Employee is in a full-time, benefits eligible position, employer pays 80% of cost of coverage (separate medical, dental & vision plans) for Ee-only or Ee plus dependents (spouse and/or children). Ee changes to a Part-Time variable hour position mid-year. Not expected to work 30+ hours on average after change. Ee compensation rate is unchanged, but hours are significantly reduced. As a PT Ee, the Ee is eligible for same medical plans but no dental or vision coverage if enough hours are worked. Employer pays 80% of Ee coverage, but $0 toward dependent (minors only, no spouse) coverage.

Employer offers benefits to variable hour employees who work 30+ hours on average over 12 month look-back period. Ee, as a long-time full-time Ee is in month 1 of a stability period.

1) Because of the employment status change, has Ee experienced a 125 qualifying event?

2) If yes, what changes is the Ee permitted to make? Does status change only apply to dependents due to increased cost or can Ee drop coverage as well?

3) Does the "Special Rule" apply to this situation that would allow the Employer to begin monthly look-back after 3 months in order to allow the Ee to drop coverage?

Thoughts and comments appreciated.

P.S. - The employee does not want to continue coverage.

I have an unusual situation. Company A sells their company to Company B. Company A sponsors a 401k plan but Company B by nature of the sale does not decide to sponsor that plan but set up their own plan. Company A sets a termination date for their plan and owners take their distributions from the plan. All participants of company A are now terminated from Company A and are participants in Company B. They have requested Distributions/Rollovers from company A plan. TPA that is executing the plan termination has held the distributions to the remaining participants and now indicates that termination expenses will be charged to the remaining participants.

Considering that the owners of Company A had the largest balances in the plan and have taken their assets, have they not breached their fiduciary responsibility? Can they legitimately charge plan termination fees to participants? Are these not settlers expenses? What is being done wrong here?

At least half a dozen client call me every other week asking why a Fidelity Bond is needed on an individual account plan and the participant is in charge of his/her own investments.

Apparently the DOL is looking at Sponsors who do not check the appropriate box on Form 5500, and one client has received a letter advising the client that he has 15 days within which to obtain one.

If the participants are responsible for investing their own accounts, technically, why is a Fidelity/Fiduciary Bond necessary.

In the old days before individual accounts, it is entirely understandable.

To this day, a handful of insurance companies are still saying that as long as the plan invests in insurance company contracts, i.e. annuities, a Fidelity Bond is not necessary.

As a TPA trying to follow the letter of the law, we are told we do not know what we are talking about when it comes to this issue.

Any thoughts.

We received a distribution request from a beneficiary. The death certificate is a copy and not original and says: "This is not an original death certificate" in large letters across the whole page. Doesn't seem like this would be an acceptable proof of death. What do you think?

If the owner of a corporation that sponsors a 401(k) un-incorporates and assigns the assets of the corporation to a trust administered by him, can he still maintain the 401(k)?

Should qualified ERISA retirement plans have to escheat any funds to the sponsor's state of domicile or should the state escheat laws be treated as pre-empted by ERISA?

In a defined contribution plan, shouldn't amounts that cannot be paid for an extended period of time be treated as forfeitures, to be reallocated to the other participants? In a defined benefit plan, shouldn't such amounts also be treated as forfeited, reducing future employer contributions?

The MPRA changed the definition of "funding improvement plan" to require that the plan's funding percentage at the close of the funding improvement period equal or exceed the sum of (i) such percentage at the beginning of the first plan year for which the plan is certified to be in endangered status, plus (ii) 33% of the difference between 100% and the percentage in (i).

Prior to MPRA, clause (i) was the plan's funded percentage at the beginning of the funding improvement period.

Does this mean that plans that are half way through their funding improvement period need to comply with the new target? Or is this just for new funding improvement plans? In our situation, this change causes the plan to have a significantly higher funding target.

Any thoughts?

Employer starts two new plans in 2014, DB and PS. They mistakenly think the DB plan is subject to PBGC coverage. Oops, they find their plan is not PBGC covered and 404(a)(7) applies.

Eligible Payroll: $1,000,000

Total contributions, both plans combined: $400,000

PS contribution made during 2014: $100,000

DB contributions: $300,000

made during 2014: $280,000 (covers the MRC)

made during 2015 for 2014: $20,000

Amount deducted on the 2014 business tax return: $400,000 (already filed).

Recommendations?

Can the employer make an election under 4972(c )(7) to avoid the 10% excise tax? Or is the excise tax avoided regardless of this election?

