3% Safe Harbor Nonelective excludes HCE's. Need I concern myself with the definition of compensation/414s? So for example, may I exclude bonuses and overtime from the calculation of the Safe Harbor? I will be doing some profit sharing for the HCE's, but all of the nondiscrimination testing would of course be done using a 414s definition of comp.

I have a money purchase plan with an attorney drafted plan document. The employer wants to amend the plan to not permit buy backs and not to permit forfeiture to be restored, even if the participant is rehired before not incurring 5 one-year breaks in service. I think I am OK with the plan not permitting buy backs, but I believe that they must restore forfeitures if the participant is rehired before incurring 5 one-year breaks in service.

Any 411 experts out there? Thanks

Hi Guys,

Please help in sticky situation.

The plan is frozen since 2003. The plans NRA is 62. The DOPT isin 2014. Expected payout date is in 2015. The owner currently is67. Each year he is over NRA he got an AI of his frozen benefit. However the AI was capped at his 415 comp limt. Suspension of benefit notice not given.

My first question is that is his comp limt also gets frozen at the plan freeze date? The guy has 10 YOS at the time of freeze, however is comp increase after the freeze date.

Is there a violation of 411 here? Should he have been given a forced suspension of benefits notice at the time the AI first hits the comp limit?

What if in between the comp drops and now he can get the full AI? I guess first it has to be clear if his 415 comp limit can change or not?

If there has been a violation of 411 what are the corrective measures?

A participant has after tax moneys (non-Roth) in a 401k of $10,000. 401k portion is $90k. The employee is over 59 1/2. Can the employee take a $10k distribution from after tax portion and roll over to a Roth IRA? If yes does it matter if the person is under 59 1/2 and the plan allows after tax distributions? Finally, if yes, can the person do it every year?

Does anyone know if there's an office of the IRS that entertains requests to allow late starting payouts over the life of the death beneficiary of a nonqualified annuity?

Section 72(s) has rules similar, but not the same as the RMD rules under 401(a)(9). If the annuity payout had begun before the contract holder died, then those payouts must continue as rapidly as if the contract holder had not died--unless payouts of the remaining value as an annuity over the life of the beneficiary begin within 1 year of contract holder's death. (Only if the annuity payout had not begun by the time of the contract holder's death must the entire contract value be paid out within 5 years of that death.)

I was contacted today by a beneficiary of a contract holder who died in 2013. The 1 year mark passed in 2014, without payout beginning on the life of the beneficiary. If you know of an office of the IRS with authority to waive that, it would be greatly appreciated if you would send information about that office to me at jsimmons@ida.net. Thank you.

Defined contribution plan that says that a Participant may take a distribution if he doesn't have any employer contributions made to the Plan for 6 months.

Can a Plan provide that, upon this occurrence, the Participant may elect any of the forms of benefit offered by the Plan? For example, if the Plan offers non-periodic installments, can that be offered for this termination benefit?

So if the Participant has a $100,000 balance, if he doesn't have contributions for 6 months, can he apply to take out $20,000 and leave the other $80,000 in the Plan?

Thanks.

Can you file your 1040 early i.e. before 4/15 and still have until 4/15 to fund your IRA?

A client has a number of participants who took out plan loans and then default due either to failure to make repayments or termination of employment. The client is filing under VCP and proposing to correct by reamortizing those loans to allow a longer period of correction for those participants who are within the five-year period for repaying plan loans. According to Section 6.02(6) of Rev. Proc. 2013-12, "the employer should pay a portion of the correction payment on behalf of the participant equal to the interest that accumulates as a result of such failure--generally determined at a rate equal to the greater of the plan loan interest rate or the rate of return under the plan." Does anyone have any thoughts on the meaning of the term "rate of return under the plan?" It might be easiest if the client took the pure earnings amounts on the previous year's Form 5500 and compared it to the beginning plan balance to arrive at the "rate of return under the plan." Thoughts?

Facts are fairly simple. Corp A owns 100% of Corp B, operating separate businesses. Each has a 401k plan (calendar plan year) with different structures and each has comfortably passed ratio percentage year after year. Before the end of 2015 Corp A will sell virtually all of its assets to an unrelated buyer, and all of the employees will go with buyer except Corp A's CEO and CFO who will stay on payroll for a while to handle a variety of clean up and other matters and will receive compensation. Corp A's plan will not be terminated. CEO and CFO will be HCEs for 2016. Does Corp A's plan get the benefit of 410(b)(6) through 12/31/16?

When a 401k plan terminates mid year, I know this creates a short limitation year and the 415 limit is pro-rated. However what happens to the compensation limit for allocation purposes and ADP and ACP testing? Do you use partial year compensation, full year or compensation up to the date the 5500 is filed?

Thanks!

Two plans, one with all the HCE's and one with all the NHCE's. The HCE Plan uses prior year testing and the NHCE Plan uses CY testing. I need to aggregate to pass coverage. Is EPCRS my only option?

[obviously, no one knew about the coordination rules - the operation of the entities was quite disparate].

We have recently changed our health plan from 20 hours per week to 30 hours per week to be eligible. We have a few employees that will no longer be eligible due to the change. My boss in HR wants to grant an exception to a few (not all) of those employees affected; as in, he wants to continue to cover them even though they don't meet the Plan's eligibility requirements. Can anyone help me to understand what the risks are in doing this?

