A participant in a 401(k) Plan is requesting a hardship withdrawal under natural disaster due to normal rain causing roof failure from rain but not as part of a natural disaster.

Would this qualify? My thought is no.

Thanks!

I have a client that has self directed brokerage accounts. The accounts have both Roth and Safe Harbor contributions mixed together in each individual account. We track the Roth earnings separately but it is not as precise as it would be if the contributions were in two brokerage accounts. Is this permitted?

I'm taking over a Plan where they amended the eligibility for 401(k) Contributions to 21 + 1 month of service, but the eligibility for Safe Harbor Contributions still reads 21 + 1 year (it wasn't amended).

Does anyone see a problem with that? A SH Participant just says that they satisfied eligibility as per the Addendum and were eligible to make a 401(k) Contribution at any time during the year.

Thanks in advance!

A business owner owns 100% of his business. No employees.

This business also owns 40% of another business. This other business has employees. Neither business has a DB plan.

Questions:

1. Do these businesses form a controlled group?

2. Can the business owner set up an individual DB plan through his 100%-owned business?

My thoughts are that, no, these businesses do not form a controlled group. The ownership % would have to be at least 80% for that to be the case, but it's only 40%. And as a result, he can set up his own individual DB plan through his 100%-owned business.

Thoughts? Thanks in advance.

Just soliciting general discussion. Please ignore plan design issues, it has all been hashed over with the client before!

We have a plan that fails ADP every year, and refunds are made, and of course properly reported. There is one active employee/participant who refuses to cash the refund checks.

Why is an unknown, but I have a personal suspicion that in his pea-sized brain, he thinks that by not cashing them they aren't really taxable, so he doesn't include them when he files his taxes. Just speculating...

So, this has gone on for 3 years now. The Plan has done everything appropriately. What other steps are available? (this isn't someone the employer will fire)

One solution is to keep reissuing checks, (but no reporting or withholding necessary, as it has already been done) as the plan has an obligation to distribute the money. And since there is a distribution fee that is appropriately charged to the participant's account, perhaps when it is pointed out to him that he will get charged $100.00 per check, maybe it will sink into his thick skull.

Any other general thoughts? Does it raise any fiduciary issues - charging him for reissuing checks? It seems to me that it shouldn't. Any limit on the number of times checks can be reissued? Etc.? Just wondering about what real-life solutions you might use in this rather unusual situation.

db plan terminates and assets are transferred to a safe harbor plan.

of course the question becomes "Can these assets be used to fund the safe harbor"

the assets weren't 100% vested when made to the DB originally, so my thought would be no, they can't be used

certainly they can't be used if it is a match, because the IRS said you can't prefund a match.

on the other hand, technically the DB plan terminated so everything would be 100% vested, but that makes no sense, because there is nothing that says when you allocate the excess assets in the DC plan they have to be 100% vested as well.

Based on my reading,

Qnecs may be included in the ADP test only to the extent they are not disproportionate within the meaning of Treas Reg 1.401(k)-2(a)(6)(iv).

QNECs under a Davis-Bacon feature are considered not to be disproportionate to the extent they do not exceed 10% of an NHCE's compensation.

A similar rule applies to QNECs that are included in the ACP test. See Treasury Reg 1.401(m)-2(a)(6)(v).

So, can the plan administrator use the excess, with an over 10% QNEC, to help pass the ACP test?

In other words, can (s)he use the first 10% of a QNEC to help pass the ADP test, and use the last 2% (12% QNEC -10% limit = 2%) to help pass the ACP Test?

Thank you in advance for any thoughts or suggestions for resources to consult!!

Plan provides immediate eligibility for CODA and 12 month/21 statutory eligibility for SH match.

Employee met the 12 months and entered the plan on 10/1 (calendar year plan).

Plan does SH match per pay period. SH regs say that the SH much be made for all comp during the period in which an employee is eligible defer, which was all year. So does the employer have to go back and deposit the SH match for the first 9 months of the year prior to the employee being eligible for the SH match?

Does your answer change if the plan does a true up of the match at year end?

A client has a 401(k) plan that matches dollar-for-dollar up to 4% of Compensation. Compensation is defined to include bonuses. Participant A elected to defer 4% of Compensation into the Plan. Participant A was paid a bonus of $25,000, and therefore, $1,000 was electively deferred into the Plan and a $1,000 match was also contributed into the Plan. Two weeks later payroll discovers that Participant A should have received a $10,000 bonus (which would have resulted in only $400 being electively deferred into the Plan and a $400 match also being contributed into the Plan). So, due to the erroneously large bonus, an excess $600 of deferrals and $600 of match were contributed to the Plan account. The client would like to know there options for fixing this situation.

If no applicable IRS limits were breached, it doesn't seem to me that the result is a plan qualification failure that would require correction under EPCRS, for example, as an "Excess Amount." Could the client just take the excess $600 of deferrals out of the Plan and pay to the participant (and then require full repayment from the Participant of the excess bonus ($15,00) and return the excess $600 in match to itself? Could the client recoup the amount by reducing future compensation and therefore not taking deferrals from that compensation? I can several different possibilities here, but the real question is am I right that this would be outside EPCRS and how are companies dealing with this type of legitimate compensation error when it occurs?

