share their performance this year?

Also, I am exploring my options to roll it over to IRA like Vanguard but not sure if there are any limitations to do that. I am 30 years old and working for the same employer who provided the 401k.

Thanks!

Client is a municipal plan who recently discovered that a few employees who should have been excluded has been making employee contributions. One employee has been erroneously included for about 15 years and the others for less time. Mandatory employee contributions have been picked up by the employer since 2003 and were after tax prior to that.

Note: This is not an early entry of an otherwise eligible employee - this employee would never become eligible for this plan.

Can the plan distribute the contributions to the employee to correct? Can this be done under SCP (assuming insignificant failure) or would a VCP application be required? Would the distribution be taxable in the year distributed as an excess amount or be taxable in the year in which each contribution was made?

I am not aware of any formal guidance that addresses this issue specifically. However, I have read the transcript of an IRS phone forum from 2/21/13 on EPCRS changes and the last question asks what should be done with 401(k) deferrals for a participant who was not eligible. Janet Mark stated that the deferrals should not be forfeited and should not be treated as excess amounts, but should be distributed back to the employee and the employee would take that dollar amount into his taxable income. Further, this might required that the participant file an amended tax return to take into account the deferrals.

This situation seems to be analogous - so would a participant have to re-file 15 years' worth of tax returns in order for the plan to make this correction?

Any thoughts are appreciated!

We have a partner who at 12/31/14 had 6.9% ownership. The ownership was derived by looking at the capital and income expenses (whatever is highest). Needless to say it changes ever year. For this partner, it is expected that is ownership will be under 5% for all future years. He turns 70 1/2 in 2015.

Issue 1 - If he owns 5% at any time during the 2015 plan year he has to take an RMD for 2015. If he owned 6.9% at 12/31/14 then at 1/1/15 would still have the same ownership?

Or could we argue that at 1/1 it’s zero because they do not know the ownership for the year until after year end. My guess is probably not.

Issue 2 - Would you consider him a 5% owner because of his 2014 ownership? For HCE and Top Heavy you use prior year but it seems like for RMD is current year only?

Issue 3 - I also found that once a 5% owner has to take RMD he is “locked in” so that even if his ownership dips below 5% he still has to continue taking. Is that correct? I think yes.

Issue 4 - His 12/31/14 balance is 0. He has a 2014 receivable profit sharing contribution that will be deposited in July 2015. IF he has to take an RMD is his first one zero?

Hi,

Can we use the Age Weighted Allocation method together with the Safe Harbor Nonelective? I have this nagging suspicion that the answer is no we cannot. Wouldn't this cause the equivalent benefit rates to be different at NRA? Case in point we have two very young HCE's (their father owns the business). Under Age Weighted they get very very little, but if I throw the 3% Nonelective on top, all of a sudden their Equivalent Benefits rates are much higher than the NHCE's (who are a little older).

I'm referring to the "safe harbor" Age Weighted method, the one that gets me out of the gateway minimum.

I don't post much, but I'm confused about the effect on TH testing with respect to Key Employee balances and Safe Harbor status in a multiple plan arrangement.

Here is my fact pattern...

Plan 1 - 401k

Plan 2 - PS

Plan 3 - CB

3 Categories of employees

1 - Owner / Key EE

2 - Staff 1

3 - Staff 3

- Category 1 and 3 are NOT eligible for Plan 1.

- Category 2 is NOT eligible for Plans 2 and 3.

- All 3 plan are top heavy individually / separately.

Questions...

1. If Key employee balances only remain in Plan 1, does it need to be aggregated with Plans 2&3 for TH purposes (even though the Key's are ineligible and do not make are receive any contributions)?

2. If yes, then would the Staff 1 category would be required to receive the 3% TH min. contribution?

3. If yes, if I transfer the balances of the Key employees to Plan 2 then I do not need to aggregate and Staff 1 does not need to receive the TH min. contribution in Plan 1?

4. Is this statement correct - If Plan 1 has Key employee balances AND is a Safe Harbor Match plan with no other contributions, then I am required to aggregate but Plan 1 is exempt from TH because of the safe harbor status?

Thanks for your help!

I think this has come up before but can't seem to find anything definitive/official regarding what to do when a plan sponsor has a cycle-changing event and its determination letter expires before its next applicable cycle.

