A client has a 401(k) plan that matches dollar-for-dollar up to 4% of Compensation. Compensation is defined to include bonuses. Participant A elected to defer 4% of Compensation into the Plan. Participant A was paid a bonus of $25,000, and therefore, $1,000 was electively deferred into the Plan and a $1,000 match was also contributed into the Plan. Two weeks later payroll discovers that Participant A should have received a $10,000 bonus (which would have resulted in only $400 being electively deferred into the Plan and a $400 match also being contributed into the Plan). So, due to the erroneously large bonus, an excess $600 of deferrals and $600 of match were contributed to the Plan account. The client would like to know there options for fixing this situation.

If no applicable IRS limits were breached, it doesn't seem to me that the result is a plan qualification failure that would require correction under EPCRS, for example, as an "Excess Amount." Could the client just take the excess $600 of deferrals out of the Plan and pay to the participant (and then require full repayment from the Participant of the excess bonus ($15,00) and return the excess $600 in match to itself? Could the client recoup the amount by reducing future compensation and therefore not taking deferrals from that compensation? I can several different possibilities here, but the real question is am I right that this would be outside EPCRS and how are companies dealing with this type of legitimate compensation error when it occurs?

A S.H. 401(k) had a couple of participants whose deferrals/match were "turned off" by the plan sponsor for one payroll. The sponsor discovered this and apparently authorized the payroll company to double up on the subsequent payroll to make the participant "whole".

It is my understanding that the sponsor should have self corrected (the amounts were miniscule compared to the plan assets) by depositing 50% of the missed deferral and match into the participants account.

Now that the problem has been exaggerated by the employer doubling up on a future payroll and in essence allowed the participant to change their deferral rate outside the plan parameters what would be a recommended course of action?

Here is an example, $2000 payroll participant was deferring 5% and getting a 4% SH basic. To make up for the missed deferral/match, sponsor upped them to 10% and a 8% SH. Even if you allowed the participant to double up on the deferral, the SH basic would still remain at 4%.

I am involved in a plan termination. We recently mailed the NOIT, Notice to Interested Parties and NOPB's to 67 of the 73 participants. However, we were unable to find addresses for 6 participants after asking the plan sponsor and using a commercial online locator service. I understand that we may not have fulfilled the diligent search requirement yet, as we haven't yet inquired about any beneficiaries. Must this search be done by 60 days prior to the proposed termination date in order for the notice mailing to be timely? From the PBGC standard termination instructions, I get the sense that it only needs to be done prior to filing the post-distribution certification. Is that correct?

Thanks for any responses!

Am I correct that a governmental Section 457(b) plan, Section 403(b) Plan & Non-ERISA 403(b) plan, qualified govermental and non electing church defined contribution plans are required to sent the EACA notice?

Please provide the regulations/cite where it states that govermental plans are required to send the EACA notice and are not exempt. Thanks!

Am I correct that a governmental Section 457(b) plan, Section 403(b) Plan & Non-ERISA 403(b) plan, qualified govermental and non electing church defined contribution plans are required to sent the EACA notice?

Please provide the regulations/cite where it states that govermental plans are required to send the EACA notice and are not exempt. Thanks!

Is a Money Pruchase Plan subject to the minimum funding requirements? (Line 12) I am thinking yes. Thanks.

Plan allows for hardship distribution based on safe harbor standards. A participant wants to take one to prevent foreclosure (as stated under the sh reasons). What constitutes as preventing a foreclosure? Actually receiving a foreclosure notice and then taking a hardship. OR Can he take a hardship because he is behind on his mortgage by two months. He is preventing foreclosure by taking the hardship to get caught up.

Employer established a new DBPP effective 1/1/2014. Employer enters into an asset sale agreement on March 15, 2015 to sell substantially all of the business assets to Buyer. Effective on close of transaction, all of the Employer's employees will become employees of the Buyer.

Employer is an S corporation. Employer will be dissolved following close of the sale.

Employer would like to fund the DBPP for 2014 plan year and for 2015 short plan year, and then terminate the DBPP.

Reason for termination: Sale of business assets; dissolution of Employer. Would this be considered a legitimate business reason for Plan termination?

Very early in the audit, but the auditor is being unreasonable. We may be able to shift this position, but for general purposes, I have a question. This is a 401k only plan. The only contributions are employee deferrals. The owner does not defer nor does he have any money in the plan. There are 3 HCEs with balances and about 90 NHCEs with balances. If thie plan is disqualified, the only people harmed are essentially NHCEs.

The issue is failed ADP test. When the test was originally run the failure was corrected by recharacterizing as catchup. In preparing for the audit, i discovered that the date of birth had been entered into the system incorrectly and the paritcipant was not actually eligible for catchup. If i had found this without the audit, i would still be in the correction period for SCP. The auditor is trying to play hardball and insist on audit cap.

