I have several clients who operate staffing firms and they offer short eligibility to entice workers who might have other employment options. One plan has an eligibility provision of three months of service (no hours required) and age 21 with entry on the first day of the month following attainment. We're getting beat up on the ADP and ACP tests and I want to apply Otherwise Excludable (a/k/a Early Participation) rules to test the "short service" partcipants separately. (We have no Otherwise Excludable HCEs.) If I'm allowed to apply a statutory requirement of one year and age 21, can I exclude people who have worked for the company for three years but never acheived 1,000 hours?

The intent of the Otherwise Excludable and Early Participation rules was to prevent employers who are generous with eligibility from being negatively impacted. I feel as though I should be allowed to exclude employees who work 20-100 hours per year but I cannot find a citation to support this anywhere.

Help?

A non-spouse inherits a Roth IRA. Are the earnings subject to federal income tax?

Defined benefit multiemployer plan. When contributions come in to the Plan, 70% of the contribution is credited to the participant, 30% is non-credited. The participant's total benefit amount is a percentage of only the credited portion.

Due to an honest mathematical error, some (not all) of the participants had more than 70% of the contributions go toward credited and therefore less than 30% put toward non-credited. This went on for about 3 years before it was discovered. Again, it was an honest mathematical error (don't worry about how it happened, I'm satisfied with the explanations I've received).

91 total participants were affected. The Plan has about 180 participants, but not all of the 91 participants were affected each year. That's 91 total over 3 years, not 91 each year. So, one year it may have been 15 affected, the next may have been 40, the next may have been 26 (hypothetical, just using as illustration).

Of those 91, only 6 have since retired. The other 84 are still active and are not drawing any benefit yet.

Per EPCRS, the Plan can self-correct insignificant operational failures. I would argue that this would fit into that (the Fund is about $90,000,000 and the total amount at issue here is about 0.1% of that). Specifically, EPCRS talks about correcting Overpayments.

Overpayment is defined as a "Qualification Failure due to a payment being made to a participant or beneficiary that exceeds the amount payable to the participant or beneficiary under the terms of the plan or that exceeds a limitation provided in the Code or regulations."

Here's my question for all my learned colleagues on the board: for the 84 people whose accounts have been overstated but have not yet retired, has there actually been an Overpayment? Or, does Overpayment only apply to ACTUAL payment (like to the 6 who have retired)?

Thanks for your responses.

Wanted to run this by people: Can an employer who normally pays 75% of an employee's premium offer to pay 100% as part of a hiring incentive for certain positions they want to fill? Lets just say they need one key employee (the CFO or COO or some C suite person) and this is one way to incentivize the candidate to take the position.

I submitted a question for an IRS Webnar on Plan Terminations on whether the IRS position was "exactly" 25% or "at least 25%" of the reversion being transferred to a DC.

I submitted a question for an IRS Webnar on Plan Terminations on whether the IRS position was "exactly" 25% or "at least 25%" of the reversion being transferred to a DC.

Participant terminated and elected to roll funds to an IRA Rollover - custodian sent the funds to the IRA.

During an internal audit of the plan, it was discovered an incorrect date was provided to the platform and the participant was paid 80% instead of 60%. The over payment is approx. $1,800.

If the employer sends a letter to the participant requesting he contact the IRA custodian and have the overpayment returned to the plan, is there a problem with "ccing" the IRA Custodian on the letter. The participant has not acknowledged the calls from the Plan Sponsor and he may just discard the letter. But by including the IRA custodian on the letter, maybe the IRA custodian will convince the participant to authorize the return of the overpayment.

If the employer does not get the funds back, they will make the Trust whole.

thoughts??

Good article:

http://www.gizmag.com/tech-maintenance-tasks/33176/

I plead ignorance in advance. I do not work on 457(b) plans but had this question thrown my way.

May a 457(b) plan condition its match on last day employment? The plan is silent.

If permitted, am I correct that it is too late to amend for this for the 2014 calendar year?

I also just found out that there is a 403(b) plan. I do not know if the match is made to the 457(b) or the 403(b), so an answer covering both situations would be helpful.

Thank you!

I recently took over a terminating plan from another administrator. The plan terminated in 2010 and has been trying to pay out the participants over the past few years. There are currently 7 participants with a remaining balance. I noticed in the file that the prior administrator requested census info last year, and listed 77 participants with 7 having balances. If it's a terminated plan, wouldn't the plan only have 7 participants, (the ones with the remaining balances)?

If there are no HCEs in the plan, and each participant is in their own group.

Can some of the NHCEs receive an allocation, and others do not?

There are no key employees in the plan.

