I am thinking applying a $2,500 cap on a "100% of the first 4%" match would blow the ACP Safe Harbor because it is possible that an HCE who terminates early in the year might have ALL of his/her 401k matched, whereas other NHCE's might be subject to the cap. Also, an HCE deferring say 1% might have 100% of his/her contributions matched whereas again the NHCE could have less. Note that the reg below merely talks about the ratio of match to deferrals with no exceptions. Everyone agree? Seems strange as this sort of provision obviously disproportionately (although not exclusively) affects HCE's.

From 1.401(m)-3

(4) Limitation on rate of match. A plan meets the requirements of this section only if the ratio of matching contributions on behalf of an HCE to that HCE's elective deferrals or employee contributions (or the sum of elective deferrals and employee contributions) for that plan year is no greater than the ratio of matching contributions to elective deferrals or employee contributions (or the sum of elective deferrals and employee contributions) that would apply with respect to any NHCE for whom the elective deferrals or employee contributions (or the sum of elective deferrals and employee contributions) are the same percentage of safe harbor compensation.

DB plan wants to allow retirees to direct a portion if their monthly benefit to be paid to the employer to cover their share of self-funded retiree medical premiums. Doesn't seem like a violation of anti-assignment under the Code. But what about prohibited transactions under ERISA?

In the middle of terminating an ERISA 403b plan when it came to light the client did not file the 5500 for 2013. The client submitted the late 5500 through DFVCP and paid the $750. Now the client has decided to petition the DOL to have the fine waived claiming they "attempted" to file the 5500 on time, but the TPA's 5500 filing website did not process their original filing attempt.

Question: would the client still be OK to proceed with termination while contesting the late filing penalty or do they need to leave the plan open until this is resolved?

Thanks!

If a 401(k) plan has late salary deferrals and makes a deposit of lost earnings to the plan, but does not file a form 5330 to pay the excise tax, what are apt to be the consequences to the plan sponsor?

Looking at a takeover CB/DC plan. The CB has immediate entry, 0 hour req for a pay credit, 1000 hours for vesting. The owners get a large pay credit and the rank and file get a flat $1000 pay credit. So you have employees with very low compensation getting a very high testing EBAR (and in fact they may never get a benefit from the plan due to the vesting schedule).

My personal feeling is that using these low paid employees to help pass nondiscrimination testing is too aggressive.Opinions?

We have a situation where a participant divorced in 95, notified us of a QDRO for the pension plan, is getting ready to retire now, sent in the QDRO, it is not valid, so it has to be redone. The question tho is around the 401(k) plan. In 95 when the divorce occurred, he did not participate in the 401(k) plan. Didn't begin until 2003. I don't see a reason to hold the 401(k) money until the valid QDRO for the pension comes through, but I wanted to make sure i wasn't missing anything??? Thoughts? Okay to distribute the 401(k) proceeds? Or should we wait until the valid QDRO is received.

New Comp Profit Sharing Plan, contribution elig. is 1000 hours and employed on plan year end.

Plan has 2 HCE's and 2 NHCEs. 1 NHCE terminated and is not benefiting. Plan is failing Ratio Percentage test at 50%

Document is marked fail-safe provisions do NOT apply.

Plan is passing Rate Group test at midpoint and the average benefits % test is passing.

Are there any other tests I must run to pass coverage?

Hi,

A TPA helped us to setup a DB Trust Plan and got a tax ID from IRS in Dec 2014. My question is

do I have to open an investment account before Dec 31 2014 in a financial institution, e.g. Vanguard, to meet IRS codes so that we could contribute fund and get tax deduction for 2014?

I got conflicting answers, some say no, we only need to establish an account before tax filing deadline (either March 15, 2015 or Sep 30 2015 for extension); other say yes - we have to setup at least one investment account before Dec 31 2014.

Please help me to clarify with this issue -

Thank you!

Charli T

Thank you in advance for all responses -- Client began matching in July 2014 (plan was not amended - that's just when they began matching again).

One HCE had maxed out at $17500 in June, therefore the client did not give him a match contribution for 2014. Is this allowable?

Match is discretionary and there is a discretionary cap on the match. No conditions to share.

The new Form 5500 rules impose additional reporting disclosures for multiple-employer plans starting in 2014. The DOL rules use the term "participating employer." However, I am unclear how this term should be interpreted in the context of a multiple-employer plan that has both related (part of a 414(b)/© controlled group) participating employers and unrelated (not part of a 414(b)/© controlled group) participating employers.