My question is this. It would be cheaper for the employer to just let the plan be disqualified. That would harm the participants however. Is there fiduciary liability there? Could the participants sue and win for this?

Anyone with experience with an actual disqualification?

Thanks

We have a plan that failed the ADP test. Corrective distributions have been done and everything is wrapped up at this point. Now, we hear from one of the participants (an NHCE) and he's telling us that he exceeded the 402(g) limit for the year, due to the fact that he switched companies and did not track the fact that he exceeded the yearly $17,500 deferral limit. Now, we have to do an excess deferral distribution for him and forfeit the match for that portion of the deferrals. Question: how does this affect testing? Does it reduce his ADR/ACR?

The IRS documentation says upon any withdrawal the adjusted vesting calculation would be either of

(1) X = P (AB + [R x D]) - (R X D)

X is vested interest at relevant time.

P is vested percentage at relevant time.

AB is account balance at relevant time.

D is amount of the distribution.

R is the ratio of the account balance at the relevant time over the account balance after distribution.

(2) or X = P (AB+D) - D

The difference is, in 2nd formula the value of R is 1.

My question is when we can use formula 1? Under what circumstances we need to use formula 1? Any thoughts.

Over 50 HCE has hit the $265K Salary Limit but has not put in the Catch Up contributions. Given that we look at compensation, etc. at year end, could they put in catch up with salary over $265K now as long as they don't go over the 402g limit and the plan's deferral percentage limit annually with their $265K Salary?

I'm having a disagreement with the financial manager, so I want to confirm.

Non-owner was hired mid-year 2013 and earned less than $115,000. In 2014, his first full year of service, he earned well over the $120,000.

In other words, in the look back year he didn't earn enough but it was a partial year. By the letter of the guidelines I do not believe he would be an HCE.

Thoughts?

here is the most recent version

looks like they have removed the questions pertaining to ESOPs and amounts deducted, etc.

good chance to plan ahead, since many plans will be restated in the upcoming year.

you can compile and have the required info ready to go

5500 SUP latest version.pdf

Does it make sense to open a Roth IRA for kids?

What obligation does a plan sponsor have to disclose the fees that will be charged by the IRA provider in order to open the default IRA account? So recordkeeper charges $75 to process a distribution, but the IRA provider charges $100 to open the account. This fee mind you is assessed from the IRA - it is not paid by the plan.

What are people doing here?

My client's 401(k) profit sharing plan document (I believe it's Sungard Corbel-generated) says that contribtuions may be conditioned upon deductibility. And "to the extent any such deduction is disallowed....whether by agreement with the Internal Revenue Service or by final decision of a court...." the Employer could get the money back within one year.

My question is, what constitutes "agreement" with the IRS?

Here's the backstory - small doctor's office, and they advance-fund their profit sharing throughout the year and true up the rest after 12/31.

Last spring they adopted a DB plan for 2014 to get a huge deduction. But as a non-PBGC plan, that capped DC contributions to 6%. Which they easily exceeded by December. (And they were pretty close to the actual 6% number in the DC plan by the time the first DB deposit was made last June.)

Does 404 basically constitute "agreement" by the IRS that the excess amounts are not deductible?

Or is this something that requires a written edict formally disallowing the deduction?

thanks....

-bri

We have fiscal 401(k) plan, PY 07/01/14 through 06/30/15. The owner's deferrals are all after 01/01/15, and he turns 50 in October, 2015.

1. He will definitely defer $18,000 limit for 2015 before PYE.

2. Since he will be 50 by 12/31, he will be eligible for $6,000 catch-up for 2015

Q: Can he make his catch-up deferrals before the 06/30/15 PYE or does he have to wait until after 07/01/15 - which would be the plan year containing 12/31/15?

Client with 2 participant 401(k) Plan where investment company issues 1099's for distributions. Contracts are owned by Trustee, xyz 401(k) Plan. A participant took a distribution during 2014; the 1099 shows the distribution to the Trustee of the Plan rather than the participant. CPA says he needs a 1099 showing distribution to the participant. Investment company insists that the only 1099 they will issue shows distribution to Trustee, xyz 401(k) retirement plan.

What to do, please?

Not knowing doodley about cafeteria plans, I just wondered if there is any sort of a general answer to this, or is it purely dependent upon plan terms, or a combination of both, or perhaps neither?

Can a plan permit an employee, on a personal leave of absence, to pay her health insurance premiums through payroll using her combined time off?

If yes, can this continue being a pre-tax deduction or can this be done only as a post-tax deduction?

I have a faint memory that you have to make an irrevocable salary deferral election prior to the beginning of the year, but this can perhaps be modified for a change in status? If an unpaid absence qualifies as such a change in status, then it would seem to me it ought to be possible to use CTO which presumably is run through normal payroll?

Thanks.