Our company has done much better than expected in the first 6 months. As a result, we are able to and want to contribute the 4% profit sharing portion to all our employees.

Unfortunately we elected 1 YOS for profit sharing eligibility on our Safe Harbor 401k plan.

Any other options for us to be able to provide this contribution across the board to our employees?

I am processing a 401k hardship distribution for a participant who normally contributes the elective deferral max each year. There was a regulation that stated an employee's annual cap on elective deferrals for the year following a hardship distribution is reduced by the amount of elective deferral contributed in the year the employee received the hardship distribution. I do not see this requirement in the current regs. Was it repealed?

We have a plan that is considered a Davis Bacon plan. The company made QNECs as part of the prevailing wage arrangement some HCEs and NHCEs. I understand that up to 10% of compensation can be used for NHCEs in the ADP and ACP tests, however, do the QNECs for HCEs have to counted in either of those tests as well or can the HCE QNECs be ignored for testing purposes?

For plan purposes when does an owner (stockholder) actually "terminate"? The owner in question has not disposed of his shares, so still owns more than 5% of the company. He has, however, stopped taking salary and is not sharing in corporate gain/loss. I still need to confirm if he is actually performing any services, but for this scenario, let's say he is not. At what point is he "terminated"?

Thanks

I know I have seen this question before & probably even asked it myself!

Background: plain 401(k) profit sharing plan

the over age 50 owner made $22,669.18 in 401(k) contributions

the ADP test passes.

there is no match in the plan

computing the profit share contribution to maximize the owner using a cross tested formula.

The 2014 individual limit is $52,000. with $5,500 401(k) catch up, $57,500.

Since this owner only made $5,169.18 in catch up contributions is his total allocation amount limited to $57,169.18 or can he still get to $57,500?

I know it's not much in this instance but I want to do it right and get the client as much as possible.

thanks in advance!

I am sick of sponsors that insist on allocating matching contributions to participant's accounts over the course of the year AND insisting on having allocation conditions (last day, 1000 hours, or both)! I am looking for support for the propostion that allocating a match to participant's accounts before the allocation conditions have been met is a Code, Reg, or IRS or DOL Guidance violation.

Any thoughts?

Going to submit a VCP for 401(k) plan where the company owner, age 84, has never taken RMDs. Plan has 80 participants but just the one owner needing RMDs.

Any recent experiences calculating the correction with IRS? I did one of these a couple of years ago and IRS kept going back and forth on how to calculate the correction. I don't remember now what they finally accepted at that time, just hoping they have a more settled methodology today.

Seems to me we'd calculate the RMD for each year required, bring it forward with earnings to the present. In calculating the RMD for each subsequent year we'd back out the cumulative RMD payable from the account balance.

Thanks.

Safe Harbor 401k plan provides for the 3% nonelective contribution. Plan amended for 415 Final Regulations and thus includes adjustments for amounts paid post-severance for : 1) regular pay w/i 2 1/2 months or the end of the limitation year; 2) leave cashouts; and 3) deferred compensation (as described in the Reg.). Employment agreement provides for salary continuation to be paid to terminated employee over 36 month period. The salary continuation would not fall under the "regular pay" prong, nor the "leave cashout" prong. As for "deferred compensation" prong (as well as the "regular pay" prong), the amount would not have been paid if the participant had continued in employment. Thus, I do not see that the salary continuation is includible as compensation form purposes of computing the 3% non-elective safe harbor contribution. Any thoughts appreciated. Thanks.

I have seen some secondary / informal guidance and discussion suggesting that the prohibitions on reimbursing individual premium expenses under IRS Notice 2013-54 (and related DOL guidance, etc.) extend to prohibit tax-free reimbursement of premiums of COBRA coverage under the former employer's group health plan for a departing employee. That makes sense to me and I can see why requiring that these reimbursements be treated as taxable under 2013-54.

Given the guidance, it is unclear to me whether merely treating the reimbursements as taxable amounts is sufficient for compliance. It seems that the evolving interpretation of the guidance is that in order for payment of the premiums to be permitted the amounts must not only be taxable but not provided on a strict reimbursement basis or with restrictions on the use of the amounts. Again, while I can understand the rationale for that under the rules, the reimbursement of COBRA premiums under an employer's existing group health plan seems a bit distinguishable from reimbursement of individual coverage, etc. where the employer does not provide regular group coverage.

I was wondering if anybody had seen any formal or direct guidance from the regulators on this specific issue. My concern is that many many employment agreements are drafted to provide for actual reimbursement of COBRA premiums as part of a departing employee's severance package. Although having such reimbursements treated as taxable may not be inconsistent with existing employment agreements, having to pay the amounts out regardless of whether the departing employee elects COBRA is very different from how such provisions are typically interpreted / administered. Furthermore, providing for such amounts on a non-reimbursement basis would seem to destroy the potential 409A exemption for reimbursement of health coverage amounts for the COBRA period.

