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?

Have a client that wants to add a Automatic Contribution Arrangement (ACA) and not an EACA or QACA. They want to do as soon as possible.

Do we have to wait until the beginning of the next plan year to adopt? Or can we amend mid year. Seems clear to me that an EACA and QACA must be at beginning of year but have conflicting view points on ACA.

Thanks in advance.

So, I've taken a job where some of the DB plans have separate accrual rates for separate groups of employees.

A lot of the times, the accrual rate for a specific group is 0%.

We're not counting people in these groups towards our 401(a)(26) count, since there's no meaningful benefit accruing for them.

Now - let's take an example where the plan is combined with a 401(k) plan, and they're top heavy.

The employee in question is Highly Compensated but not Key, and he's in one of those 0% accrual groups.

Who out here thinks he counts as a participant in the DB plan, for purposes of needing to get a 5% top heavy minimum in the DC plan (the plan where the top heavy is taken care of for all)? Versus who'd think he's not really a participant in the DB and can get by with just 3% in the DC....

I wish the document had excluded these employees in the eligibility section, where it would be much clearer that they're definitely not "in" the DB plan. But that's not what I've got.

Thanks...

--bri

(insert witty signature here....)

Hi

Does a new plan that had no assets need to file a 5500 S/F. For example, a 401(k) setup from 12/1 - 12/31/14 but nobody contribute during this period.

company A sold a portion of the entity to an unrelated company, this will not be a controlled group. the new company will keep the EIN and name. The only difference is the ownership.

1. Is there a time frame when the new company must transfer assets to their plan ( current the new employer does not have a plan)

2. can't the new company be a participating employer - Multiple Employer Plan

3. Can the 18 month transitional rule be used in this case, giving the new employer time to set up a plan and transfer the assets??

thanks

Company A is acquired by Company B on 3/27. Company B wants to establish a new 401k plan and merge Co A asset into the new plan. Since it will take about 60 days to get new plan operational, can Co B become the sponsor of Co A plan in the meantime? My concern is the employees no longer work for company A on 3/28.

a small plan is looking to save the employer cost. Currently satisfy Safe Harbor using the 3% non-elective. It is permissible to amend and notify participants in advance to change to a safe harbor match mid plan year and still satisfy non-discrimination requirements and Top Heavy, yes?

A governmental employer gives a 5% employer contribution into their 457(b) plan. The employer wants to give employees the option of receiving a 2% raise or in lieu of a raise the employer will put an additional 3% employer contribution into the plan. Thus, employees who elect their raise will get a 5% employer contribution and employees who elect no raise will get a 8% contribution.

My gut tells me this may be against state labor.

Has anyone see a governmental employer do this?

I'm running testing right now for one of our plans and it specifically states in the document that it excludes key employees from participation (there are 3 key employees). However, because we're excluding these employees from testing, the ADP test is failing. If they were included in testing, the ADP test would pass because there would be 3 extra participants with 0% ADR which would lower the HCE ADP. Question: can the document be amended retroactively (for 2014 plan year) to not exclude the key employees?

I just came upon a PS Plan with a NRA of 60 - normally fine in a PS plan, BUT, this was formerly a MP plan that was amended and restated to a PS plan. Since there are pension assets, the NRA of 62 isn't allowable in this case (it isn't an industry that can reasonably demonstrate or argue that NRA of 60 is normal or representative of the industry)

So here's the conundrum - easy to amend to 62, but it seems to me that this is an impermissible cutback. What does one do in this situation? If you leave it alone, it is noncompliant and you can't rely on the pre-approved language. If you amend, it is a prohibited cutback. Do you have to submit to IRS under VCP as a document failure? And even if you do, what "fix" can reasonably be proposed?

Should have known better than to review a plan on Friday the 13th!

Companies B and C are subs of mothership A. The mothership has told Company B that one of its subs (call it D) has been transferred to Company C.

Effective 1/1/15 D is no longer contributing to plan B and deferrals are going to plan C. The natives in sub D want their assets in the plan with Company C and out of the plan with Company B.

• Is C required to take all assets or just actives of those in D?
• Can ppts in D elect to keep their money in B if they so choose (I'm told B has a brokerage window and C does not)?

It seems on paper that this should be pretty straightforward but C's RK is talking blackout on both sides. B's RK doesn't know this is happening yet either.

What is the difference on 5500 SF Participant count difference between line 5a and 5(d)(1)?

There are 5 members of a control group, and only 2 out of the 5 companies give a Profit Sharing contribution. The formula is 2% of Compensation.

Assuming that the control group passes the Ratio Percentage test, does the Gateway test and 401(a)(4) still apply?

Any guidance is greatly appreciated.

Alex

An employer currently is part of a PEO. Employer has made the decision to exit the PEO for all benefit purposes. The employer currently participates in the PEO 401k plan. As part of the exiting documents, the TPA and PEO state that all employees of client/employer organization will incur a distributable event. The employer will maintain their own 401k plan.

I am having a hard time finding an answer to the following in the EOB

Question: Is it accurate that all participants of the client organization/employer will incur a distributable event when a 401k plan will be sponsored by the employer? As an adopting employer of the PEO plan, wouldn't you have successor plan issues if the assets are distributed?

My thought was to have the assets transferred directly to new plan without the option for participants to elect a distribution.

Thank you

We are consulting on a 403(b) plan that has had an ADP test run (and refunds processed) for the past several years. Anyone have any thoughts about a correction method?

Thanks.

Suppose you have a plan where compensation is defined as W-2 - as many are.

Further suppose you have a taxable fringe benefit, such as life insurance over 50,000. (P.S. edit - the taxable amount of the life insurance is not considered part of the salary, but is in addition to it)

Using a simplified example, suppose the employee has a salary of $52,000, paid weekly. The taxable amount for the life insurance for the year is $1,000. This amount, while taxable, isn't "paid" in cash to the employee, but shows up on the final pay stub only - it isn't listed per payroll period during the year. And of course it shows up on the W-2.

If the employee has a 10% deferral election in place, do you find most payroll providers/employers:

A. Withhold 10% of $2,000, or a total of $200, or

B. Withhold 10% of the normal $1,000, or a total of $100, or

C. Something else.

Just curious.

Paychex is telling one of their clients they cannot modify a safe harbor plan to add auto enrollment until next year. Any truth to that?

Participant is age 50+

On 3/11/15, he's asked if there is any way to go back and do the catch-up elective for 2014 at this time

Since the calendar year is long ended, and he's already rec'd W-2 - could the employer withhold now and issue an updated W-2?

The participant is an employee at a C-Corp

My answer is no - just seeing if there is anything creative I could recommend outside of indicating the participant should just increase his elective contribution % for the 2015 year