Must the 2014 business tax returns be amended? Or does the deducted contribution carry forward into 2015 to count against the 2015 deduction limit?

Schedule SB will show all contributions made during 2015. If the employer does not amend the business tax return for 2014, should the Schedule SB also include the $20,000 contribution made in 2015 but deducted on the 2014 tax return?

Is it still so that a plan, while making a direct-rollover distribution payable to the receiving eligible retirement plan, may mail the check to the participant's address?

We have a client who wants to explore a SH match. Their issue is that they've got a bunch of employees who earn $300K+ who will defer the max, and they don't want to be on the hook to give each one a $10,600 match - that's just not in the budget.

Obviously, we can exclude the HCEs from getting the SH contribution altogether. But is there a way to give them a discretionary match that doesn't fail coverage and/or ACP? Then they can decide to match all those HCEs at, say, 100% of 2% instead of at 100% of 4%. It seems to still preserve the safe harbor because the NHCEs will still have equal or better match rates and we're still under 4%...

Is the use of the DOL online calculator to determine the earnings to be paid when correcting late 401(k) deferrals, and the payment of the excise tax on that amount by filing Form 5330, sufficient to correct the error?

Is anyone finding that the DOL is requiring a VFC application as well in order to rely on the use of the DOL online calculator?

This question is about an employee stock ownership plan. The plans sponsor (which also is and was the employer of the plans participants) elected, and intends to maintain, Federal income tax treatment as an S corporation. The employer securities are not publicly traded.

The plan provides: Whenever the Sponsor has a Subchapter S election in effect, the portion of a Retirement Distribution that is attributable to Employer Securities shall be paid in cash or, in the Administrators Discretion, shall be delivered in the Corporations Shares but subject to the Distributees obligation immediately to sell the Shares to the Corporation at the Fair Market Value set as of the most recent Valuation Date that precedes the Distribution. (The provision seems consistent with Internal Revenue Code § 409(h), and the plan has a recent IRS determination letter.)

The plans trustee annually has used an independent appraiser, and always has used the valuation reports per-share amount as the value for the plans transactions.

The appraiser set the value as of December 31, 2014 at $0.00. (The corporations debt was much more than any valuation of the corporations assets.) The plans trustee believes the year-end value for 2015 also will be zero.

For a set of upcoming distributions to participants who severed from employment in 2014 and earlier, the plans administrator is thinking of informing the participants that a notional delivery of the shares and the sale of them for $0.00 per share is treated as having happened simultaneously.

Can there really be a sale that extinguishes a property right in exchange for an imaginary payment of $0.00?

If, instead, the plans administrator decides that the distribution shall be paid in cash, can there really be a payment if the amount paid is $0.00?

Should the plans fiduciaries be worried that a participant now surrenders property, gets nothing for it, and forever loses the opportunity for the property to increase in value?

I have received a QDRO for a plan participant where the spouse receives a flat dollar amount as of 12/31/14. Typically qdro's will have a section on earnings stating the alternate payee is eligible for earnings from 12/31/14 to date of segregation. This qdro does not address earnings during this period. Only stating that after the account is segregated the alternate payee is entitled to investment earnings. Any thoughts on how to handle the period from 12/31 to current date?

Insurance Agent/Registered rep has his own corporation with 6 employees. All 6 of the employees are on the payroll of the insurance company, but they work exclusively for and report to the insurance agent.

Furthermore the agent pays the full cost of the employees out of his production with the insurance company, and if his production is insufficient to cover the expense he has to write a check back to the insurance company. These employees participate in the insurance company's 401(k) and pension plans.

So, the agent wants to set up a DB plan and wants to know if he has to cover the employees.

To me, looking at it from the agent's side, the insurance company is acting like a PEO and the employees should be classified as common-law employees of the agent. The agent, who does a lot of 401(k) work and is familiar with this stuff, agrees that the arrangement is most like an employee leasing arrangement. He also freely states that any employee asked would say they work for him, not the insurance co.

From the insurance company side, it appears the insurance company is treating the employees as its employees. It is covering them in their plans, and the agent's corporation is NOT an adopting sponsor of the insurance company's plans.

Anyone run across this before? The insurance company is clearly not a PEO, but I don't see that this changes the relationship between the agent and "his" employees.

FYI but not necessarily relevant, for some life insurance production the agent is a "statutory employee" of the insurance company and participates in its 401(k) plan as well. Thanks.

