If employee switches to a PPO plan and had a HDHP/HSA the prior year (same employer), can they use the HSA to pay for eligible medical expenses for the new plan year on the PPO? If they are covered under a PPO with an FSA (not limited) can they also access the HSA funds previously contributed a prior year under the HDHP (of course not double dipping on same expense)?

This probably isn't that uncommon, but...

Found a governmental plan using a normal ERISA VS document. The document has all the normal provisions and specifications including that it is an ERISA plan, etc...

Now, as far as I know there is nothing preventing a governmental plan from adopting provisions that aren't legally required - nondiscrimination testing, whatever, whatever. The employer, being governmental, isn't subject to ERISA, so doesn't file 5500 forms, but otherwise operates the plan according to its provisions, even though it doesn't have to adopt a document containing many of the provisions it has.

Only problem I see is that they have never filed for a d-letter (which of course isn't required either). So I suppose they could re-adopt a VS document, updated for PPA, by 1/31/2016 (going from memory, that's the Cycle E deadline) and continue to not file. Since they don't have reliance, because the VS isn't a governmental plan document, then I don't think they are in a position that is any worse than they are now. And probably better than not adopting anything, because it at least shows some efforts at good-faith compliance.

Or, do you think they would be better off just waiting until someone like Sungard gets IRS approval for a prototype/VS governmental pre-approved plan, which I think is coming in the next year or two, and adopting that?

A self-employed individual with a handful of employees adopted a 401(k) profit sharing plan effective January 1, 2014. The plan was timely adopted in December 2014 and only has a discretionary profit sharing feature for the 2014 plan year. The client inadvertently filed his 2014 personal tax return prior to making a profit sharing contribution for 2014 and without taking a deduction on the returns. It's not likely the client will have the ability to make the contribution before April 15, 2015. Can the client still make a contribution for the 2014 plan year and deduct that amount for 2014 and also count the allocations towards the 2014 415 limit? If it's still possible to make a 2014 deductible contribution, will the client need to file an extension for the 2014 personal tax returns to give himself the ability to make the deposit prior to October 15, 2015. I'm not sure it's even possible to file an extension for a return that has already been filed. Of course, the accountant is willing to amend the 2014 personal tax returns to pick up the deduction assuming it's still possible to make a contribution.

I am just curious if benefit plans (retirement or health & welfare) are ever penalized for filing inaccurate information (as opposed to issues related to filing late or incomplete)?

examples:

bad employee counts on main form or Schedule A

used wrong date for asset totals

wrong outstanding year end loan amount

recorded expenses in the wrong field

etc. etc.

if so how much are such penalties?

I have a plan with a basic safe harbor match. The plan sponsor also does NEC PS contributions. The plan document is a VS doc from a major vendor.

The plan is TH.This is a DB/DC combination so the TH minimum is 5%. Can the SH Match be used towards satisfying the 5% TH minimum contribution?

I have a client that employs a minor child of the owner, and the child was paid $20 for the year. Is there a de minimis amount of compensation that should be paid in order to include this HCE child in the ADP test?

We have a few clients that are considering adding a Cash Balance Plan to go along with their current DC plan. Is there software available to do the combined testing?

Re the correction for 415© violations under the new Section 4.04 in RP 2015-27.

Is this limited to plans that do NOT provide matching contributions? The language could probably be read either way. I'm not sure if this is meant to act as an example, or if it is meant to limit it only to plans with no match. Any opinions?

"A plan that provides for elective deferrals and nonelective employer contributions that are not matching contributions is not treated as failing to have established practices and procedures to prevent the occurrence of a 415© violation in the case of a plan under which excess annual additions under 415© are regularly corrected by return of excess deferrals to the affected employee within 9-1/2 months after the end of the plan's limitation year."

I have a plan that made a contribution to participants based on satisfying the gateway using the 3 times ratio. The contribution they made to participants was as follows. When calculating the contribution for participants, it was calculated out to three percentage decimal places as shown below.

Calculated contribution Illustrated rounded several places

Lowest NHCE% .635% .6349543249

Highest HCE% 1.905% 1.9050052640

Using the numbers above, it would appear that the plan satisfies Gateway, since the numbers in the first column satisfy the 3x1 ratio. The numbers in the second column would also appear to satisfy gateway if rounded to three decimal places.

When using our testing software, the system is rounding to two decimal places and several participants with the contributions shown in the far right column are ending up as .63% for the lowest NHCE with a resulting failing gateway test.

My question is this, is there any requirement that gateway testing be rounded to two decimal places? I have researched this and am unable to locate such a requirement any thoughts our guidance would be greatly appreciated.

Ownership of Co. A is

X 42.5%

Y 42.5%

Others 15%

At 01/01/13 Co. B was owned

X 35%

Y 35%

Z 10%

W 20%

Mid year 2013 W's shares are purchased by Co. B and are no longer outstanding.

Once Co. B purchased those shares form W, Co. A & Co. B becmae a controlled group. We just found this out. Any argument that the 410(b)(6) transition rules can be used? I don't see that it is really an acquisition, but I'm hoping.

Thanks for any guidance.

Question has come up where an employer is terminating its participation in a MEP. The employer will probably choose a SEP or SIMPLE IRA going forward.

The MEP is a 401(k) plan. Once the employer terminates its sponsorship, employees will be given distribution forms. Can the MEP force out distributions to participants with more than $5,000 in the plan? If this was a single employer plan and the employer terminates it, 1.411(a)-11(e) permits a cash out without participant consent if there is no successor DC plan.

With the MEP, the employer is terminating and not establishing a successor plan, so in that sense the cash out without consent should work the same way. However the plan is not going away so does 1.411(a)-11(e) apply?