I have a client who wants to design the plan the following way: SHMAC 100% up to 4% and an additional match with a formula of 0% of the first 4% and 100% of the next 2%. I believe that due to the increasing match formula on the additional match, the plan would be subject to ACP testing. My colleague beleives that because the entire match is effectively 100% of the first 6%, then no ACP testing is requried.

There are effectively no caps on the elective deferral precentages.

Opinions would be greatly appreciated.

Is it possible to elect the "2 year eligibility" provision but waive eligibility for active employees as of the effective date? I assume no, but please confirm.

Has anyone had a client receive one of these rejection letters, specifically citing the reason as the IQPA failing to perform a sufficient audit? I'm wondering if there is some sort of audit initiative, if this is random or if something on the 5500/audit package triggered the inquiry. Thoughts/Comments?

We have a plan that is hovering around audit size. At 12/31/12 the plan had 115 participants, so it fell just under the first year audit size for 2013. On 1/1/13 the participant count grew to 160, but the question is, how do we base our count?

The plan has no hours or service requirement and entry is on the date of hire. Since this is a health care placement group, we have many employees who work as fill-ins and are hired for a week or so, here and there, during the year. The problem is that if an employee became a participant and terminated during 2011, didn't work at all in 2012, then was hired to fill in for a week in November-2013, the program is counting that participant as a body on 1/1/13.

I haven't been able to find any document that discusses how to handle rehires in this situation. Should the beginning of the year participant count be inflated for these "participants," even though they didn't physically get rehired until later in the year?

Hello. I am looking for some guidance here. We have been hired by a small dentist office that established a 401(k) plan as of 1/1/2003. Prior to that time, the client sponsored a simple IRA.

During the set up of the plan on your systems, we attempt to reconcile the assets at the investment house (in this case, strategic alliance) to the Form 5500 for the beginning of the plan year for which we have been hired. For this client there was a signifciant difference (besides the usual year end adjustments, eg receivable, etc.) When I approached the prior TPA, they informed me that from 1/1/2003 until 12/31/2006, the cleint was depositing the 401(k) and employer contirbutions into the Simple IRA investment accounts and that they did not establish a dedicated 401(k) account with the strategic alliance until 1/1/2007. When I asked the prior TPA about this, they indicated that they knew that the deposits should NOT have been made into the Simple IRA accounts but never tried to fix it.

Here is it now 13 years since that first incorrect transaction. How can this be fixed? On the face of it, when looking at SIMPLE investment statements it looks at if the SIMPLE plan continued to be funded between 2003 and 2006. And there is no record that a 401(k) account received monies during this same time period.

Has anyone ever encountered this before? What recommendation would you make to the client other than to hire an ERISA attorney?

I have client that is planning on terminating their cash balance plan.

If participants in a cash balance plan accrue the benefit after 1000 hours, and the plan terminates 9 months into the year, are they only entited to 9/12 of a benefit? If so, we will wait until Decemebr 31 to terminate, if not we will start the process now.

I know for profit sharing plans, if the plan terminates 9 months into the year, the max profit sharing of $52,000 is reduced to 9/12 or $39,000.

Thanks

First time poster, so please bear with me.......

This is a calendar year plan. The plan is a hard coded safe harbor.

I have a participant that was termed in 2012 and recieved pay 90 days after termination which went into 2013. What confuses me is the employer also withheld 401(k) from this excess monies.

My question is: Is she entitled to Safe harbor for 2013? And or included in testing. Can i disregard her all together?

Please advise.

Facts are as follows--

• Person A owns 100% of Management Co.
• Managment Co. derives 45% of gross receipts from Co. Z. Co. Z is owned 40% by Person A, 30% by A's brother (Person B) & 30% by somone unrelated.
• Person A & Person B also own 5 other businesses 50/50.
• Managament Co. derives about 20% of its revenue from the 5 businesses ownerd 50/50 by the brothers.

The goal is for Management Co. to adopt a plan without having to include any of the other business. My concern is whether Co. Z needs to be aggregated with the other 5 businesses when determining from where Management Co. derives its revenue. It is my understanding that under 267 the brothers are related persons. I'm unclear though about whether there needs to be a certain degree of common ownership between between Co. Z and the other 5 before all businesses are considered related. Under 1563, Co. Z wouldn't be part of a controlled group with the other 5 because there isn't 80% common ownership. Does that same 80% threshold apply when using 267©? Am I analyzing everything else correctly?

Thanks in advance for any guidance

Suppose an employer cannot fund the 2013 safe harbor match by September 15, 2014?

What happens?

I would think they would need to run the ADP and ACP tests and provide a top heavy minimum since the plan is top heavy. Any other horrible consequences?