An employer, since the beginning of its operations, has restrained every employee's work hours to no more than 20 in any week (and no more than 980 in any year).

This employer (which has no subsidiary, affiliate, or other business that is treated as the same employer under IRC 414) believes it has no exposure (despite more than 50 full-time-equivalent employees) to the IRC 4980H play-or-pay excise tax. Is that correct?

Is such an employer's only compliance requirement information-reporting about its non-offer of health coverage?

Let's say we're doing a Form 5500 for 2014 year. If someone terminated on 12/31/2014, are the considered to be participants as of the end of the plan year in section 5d(2) on Form 5500?

Also, if someone is hired on 1/1/2014, are they considered to be participants as of the beginning of the year in section 5d(1)?

If the answer to either of these questions is "yes", then the total number of participants at the end of (let's say 2014) can be different than the total number of participants at the beginning of the following year (in our example, 2015). Is that line of thinking correct?

Wondered what you'd do in this situation. I don't have a lot of details yet, so I'm making several assumptions to a possibly hypothetical, or possibly real, situation. And I'm hoping that I'm overthinking this, and it is simpler than I think.

1. You have four medical PC's, each owned 100% by a doctor.
2. You have partnership "x" - owned 25% by each of the 4 doctors. Partnership "x" does, let's say, all of the blood drawing and throat cultures for each of the 4 medical practices - that's all they do.
3. So, all of these are service organizations (health) and each doctor is an "FSO" and partnership "x" is an "A-org" for purposes of determining ASG status, as it regularly provides services to the PC's of each doctor.

Now, it appears to me that this means there are 4 separate ASG's - one different one between "X" and each PC. Agree/disagree?

I'm not finding solid guidance (well heck, not any guidance) regarding what has to be done once you determine that there are, in this case, 4 separate ASG's. The proposed regulations under 1.414(m)-2(g) give an example of determining that multiple ASG's exist, but that's as far as it goes.

So, if PC "A" for Doctor Killjoy sponsors a qualified plan, for coverage, testing, etc., he must consider all employees of partnership "x."

How the heck do you handle it when each PC has sponsored its own plan, doing their own thing, without considering the employees of partnership "x?" How would you even go about this? Do you have each PC test their own plan with partnership "x" employees only - and make sure coverage/nondiscrimination testing pass, and then somehow allocate the appropriate contribution amounts internally in partnership "x" to coordinate them for deduction purposes, based upon the relative amounts attributable to each partner's PC? For a simple example, suppose 3 of the 4 PC's contribute 5% to a straight PS plan. But PC 4 contributes 10%. In order to pass testing, let's say all of the employees of Partnership "x" have to receive 10% in order for PC 4 to pass. When it comes to allocating the PS expense in partnership "x" I presume any such expense would be allocated according their partnership agreement.

Blech...

As an aside out of curiosity - ASG plans I've run into have the plan sponsor being the FSO, do you see the A-orgs (or B-orgs)as sponsors very frequently?

Company A sponsors a 401(k) Plan. Company B is a related participating employer. Effective August 8th, Company B will no longer be a related employer.

The 401(k) platform has recommended, that Company B be removed as a related employer and an amendment drafted to have them participate in the plan as an unrelated employer. The Platform does not want to loose the assets of Company B.

While Company A is not opposed to this recommendation, they want to be aware of any risk to the plan if they allow Company B to be a unrelated employer.

There will be no controlled group issue as of the spinoff date.

I realize Company A who sponsors the plan is responsible for any for any action of Company B that causes the plan to be "disqualified" or other actions i.e.. late deferrals,

What other issues to you find when unrelated employers participate in the plan?

July is a busy month for ... for multiple reasons. Firstly, although tax season ends on or before April 15 for many investors, it runs through June for others. The Internal Revenue Service allows investors to request an extension until mid-June, and many employees and owners of small businesses take advantage of the extension to put off taxes until the middle of the year. Many doctors, for example, close their respective practices for the entire month of July after working non-stop from January through June and getting their taxes done. It’s during this time that doctors and other small business owners can focus on evaluating their portfolios, and this often leads to the decision to roll over 401k plans.

July is also a busy month ... because many teachers and government employees retire at, or close to, the end of June each year. When someone with a 403b retires, they often decide to immediately roll their 403b plan over to a self-directed Individual Retirement Account (IRA). This provides the investor with greater financial flexibility, more retirement account investment options, and lower fees.

Anyone care to conjecture a rationale for this ruling which appears to be a solution for a non-existent problem?