I know the answer, but I am hoping I'm missing something.

Jim contribuites $24,000 in January to ABC, Inc. 401(k) plan.

In March, XYZ, Inc. purchases ABC, Inc. in an asset acquisiiton. ABC, Inc. plan termninated immediately prior to the acquisition. Jim gets a $12,000 refund for the 2015 short plan year.

Jim wants to contibute to the XYZ, Inc. plan. I don't see that he can for 2015. Even though he received a refund from the ABC, Inc. plan for 2015, he still hit the 402(g) limit. I don't see that the refund changes that.

Am I missing anything?

Thanks in advance for any guidance.

We have 2 plans that were previously part of a control group, but that have now been merged together. After doing some research, it appears that 1099-Rs are not required for plan that was merged into the other plan. Would you agree with that? Also, should the merged assets be listed as "benefits paid" on the final Form 5500?

Have a client that has Collateralized Securities in their 401k plan. Is this allowed? Thanks in advance.

Let's say a participant is 60 years old, but has the funds in the Roth account for only 2 years when he requests a distribution. Two questions:

1. The 10% penalty doesn't apply and the 1099-R code is simply "B", correct? The participant simply pays taxes on earnings because it's not a qualified Roth distribution...

2. Let's say the participant is actually 40 years old. In that case codes "B1" are used. However, does the 10% penalty apply to the WHOLE distribution amount or just the taxable (earnings) amount?

Probably a very simple question here, but I couldn't find too much guidance on the IRS site. If the plan was terminated in 2014 and all the distributions were done by, let's say September 10th, should the ending date on the Form 5500 be reported as 9/10/2014 or should it be the end of the month in which the distributions happened, so 9/30/2014? The end result is the same as the filing is due 7 months after the month of last distribution. Just wanted to see if there's a requirement to do it one way or the other.

Hi,

I terminated service in 2/2012 and I received notice that my previous 401(k) plan was merging with another company's 401(k) plan (Company B). When I left my pervious employer I was 75% vested.

After the transfer occurred, I received a distribution statement. I was informed that 25% of my account balance was forfeited upon the transfer.

Can the company take away my non-vested account balance prior to 5 years?

What happens if I join Company B tomorrow, wouldn't they have to count my service with my prior company since it hasn't been 5 years break in service?

Thanks

This is a new one on me. A state instrumentality ("Employer") sponsors Plan A, its own defined benefit plan (i.e., Plan A is not a state-wide, public plan). Participant X, who has a vested benefit under Plan A, has been arrested for embezzling a large amount of money from Employer. Employer would like to amend the plan prospectively to provide that any participant convicted of a felony against Employer forfeits all employer-provided benefits under the plan. Can it do so?

The plan is exempt from ERISA as a governmental plan, so the federal vesting and anti-alienation rules don't apply. Not surprisingly, the state's statutes don't deal directly with this question. (And the statutes governing the state's own pension plan don't apply.) Does this boil down to simple state contract law?

Cheers.

I found some prior threads but most were 7+ years old and dealing with non-spousal beneficiaries. I have a spousal beneficiary.

It appears that if he rolls over the balance of the account to a traditional IRA then he'll receive the 1099-R with a Code of 4G. If that happens this year (the year of death) then the 1099-R for the loan offset will go under the deceased participant's name/SSN and is part of her final personal income.

My question is...does the 10% "early distribution" penalty apply in this case to the loan offset? I'm assuming that the 1099-R won't be coded with a "4" because that portion is not a death benefit but rather a loan offset under the decedent.

Any thoughts appreciated!

I am preparing a Form 5500 filing for a wrap plan containing a self-insured health plan as well as several insured benefits (STD, LTD, life, AD&D). The client also has a stop-loss policy and a transplant policy. Do I need to complete a Schedule A for each of these? I understand if the stop-loss policy is owned by the employer and the premium is paid out of general assets, it is not reported on a Schedule A. Does the same principle apply to the transplant coverage as well? If I do need to report these on a Schedule A, how is the participant count determined - use the same number of participants in the group health plan or only those participants whose expenses triggered the stop-loss or transplant coverage for the plan year? Any advice would be greatly appreciated!

I was employed with TWA from 1977 -2003. My pension from 1977-1999, which was the date American Airlines aquired TWA, is held by the PBGC. They claim to not have any record of me in their data base. They requested TAX returns from 1999 and before. I have been on the IRS website and they only go back to 2005. How do I prove employment? I provided letters of my 10 and 20 year employment but they want IRS proof.

Was Fidelity the source of the IRS's newsletter regarding ensuring that plan sponsors keep hardship documentation?

http://dcda.fidelity.com/static/dcle/WPSFidelityPerspectives/documents/FF_YFC_42215_Hardship_withdrawal_721275_final_041715.pdf

It certainly seems that way. The largest 401k provider in the country says "ee's can self certify hardships" which as far as I know is quite contrary to everything I ever read on the topic. Just curious...

Any thoughts on whether or not Fidelity will win this fight? They certainly put together quite a defense...

Company A - is owned 50% by Mom and 50% by Dad.

Company B - is owned 25% each, by Mom, Dad, Son 1 and Son 2 . . . both sons are well over 21.

Is this a controlled group? It seems to me the answer is no since the parent is deemed to own the child's shares only if parents own over 50%. In company B the parents own exactly 50%.

However, it doesn't feel quite right as seems like a good plan design to get more contributions into the owners accounts.

Thanks for any input.

We have a new comp plan and each employee is in their own group. Each year the sponsor will inform us what percentage or dollar amount each HCE and Owners should get. We then test the plan and determine what the NHCEs must get. In most cases even though the NHCEs are all in their own group we will give them the all the same %. Enough to have the test pass.