For example, suppose there are 3 participating employers that have employees covered in a multiple-employer plan in 2014 - - ABC Company, DEF Company and XYZ Company. ABC Company owns 100% of DEF Company. ABC Company owns 50% of XYZ Company and the other 50% is owned by some unrelated individual. Therefore, ABC Company and DEF Company are related companies. XYZ Company is unrelated.

How would the Form 5500 schedule look:

Option #1

Under this interpretation, each participating employer (both related and unrelated) are listed.

ABC Company 12-3456789 – 50% (proportion of contributions)

DEF Company 55-5555555 – 20% (proportion of contributions)

XYZ Company 98-7654321 – 30% (proportion of contributions)

Option #2

Under this interpretation, only unrelated participating employers are listed.

ABC Company 12-3456789 – 70% (proportion of contributions)

XYZ Company 98-7654321 – 30% (proportion of contributions)

Or is there another manner of disclosure?

My client (DC- 401(k) Plan) is re-enrolling their entire participant population into an age-appropriate target date fund, unless participants opt out. Dates are still being worked out, but we are tentatively looking at opening the opt-out window on 2/9, closing it on 2/27, and updating the planwide exchanges and allocation changes on 3/1.

QUESTION:

My question is about requirements for timing of participant communications/notices. If we notify participants on or about 2/9, is that sufficient notice? Or do we have to give them at least 30 days for 404© purposes, etc.?

Bear with me folks, my post is a bit lengthy, but I would really appreciate any feedback or insight. Neither the IRS nor PBGC had an answer, so I'm hoping someone here will.

I didn't know if should post this on the 401(k) board instead.

THE QUESTION:

When the employer has both a DB and DC plan and the DB plan goes from being PBGC covered to not PBGC covered , what is the deduction limit for the DC plan?

If it helps, keep in mind that the employer had to pay full year PBGC premiums per the PBGC instructions, even though coverage was for only part of the year.

My analysis so far:

When an employer sponsors both a DC and DB plan, the deduction limit as provided in IRC §404(a)(7)(A) generally applies. This provides in part:

404(a)(7)(A)

If amounts are deductible under the foregoing paragraphs of this subsection (other than paragraph (5)) in connection with 1 or more defined contribution plans and 1 or more defined benefit plans or in connection with trusts or plans described in 2 or more of such paragraphs, the total amount deductible in a taxable year under such plans shall not exceed the greater of—

(i) 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans, or

(ii) the amount of contributions made to or under the defined benefit plans to the extent such contributions do not exceed the amount of employer contributions necessary to satisfy the minimum funding standard provided by section 412 with respect to any such defined benefit plans for the plan year which ends with or within such taxable year (or for any prior plan year).”

A defined contribution plan which is a pension plan shall not be treated as failing to provide definitely determinable benefits merely by limiting employer contributions to amounts deductible under this section. In the case of a defined benefit plan which is a single employer plan, the amount necessary to satisfy the minimum funding standard provided by section 412 shall not be less than the excess (if any) of the plan’s funding target (as defined in section 430 (d)(1)) over the value of the plan’s assets (as determined under section 430 (g)(3)).

There are exceptions to 404(a)(7)(A) outlined in 404(a)(7)©. Paragraph not to apply in certain cases

One notable exception is :

404(a)(7)©(iv). Guaranteed plans In applying this paragraph, any single-employer plan covered under section 4021 of the Employee Retirement Income Security Act of 1974 shall not be taken into account.

Well, §4021 of ERISA happens to be the part that explains which plans are subject to coverage under PBGC. It is is also known as 29 U.S.C $1321 if someone is having a hard time finding the code reference.

This means that the employer doesn’t have to take into account any PBGC covered DB plan when looking at the deduction limit. Per 404(a)(7)(A)(i) the limit for the remaining DC plan would just be the typical 25%.

But what is the deduction limit for the DC plan when the DB plan status changes during the year?

Hello,

Is the correction for failure to implement a deferral election in a 457b plan the same as the correction in a 401k or 403b? I am familiar with the correction within the 401k and 403b but not sure about the 457. I cannot find anything to answer that question.

Thank you

Since the passing of HATFA did not bring anything new to Annual Funding Notices, we have continued to use the original MAP-21 rates to determine the funding target for purposes of the Funding Target Attainment Percentage for the Annual Funding Notice. Since HATFA is an extension of MAP-21 we have been wondering if these amounts should be based on the HATFA rates instead. Curious to know what other are doing in this regard. Thanks.

