A former participant is rehired and does not elect to join the plan on their date of rehire. Do they wait until the next entry date to enter the plan and actively participate?

A law firm has a plan with a 1 year (1,000 hr) service requirement for profit sharing. Entry is monthly. They hired a new attorney 12/15/13. She satisfied the requirements 12/15/14. She would enter the plan for PS purposes on 1/1/15.

Unfortunately they told her she would get PS in 2014. Since she is a nhce for 2014 (may be a HCE in 2015, not sure since they use top 20), can the plan be amendment bringing her specifically in the plan by name for ps purposes? I know they could have in December 2014 for sure but was unsure since it is 2015.

I work for a TPA that outsources our actuarial work to another company. Can someone please explain to me the best way to ensure that terminated people with more than 1,000 hours get the 5% THM and ONLY the THM in a DC Plan. We've been told that we need to get rid of the last day rule. So that's what we did. But now we have a plan where we're doing a 6% total allocation, and I'm stuck giving the extra 1% to a term. Shouldn't our document automatically give the 5% THM even though there is a last day rule, because in the document I specified that the THM wll be provided in the DC Plan?

We use the Corbel VS formatted Prototype.

401(k) Plan document has had one-month eligibility requirement for elective and matching contributions for at least 10 year (maybe 30 years; I am not done with my due diligence yet); no exclusions in Plan document. Employer now knows, after discussing with ERISA counsel, that it has an operational error by failing to give temporary employees the opportunity to participate in the plan. Employer is willing to self-correct with QNECs per EPCRS guidance. I am comfortable that the error is not significant notwithstanding the fact that it has gone on for so many years (just a handful of interns and co-ops each year as compared to 150-250 other employees). The issue is what is the "safe" number of years to go back to correct without correcting ALL years (including all closed years). All open years? 4 years? 6 years? If Plan is audited and they find out we have corrected for those years but not all years, what is likelihood of a problem? Alternatively, has anyone ever heard of getting VCP blessing for correcting less than all years? If so, what could we expect going down that road? Blessing if only open years are corrected? 4 years? 6 years? All years for which relevant data has not been destroyed? p.s., don't worry I am not thinking about suggesting that the client have a bonfire and burn some old payroll records.

Payroll clerk accidentally input a deferral change for the last pay period in 2014 as 100% rather than 10%. The final payroll was run and paid in 2014. Employee is surprised and questions HR.

The correction is in process with the record keeper who will send the excess to the sponsor. Plan sponsor will then make the employee whole via payroll in 2015.

Question: is there any reason we need to correct the 2014 W2? Or does it fix itself with the 2015 correction?

Thank you

Benefit in the Plan is a discretionary contribution each year, payable in 15 years. The amounts re not going to be separately invested in a brokerage account. The benefit is essentially tracked on a spreadsheet. Do I HAVE to pay interest? There is a rolling vesting schedule, so I think it is unfair that the participant will be paying payroll taxes on amounts that vest without even receiving the benefit of interest, but ultimately that is not up to me. I just need to know if it is possible to credit no interest.

Say you have a safe harbor match plan and you no longer wish to be safe harbor. When is the ealriest you can amend to not be safe harbor? Do you have to give the employees a certain amount of days notice? In this case, the client wishes to implement a regular match as soon as possible.

thanks

All but 6 cents was distributed in 2014. I s there a deminimus or do I have to file 5500?

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?