Would welcome any thoughts on this as I haven't found much discussion or guidance on this specific area. Thanks

I have a plan that is written as cross tested with everyone in their own group. The company refers to their non-elective contribution as a "Year of Service" contribution, meaning that they allocate it based on years of service as follows: (company allocates)

0 -9 years - 3% of base salary

10 - 19 years - 4% of base salary

20 - 29 years - 5% of base salary

30 and over - 6% of base salary

I believe that the formula that they use should exempt them from gateway, but here may be the problem.

For the basis of the Year of Service contribution they exclude bonus, cell phone and car allowances. The plan document does not exclude anything in the definition of compensation. Comp def says wages within the meaning of 3401 (a) including any amount includable in the gross income under section 125, 402 and so on....

Also in document, Compensation shall include only that compensation which is actually paid to the participant by the company during the Plan Year or such other period used to determine Comp for allocation purposes.

All participants receive the contribution based on the full year comp.

Based on the document, is this allowed to allocate the contribution on this comp?

Can I test gateway, average benefits and general test using the comp used to allocate the contribution?

Would it have to pass the 414s comp test first?

thank you for your help.

Cash balance plan, lump sum is available. Ppt is not 5% owner. Ppt terminates from active employment at age 73 and takes a full lump sum distribution immediately. Is a portion of this distribution considered an RMD and therefore not permitted to be rolled over?

Required beginning date under the plan is later of age 70 1/2 and retirement date.

May funding investments in a 403(b)(9) plan consist of a brokerage account holding assets other than annuities and mutual funds, such as stocks, bonds, ETF's, Partnerships, etc.? May the Trust hold real estate, collectables, etc., which would be owned and custodied by the Trust, FBO the Participant?

The shareholders of a closely held entity want to become the assignee of a deferred compensation arrangement with respect to one individual (they would be on the hook for satisfying all obligations under the arrangement). I have not found anything in the 409A regs that would prevent this, am I missing anything?

Who would be responsible for the tax reporting/withholding?

Participant Directed 401(k) Plan. When you read 404© it does not specifically say education meetings are required. Fiduciaries must provide the participants with the investment information to make an informed decision.

Does ERISA require the employer conduct education meetings? Not sure why they wouldn't...

I am looking for any regulation that requires education.

Thanks

Would a service provider run afoul of 409A rules if he/she opted to forfeit all or any portion of his/her deferred compensation payment (the arrangement is currently in repayment as installments, treated as a single payment). No other benefits would be paid in exchange - he/she would just receive a lesser amount, payable over the same time period. There are obviously other tax considerations.

What if the service provider agreed to take a lesser amount but the amount would be paid over a specified period of time rather than life - I believe this would be subject to the subsequent deferral rules, is that correct? And if a series of installment payments (treated as a single payment) had already begun, then a subsequent election may not be made. Is this correct?

Is the definition of participant for purposes of 5500EZ qualification the same as it is for counting participants for 5500 or 5500SF purposes?

If the doctor is the only employee actually contributing to his safe harbor match plan (although other employees are eligible) is it a one-participant plan?

Anyone have good references for how to handle a participant who the employer paid too much Match to due to the participant reaching the compensation limit?

The participant was paid $360 too much in employer match. I am seeing a ton of information on excess deferrals but nothing too specific on excess employer match. I saw the option to 'forfeit' but nothing to back up that correction. Thank you!!

Does anyone have any insight into what remedies a Plan Sponsor has under the VCP for not making the Safe Harbor contribution as specified in the Plan Document for a 4 year period?

In addition, the ADP test was not preformed and the Plan is Top Heavy.

When does vesting service stop in this situation? (I don't see anything in the plan document that addresses it.)

Our frozen plan's early retirement eligibility requirement is age 55 with 15 years of vesting service. We have a 47-year-old employee who had 6 years of vesting service when the plan was frozen 3 years ago so his years of vesting service now totals 9. If we never terminate the plan and he remains employed he'll have more than 15 years of vesting service when he's 55 and can retire early.

Let's say we terminate the plan at the end of this year, at which time his vesting service will be 10. Question is: Assuming continued employment past the plan termination date, does this participant continue to earn vesting service or does it stop at plan termination so that he never becomes eligible for early retirement and must wait until age 65 to draw a pension?

Let's say a participant deferred $25000 over the years. He takes a loan, and defaults to the tune of $22000. There is $7000 left in the investment account, so there were gains of $4000. Now he wants a hardship...would you say he can take the full $7000, where the defaulted loan used up gains and some deferral contributions, or only $3000, where the defaulted loan used up deferral contributions only?

I'm leaning towards the first, in the absence of guidance, at least as far as I know.