Example: Plan sponsor has EIN ending in 8 so its plan is Cycle C, with an EGTRRA RAP deadline of 1/31/2009. In 2008 the plan sponsor changes its EIN to one that ends in 0. This means the plan is now a Cycle E plan with an EGTRRA RAP deadline of 1/31/2011. Under Section 11.03(3) of Rev. Proc. 2007-44, because both Cycle C (pre-change cycle) and Cycle E (post-change cycle) are still open as of the EIN change in 2008, the plan may (but is not required to) treat the pre-change cycle as the applicable cycle until the pre-change cycle ends. The plan submits a Cycle C determination letter application by 1/31/2009. When the IRS issues the favorable DL, it issues it to the plan sponsor under its new EIN ending in 0 and specifies a DL expiration date of 1/31/2011, which is the EGTRRA RAP deadline for Cycle E. But the next filing deadline is 1/31/2016, which is the post-EGTRRA RAP deadline for Cycle E.

Based on Rev. Proc. 2007-44, it seems that a plan in this situation has a gap between the expiration date of its pre-change cycle DL and the deadline for its post-change cycle DL. In the example above, there is a full 5-year gap between the DL expiration date and the next Cycle E filing deadline. How is the plan sponsor supposed to handle this when it comes time to submit the Cycle E DL application by 1/31/2016?

I know some people say you need to submit another DL application again before the DL expiration date so you don't have a gap, but that would mean a plan sponsor has to do two DL applications in a single 5-year cycle, and that doesn't really make sense. The ERISA Outline Book talks about how the IRS does not provide an example for this scenario and states that it would not make sense for a plan to have to be restated and reviewed twice in the same RAP cycle. That certainly sounds reasonable, but how is this actually happening when the IRS is reviewing the DL applications in these scenarios and there is a gap in the DL coverage? Is anyone getting pushback because the DL expired before they next submitted a DL application? Is there anything more definitive from the IRS about this?

Is a 20% mandatory tax withholding required for a non-spousal death distribution? What about state taxes (if applicable for that state)?

A domestic partner situation, man and woman. He has family health insurance coverage since he has children. Can he add his partner to the policy and keep the total premium as a tax fee benefit (his employer pays 100% of the family premium)?

My (limited - I don't work with health insurance) understanding is that a domestic partner’s share of the premium cannot normally be a tax fee benefit and he should have her share of the premium added to his pay to be taxed as regular income. This seems simple if he was going from a single to a 2 person plan - the additional premium would be taxable. But since he already has family coverage, does it matter if his partner comes on the plan and he still receives the insurance as a tax free benefit? On the one hand, it seems like some portion should be taxable, as it would be if there were just the two of them. On the other hand, since it is family coverage, and the premium is currently tax free and will not change, it also seems ridiculous to suddenly consider a portion of it as taxable.

Maybe my fundamental understanding off off base to start with...

Thanks.

Can a participant in a db plan take a partial distribution at the plan's early retirement age and continue to work and accrue a benefir?

I need confirmation on HCE determination and testing. Company was started in 2009, then was purchased by equity firm which caused a plan term (no assets transferred). Company was an adopting employer on the new plan. Company was then sold as a spin off and they are no longer related to equity firm and they created a new plan and no assets were transferred and the participants had the option to roll funds over to the new plan from the prior plan. This company had the same EIN the whole time. Does this make a difference in testing/HCE determination?

Sole proprietor retiring at 62 with an accrued benefit approx $12k a month. Is his lump sum calculated with plan or 417e rates, rather than 415 rates because his benefit is not at the 415 maximum?

Husband has a DB Plan.

Wife has a DB Plan.

Wife cut back unexpectedly and ended up with $88,000 of required contributions in the plan against which she had no income to deduct. Self-employment has ended.

I am trying to think of a scenario where the Husband, also self-employed, can deduct the money against his income (lots of it.)

- putting her on payroll

- considering it a controlled group

- merging the plans

Is there any way this could be done?

Thank you for any thoughts.

A participant's balance is hovering around $1,000. If we request a cash out, it may take the investment company several days to process the distribution. Are we ok if the balance goes back up over $1,000 if we have proof it was under $1,000 when we made the request?