A S.H. 401(k) had a couple of participants whose deferrals/match were "turned off" by the plan sponsor for one payroll. The sponsor discovered this and apparently authorized the payroll company to double up on the subsequent payroll to make the participant "whole".

It is my understanding that the sponsor should have self corrected (the amounts were miniscule compared to the plan assets) by depositing 50% of the missed deferral and match into the participants account.

Now that the problem has been exaggerated by the employer doubling up on a future payroll and in essence allowed the participant to change their deferral rate outside the plan parameters what would be a recommended course of action?

Here is an example, $2000 payroll participant was deferring 5% and getting a 4% SH basic. To make up for the missed deferral/match, sponsor upped them to 10% and a 8% SH. Even if you allowed the participant to double up on the deferral, the SH basic would still remain at 4%.

I am involved in a plan termination. We recently mailed the NOIT, Notice to Interested Parties and NOPB's to 67 of the 73 participants. However, we were unable to find addresses for 6 participants after asking the plan sponsor and using a commercial online locator service. I understand that we may not have fulfilled the diligent search requirement yet, as we haven't yet inquired about any beneficiaries. Must this search be done by 60 days prior to the proposed termination date in order for the notice mailing to be timely? From the PBGC standard termination instructions, I get the sense that it only needs to be done prior to filing the post-distribution certification. Is that correct?

Thanks for any responses!

Am I correct that a governmental Section 457(b) plan, Section 403(b) Plan & Non-ERISA 403(b) plan, qualified govermental and non electing church defined contribution plans are required to sent the EACA notice?

Please provide the regulations/cite where it states that govermental plans are required to send the EACA notice and are not exempt. Thanks!

Am I correct that a governmental Section 457(b) plan, Section 403(b) Plan & Non-ERISA 403(b) plan, qualified govermental and non electing church defined contribution plans are required to sent the EACA notice?

Please provide the regulations/cite where it states that govermental plans are required to send the EACA notice and are not exempt. Thanks!

Is a Money Pruchase Plan subject to the minimum funding requirements? (Line 12) I am thinking yes. Thanks.

Plan allows for hardship distribution based on safe harbor standards. A participant wants to take one to prevent foreclosure (as stated under the sh reasons). What constitutes as preventing a foreclosure? Actually receiving a foreclosure notice and then taking a hardship. OR Can he take a hardship because he is behind on his mortgage by two months. He is preventing foreclosure by taking the hardship to get caught up.

Employer established a new DBPP effective 1/1/2014. Employer enters into an asset sale agreement on March 15, 2015 to sell substantially all of the business assets to Buyer. Effective on close of transaction, all of the Employer's employees will become employees of the Buyer.

Employer is an S corporation. Employer will be dissolved following close of the sale.

Employer would like to fund the DBPP for 2014 plan year and for 2015 short plan year, and then terminate the DBPP.

Reason for termination: Sale of business assets; dissolution of Employer. Would this be considered a legitimate business reason for Plan termination?

Very early in the audit, but the auditor is being unreasonable. We may be able to shift this position, but for general purposes, I have a question. This is a 401k only plan. The only contributions are employee deferrals. The owner does not defer nor does he have any money in the plan. There are 3 HCEs with balances and about 90 NHCEs with balances. If thie plan is disqualified, the only people harmed are essentially NHCEs.

The issue is failed ADP test. When the test was originally run the failure was corrected by recharacterizing as catchup. In preparing for the audit, i discovered that the date of birth had been entered into the system incorrectly and the paritcipant was not actually eligible for catchup. If i had found this without the audit, i would still be in the correction period for SCP. The auditor is trying to play hardball and insist on audit cap.

My question is this. It would be cheaper for the employer to just let the plan be disqualified. That would harm the participants however. Is there fiduciary liability there? Could the participants sue and win for this?

Anyone with experience with an actual disqualification?

Thanks

We have a plan that failed the ADP test. Corrective distributions have been done and everything is wrapped up at this point. Now, we hear from one of the participants (an NHCE) and he's telling us that he exceeded the 402(g) limit for the year, due to the fact that he switched companies and did not track the fact that he exceeded the yearly $17,500 deferral limit. Now, we have to do an excess deferral distribution for him and forfeit the match for that portion of the deferrals. Question: how does this affect testing? Does it reduce his ADR/ACR?

The IRS documentation says upon any withdrawal the adjusted vesting calculation would be either of

(1) X = P (AB + [R x D]) - (R X D)

X is vested interest at relevant time.

P is vested percentage at relevant time.

AB is account balance at relevant time.

D is amount of the distribution.

R is the ratio of the account balance at the relevant time over the account balance after distribution.

(2) or X = P (AB+D) - D

The difference is, in 2nd formula the value of R is 1.

My question is when we can use formula 1? Under what circumstances we need to use formula 1? Any thoughts.

Over 50 HCE has hit the $265K Salary Limit but has not put in the Catch Up contributions. Given that we look at compensation, etc. at year end, could they put in catch up with salary over $265K now as long as they don't go over the 402g limit and the plan's deferral percentage limit annually with their $265K Salary?