Background- Small school district with an ERISA exempt 403(b) plan (Alaska). Since we are ERISA exempt, we don't have to file a 5500. Loans are not allowed, and it's a very simple and easy plan to manage since there isn't a lot of activity. We had a single-sourced 403(b) provider, and added a second vendor (Vanguard) as a low cost provider for the employees. We also kept the original provider (we will be going from one vendor to two). For both providers the employees have 403(b)(7) accounts. As of now no contributions have been made to Vanguard.

I'm trying to see if there is anything I need to do with the plan document. Is it a requirement that the approved vendors be listed in the plan document? If so, do I need to update and amend the document to add the second approved vendor? The plan document was last updated in the middle of 2009 and it lists the original provider as the approved provider. On the IRS website I see stated "7.3 Current and Former Vendors.The Administrator shall maintain a list of all Vendors under the Plan," but I don't see anywhere that it says this must be incorporated into the plan document itself. Could I make a list on my own to satisfy the requirements and not put it in the plan document?

When I set up the Vanguard account, I put myself down as the administrator (I'm responsible for all the finances at the district) which allows me to add participants, send payroll deductions, and authorize distributions. In our written plan document, I see nothing that references the role of "administrator." The original vendor has told me they are actually the administrator for our plan (which I don't agree with since it isn't listed anywhere), and if we want to add the second vendor we will have to list them as the plan administrator (I don't want to do that!).

Any suggestions on how I should proceed? On a side note some of the new teachers have asked if we can add another vendor they used in the past (which I am not opposed to), but it would be this same process all over again.

ER adopts a PS plan with a PY 7/1/13 - 6/30/14. Tax year ends 6/30. ER contributes 20% of comp for 6/30/14. Tax year changes to calendar year for 12/31/14, so plan amended and return will be filed for short plan year 7/1/14 - 12/31/14. ER adopts a DB plan 12/31/14. Effective date is 1/1/14 and PY is calendar year. Val date is 1/1 and the MRC is $157,000 and the max is $190,000.

Does the short taxable year of 7/1/14 - 12/31/14 affect the amount that can be deducted for the DB plan? There will be no contribution to the PS plan for 12/31/14.

Does 401(a)(7) apply since there was a contribution to the PS plan for 6/30/14 and the DB plan is effective 1/1/14? If so, to what time period does it apply?

Any guidance will be appreciated. I've been pouring through the ERISA Outline Book and thoroughly confused.

I have a client who made a 2014 distribution to a participant's ex-wife without a proper QDRO. The divorce decree called for the distribution but it did not contain the required language for a QDRO; they are now in the process of having the a QDRO prepared.

Question 1: To correct the situation, do the funds have to be repaid to the Plan and distributed again after the QDRO, or can it be corrected by not having a repayment but merely having the QDRO prepared after the fact, acknowledging that the distributed amount was correct?

Question 2: Should a form 1099-R be issued by the Plan for 2014, and if so, who should be shown as the recipient on the 1099-R -- the participant or the ex-wife who received the funds?

Thanks in advance for any help.

This feeble mind has forgotten already. If monthly benefits are being provided due to the 430 restrictions prohibiting a lump sum, may the monthly benefits still be rolled into an IRA based on the concept that a lump sum distribution was requested?

We are filing for a determination letter for a plan termination on a pre-approved VS document. The plan has never applied for a determination letter before but has always adopted the document restatements and amendments on a timely basis.

The prior instructions for the Form 5310 clearly stated that if you didn't have a determination letter (DL) then you had to attach all plan documents, amendments since the effective date of the plan.

The new instructions, revised 12/2013, say this under the What to File (#4) "a copy of the opinion or advisory letter for the pre-approved plan, and/or adoption agreement and all required attachments and statements" and (#5): "A copy of all amendments made since the last cumulative list listed on the last DL or plan document, if applicable"

Do we have to send in all documents since inception or only the current document with any amendments adopted after the document restatement.

Has anyone ever heard of this company before? They sent out what appears to be a mass mailing to the clients of a particular large TPA (not us!) making all sorts of accusations and recommending that they fire the offending TPA forthwith. Believe me, the accusations are not scandalous. My 2nd or 3rd thought was "scam?". But there is zero contact information on the letter (it merely lists the county and state as Camden County New Jersey). It does not request any information nor response.

And here is the kicker - they cc'ed (at least according to the letter) 6 or 7 different field offices of both the IRS and the DOL.

I googled the company but found nothing. We're going to forward the letter as a courtesy to the named TPA (a firm that we "know of").