Thanks.

Employee is 72. His last day at work was 12/31/14 and he worked a full day. He did not go back to work in 2015. What is the "calendar year in which the employee retires from employment"? 2014 or 2015?

I don't find any support anywhere, but I would contend that in 2014 he was still working. In 2015 he was retired, making his required beginning date 4/1/16.

Thoughts? Support?

I know that a plan MUST match catch-ups as part of the Safe Harbor Match Calculation. What about a discretionary match that otherwise satisfies all of the ACP Safe Harbor Requirements (in my case, the match is 50% of the first 4%, no allocation conditions).

I know what you're thinking, 18,000/265,000 is way more than 4% anyway so who cares? The catch here is, the match is calculated each pay-period, and as such towards the end of the year eligible deferrals will be zero. So it actually does end up making a difference.

Corbel's document seems to prohibit excluding catch-ups for either the ADP or ACP safe harbor's. Fidelity's on the other hand seems to apply exclusively to Safe Harbor Match calcs.

Recently, we took over a plan. In the original plan document, the normal retirement age was age 55 and 10 years of service. Effective as of 01/01/2009, the normal retirement age was amended to be age 62 and 5 years of participation due to IRS final regulation with respect to the normal retirement age back in 2007. But there is an early retirement age definition in the current plan document which is age 55 and 10 years of service, no reduction for the early retirement benefit. I assume it is used to protect the benefit was accrued before the amendment.

So there is a participant eligible on 01/01/2009, terminated in 2014 and he is age 38 in 2015. His accrual benefit based on the plan document is $1,000 per month. Below is the normal retirement benefit definition from the plan document.

"Normal retirement benefit. The amount of monthly retirement benefit to be provided for each Participant who retires on the

During the gathering of year to date compensation and contributions for the ACP ADP testing, it was discovered that 11 people had a prize that was run through payroll and had an employee contribution taken. There was also one manual check. This was done on 12/24/2014. This is not a typical payroll day so the payroll provider did not send the contribution file to the 401(k) provider. The grand total of the contributions is $148.00. Should we be filing a 5330? Will it trigger any red flags for the IRS? DOL?

I have a solo 401k with >$250k, so have to file. I have received contradictory advice on how to report contributions for, say, 2014, that are actually made in 2015. Some say that they should be included in calculating the end-of-year plan assets, rather than the actual balance on December 31. Others (including Fidelity) say to follow a cash balance rather than an accrual method and not include the deposits made in 2015 on the 2014 form. Another source said one follows a "modified" cash balance and therefor should include these contributions.

Is there any consensus on this. Which advice should I follow?

Thanks

I have a Prevailing Wage plan. The PW funds come into the plan as QNEC. The plan fails the 401 (a) (4) testing and a HCE needs to be corrected. Can the funds be return to the employer?

While this is actually regarding a SIMPLE-IRA plan, let's use a 401(k) as an example.

Suppose someone should have been eligible to defer as of January 1, 2015. They were inadvertently excluded from being able to make deferrals until March 1, 2015 - well within the 3-month period allowed for "brief period" exclusions under Rev. Proc. 2013-12, Appendix B, Section 2.02(F). No other limitations in the plan on what can be deferred - up to the IRS limits. Matching formula is 100% up to 3%.

So, there is no required contribution for "missed deferrals." But there is a contribution required, or potentially required, for missed match.

My question is twofold. First, if an employee chooses NOT to defer for 2015, is there any required make-up for missed match? It seems to me that there should not be, but the language/example isn't all that clear to me. The Example 7 seems to contemplate a per payroll situation, and it doesn't seem reasonable to me to apply this to someone who elects not to defer at all.

Second, if the answer to the above is that a missed match make-up contribution is required, then I'd assume it would simply be 3% of compensation for the improper exclusion period.

Now, for someone who actually defers, if the match isn't calculated on a per payroll basis, then it seems like it can't be calculated until the end of the year. Suppose the employee elects to defer 10%. Compensation for the improper exclusion period is 10,000, and compensation for the remainder of the year is 50,000. So the employee defers 5,000. Since the match is 100% up to 3% of compensation ($60,000 x .03 = $1,800) there's no additional special make-up match for the exclusion period 'cause the deferral was sufficient to receive the maximum match anyway.

I'd appreciate any thoughts on the above.

I have a plan that excludes "full-time students", and then goes on to define "full-time students" as follows: an Employee is a full-time student for any period during which the Employee is enrolled as a full-time student or is between academic years/terms at an educational institution and there is reasonable assurance the Employees will be a full-time student the next academic year/term.

The plan does not include a 410(a) failsafe for eligibility, so I assume someone thought this would be a reasonable business classification not based on service.

I am just digging into this, and am trying to figure out what I need to know to evaluate this. Do I need to know if there are both full and part-time employees that fall into this classification? Seems that even classifications that end up excluding only part-time employees could still be legitimate business classification...for example, all the employees at location A are part-time and the plan excludes location A employees.

Since the employer/plan sponsor wouldn't have any control over whether an employee is a full-time student, how can this be a legit business classification? What if a full-time student decided not to go back to school, when would they enter the plan?

Can someone help me get my head around this one?