On the flip side, even if the MEP can force the cash outs, must it force them? Or can it allow participants of the former adopting employer to maintain their accounts in the plan indefinitely?

I have a question and I am 99% sure of the answer, but I just want to confirm. We have a plan that has 2 participating employers. Here are the facts:

- One plan is an S Corp, and the 3 owners recieve equal W-2 compensation of $150k.

- The other entity is a partnership, and they each receive guaranteed payments of 99k, which is the only item taxed as SE Income in Box 14.

- They contributed the 3% Safe Harbor throughout 2014 for all employees of both plans.

- The only part they did not contribute is the 3% on the guaranteed payments for the 3 owners

They are asking if they can ignore the compensation from the 2nd entity when calculating the 3% since they have not yet funded it (but did fund the other part). I don't believe they can, the plan includes all compensation (no exclusions), and HCEs are entitled to the safe harbor 3% contribution.

Is there some amendment they could do after the fact? Again, I am doubtful, but thought I would ask.

Plan is new - started 1/1/14. It has almost $71,000 in profit sharing receivables as of 12/31/14. No other type of receivables.

Would you include the PS rec'bles in the top heavy test?

There were also rollovers into this plan of a significant amount. I have them marked as a regular/outside rollover. They came from a terminated plan but from a different plan sponsor - company name and EIN entirely different. Because of this, I did not mark them are related. I assume that all participants were given an option to roll the money from the old MPP under the other company to this new plan or put it into an IRA.

Thanks for your thoughts.

I have a plan where the plan was originally a sole proprietorship who had earned income. Since then, the owner also started a corporation who is an additional adopting employer of the 401(k) PSP. The sole proprietor had loss -35,000 earned income for 2014. He also receives W-2 compensation from the corporation. The plan is a Safe Harbor 3%. For purposes of calculating his compensation for the safe harbor contribution, do you net the loss with his W-2 compensation or can you base his safe harbor contribution solely off the W-2 compensation and consider earned income for the sole proprietorship to be zero?

Let's say "Inexperienced TPA" was doing the 2009 5500 and was not aware of the exclusion and therefore was preparing a compilation of the 30 custodial accounts (no trust level report), and about 10 or 15 of those are pre 1/1/09.

We would like to report the pre- 1/1/09 contracts as distributions to take advantage of the fact that they can be excluded.

Anyone have any problems with this? I do not see anywhere in the FAB's and articles that in order to exclude them you needed to do so in 2009.

A large employer is acquiring a small employer in a stock sale. Following the sale, the large employer is going to liquidate the small employer company and, thus, causing it assets and employees to merge into one of large employer's subsidiaries. Small employer has a group health insurance plan. Small employer wants to continue to offer that insured plan following the closing to its employees participating in such plan. The small employer plan provides more generous benefits than the large employer plan. The large employer is concerned that the small employer group health plan doesn't comply with the ACA requirements applicable to a large employer plan, including the minimum value requirements of a large employer plan. Are there any transitional rules (similar to 410(b)(6)©) that would allow the large employer to continue to provide only this coverage to those employees or must the large employer make an offer of coverage to these employees under its group health plan (and also allow these employees to elect to keep their current small plan) to avoid the $3,000 excise tax that would be incurred with respect to these employees?

Let me preface this by saying this is a client who we last prepared a 5500-EZ for in 2010 (under limit), and who came back to us after a few years asking us to clean up the mess he created.

Facts:

• He took a $45,000 loan requiring monthly payments, but has never made regular payments.
• He made a payment of $5,200 right before the loan would have gone into default
• More missed payments caused default as of 09/30/12
• He paid an additional $4,500 on 01/15/14
• He has made no further payments
• Plan is a DB, with NRA age 62; owner is currently 60 years old with a calendar plan year

Questions:

• We plan to declare a deemed distribution and issue a 1099-R. Should the deemed distribution be as of 09/30/12, or should I use the plan year end of 12/31/12?
• How do we treat the loan in subsequent plan years? How do we handle a loan that is not repaid for 2 or three years?
• Any ideas on how to show everything properly on the trust accounting? For DB plans, we do our own accounting in Excel.

Let's say the Form 5500 is prepared on accrual rather than cash basis for a 401k plan. If a recordkeeping invoice (that was payable for 2014) is paid from forfeitures after year end (in 2015), should that amount be counted in ending balance for 2014?

Basically, let's say the ending balance on cash basis is $1,000,000 and the invoice for 2014 that was paid from forfeitures (with the actual payment date in 2015) is $10,000. Should the ending balance be $1,000,000 or $990,000?

Anyone know why the IRS doesn't allow SCP for "significant" violations in the 2-year correction period otherwise applicable for "regular" qualified plans? Just curious - seems strange to me.

To add an example:

Revenue Procedure 2013-12 allows SCP for SIMPLE-IRA plans, but only for “insignificant” violations.

Suppose a relatively small business intends to terminate a SIMPLE-IRA, but due to their misunderstanding of the requirements, they do not give appropriate advance notice to the employees for 2014, although they do notify the custodian (sometime in mid-2014) that they are terminating the plan for 2014.

When this error is discovered late in 2014, they realize this must be corrected, and that the correction will involve the normal 50% of the missed deferral opportunity, plus the full 3% match, for a total of 4.5% plus earnings for ALL eligible participants, based upon entire 2014 salaries.

In spite of the fact that this involves all participants, it is a one-time occurrence. Can this reasonably be considered an “insignificant” violation eligible for SCP?

My inclination is no, but I wondered what others think.

The employer made deferral contributions during the year for the 2 partners. Ned of year comes around and the partnership has a net loss, so those "deferrals" that were deposited are returned to the employer. Did these deposits trigger a TH requirement for the plan?