The IRS agent said that she's never seen so many different %'s across the board and that she usually sees three or four separate groups. I explained that all are in their own group and that the HCEs are able to get different percentages actually even the NHCEs are. However she wants us to demonstrate how we get to the % amounts for each HCE.

I guess this is more of a "what would you do" than a question. I think we are just going to give her what the sponsor provided us to show what the HCEs are to get and then show her what we proposed to give the NHCEs and that's it. I don't think we did anything wrong here.

Client maintains a safe harbor 401K, which as amended 1/1/2014 to a traditional, tested 401K.

The employer has more than 60% of the value of the plan, so the plan is top heavy, but employer is not deferring and does not want to contribute for the employees, now or in the future.

If memory serves me correctly, as long as there is no employer contribution, he is not obligated to make the 3% top-heavy contribution???

If participants who are "affected" by a partial plan termination in a DC plan have already taken a distribution from the plan and the amount the participant previously forfeited needs to be reinstated to their account, should the amount reinstated be adjusted for investment earnings?

I don't consider this to be a "mistake" that necessitates investment earnings, but perhaps the IRS would disagree.

I see a few prior threads answering some portion of these questions, but wanted to solicit thoughts on an issue I've had come up several times.

A small, privately held company wants to grant a key employee a portion of the proceeds of any major transaction. No equity will be involved; it will simply require the company to make a cash payment to the employee of, say, 10% of the total transaction value. They also want the payout to follow the same schedule of payments made to the company/shareholders for the purchase. So if the company is paid $1M at closing, then is paid contingent payments depending on earnings over the next 3 years, the key employee will get 10% of the first $1M and 10% of each contingent payment.

Most likely, any transaction will be a 409A-compliant change in control. In that case, 1.409A-3(i)(5)(iv)(A) should apply and allow payments for up to five years based on the same terms as the company or shareholders receive payments from the buyer.

If we don't use a 409A-compliant CIC definition, we can use the short-term deferral exception for any payments made before March 15 of the year following closing, e.g., entire amount paid within 30 days of closing. No further payments based on company's contingent payments. No problem there as we don't need a 409A CIC to use the short-term deferral exception.

I see a noncompliant CIC definition being useful here. Say the shareholders sell 60% of the stock to a buyer, creating a change in control, in 2015. Then in 2016 they sell the remaining 40% of their stock to the same buyer. In that case, the employee is only entitled to payment on the first 60% if we're using a 409A-compliant definition because the acquisition of additional control is not considered a change in control.

Now combine the two. If we have a noncompliant CIC definition, the first payment within 30 days of closing will be fine, but I'm concerned with the three additional contingent payments. Assume the hurdles for contingent payments are "substantially" at risk, i.e., there's a substantial risk the company may not meet the targets. Can we use the short-term deferral for the three years' worth of contingent payments to the employee? In other words, because there remains a substantial risk the company will not receive the contingent payments, there's a substantial risk the key employee won't receive anything.

Here's my concern: The preamble to the final regs says "one commentator suggested that any right to a payment be treated as subject to a substantial risk of forfeiture until the amount of the payment is readily determinable, at least where the payment could be zero. The Treasury Department and the IRS do not believe that this standard is appropriate."

I think there's no question the key employee here would have a legally binding right to the contingent payments if the company receives them. The preamble seems to say that the contingent payments are not subject to a risk of forfeiture simply because the amount is not determinable (and may be zero). Am I reading this too broadly?

This seems to leave two possibilities: (1) use only a 409A-compliant CIC definition and allow contingent payments to the employee under the five-year rule; or (2) use a noncompliant CIC definition and require all payments within the short-term deferral period.

Any other suggestions on how to combine the two permissibly?

A plan has a discretionary match. They were at one point matching catch-up contributions, but decided to stop last year. A participant is complaining that they were not notified of the change.

Does the employer need to inform participants of this change via an SMM, or is the fact that the SPD says the following enough? "Your Employer may make a discretionary matching contribution equal to a uniform percentage of your salary deferrals. Each year, your Employer will determine the amount of the discretionary percentage.'

Plan sponsor will terminate its pension plan in a standard termination. The plan currently has no lump sum distribution option, other than forced cash-outs for small benefits under $1,000, and other cash-outs (e.g., to an IRA) between $1,000 and $5,000.

The sponsor wants to add a lump sum distribution option for participants who are not in benefit payment status, to be used in connection with the standard termination. So far, so good.

The sponsor, however, wants to specify a lookback month for determining the applicable interest rate to be used in determining the lump sums under the new distribution option that is different than the lookback month used for determining small benefit cash-outs.

Is this do-able? Or, does it violate the 417(e)/411(d)(6) rules? Specifically, does it run afoul of the regulations at 1.417(e)-1(d)(4), which provides in relevant part: "The time and method for determining the applicable interest rate for participant's distribution must be determined in a consistent manner that is applied uniformly to all participants in the plan."

Would it be OK to get by this issue by "protecting" the participants with small benefits by giving them the benefit of the greater of lump sums determined under the two interest rates. (Everyone else will have a lump sum calculated under the new interest rate.)

Thanks!

When is the following participant deemed 100% Vested:

DOB 1948 (age 65 in 2013)

Entry Date 1/1/2012

Resigned 2014

Plan's NRD is 1/1/2017

"Normal Retirement Age" as elected in the Plan's Corbel Adoption Agreement is the later of the Participants 65th Birthday or the 5th Anniversary of the first day of the Plan Year in which participation began

We are reviewing a deminimus benefit defined benefit plan for a sole proprietor, age 74.

The first year of the plan was 2013. An individual from an insurance company prepared the calcs for this individual. The TNC was 103% of the net Schedule C.

Net Schedule C $3,900 - TNC $40,000?

Isn't the deduction limited to the net Schedule C?