First time I have a Plan that did not start 401(k) deferrals for 2 employees. The Company put in a QNEC contribution for the 2 employees. Would the QNEC amounts be considered late deferrals for purposes of Form 5500-SF question 10a? Or would the QNEC itself take care of the issue? TIA

A company maintains a calendar year SH 401(k) with 3% Nonelective safe harbor contribution.

They just informed us today that their firm will be acquired tomorrow (always nice to be informed at the last minute).

If they terminate the plan now, our understanding is as follows:

1. They do not need to provide advance notice.

2. They need to provide the 3% SH contribution based on compensation through the termination date.

3. Participants do not need to be given the opportunity to change salary deferrals.

Questions:

1. Are they required to pass the ADP test from 1/1/14 through the date of termination?

2. Since the firm that is acquiring them also sponsors a 401(k) plan, would there be any problem with distributing salary deferrals (the one year rule)?

Thanks.

A ps plan that had 2 participants, now 1, has the gist of its assets wrapped up in a farm valued at appx. $400,000. In order for the plan to terminate, he would have to find a buyer, which could be him as the sole participant or someone else. I know an IRA can own real estate, but could he roll over the value of the farm into an IRA?

WIthin a 403(b), since there is not a ADP test that is performed, can HCE's contribute at least $17,500 without worry of receiving a refund? Or is there some other type of test performed to avoid discrimination on the deferral side if the NHCE's are not deferring that much??

Can you aggregate a SEP and Cash Balance plan together?

If for the past 2 years, a client has been making 401(k) deferral contributions on behalf of an employee on leave out of post-tax payments that are not allowed to be used for 401(k). The employee has no other income from the client to make 401(k), and therefore should not have contributed anything.

What is the correction method?

Are there multiple ways to correct?

Do you have to file anything with the IRS or can you self correct?

My experience with excess 401(k) contributions is to refund the money and earnings as ordinary income, but that was for contributions over the $17,500 limit. I am not sure if it is different if all of the 401(k) contributions are disallowed, and if it spans multiple years.

I have been running this pension and investment sales and administrationTPA business for 40 years, and I now want to sell.

I am still full of pi.s and vinegar and want to continue in the business, but must relieve myself of being an owner and the owner responsibilities. I just want to be a rainmaker, consultant, expert witness, problem solver, etc. but I do not want the responsibility of running the business.

For almost the full 40 years we have received our business as referrals from CPAs and Attorneys. Hardly any from financial sales people. We are also an RIA and receive fees for investment advising and either insurance commissions or RIA fees on most all our 401(k) business.

I believe that I have developed the method to easily get business from CPA firms and Law firms. The method is easily taught to quality sales people and will generate business quite quickly. But frankly, I want to go "elephant hunting" for the larger more mature 401(k) plans rather than get the smaller cases from the CPAs and Attorneys. I have been working on a new marketing plan that is close to being ready to go, but I would like some help from a buyer of my firm.

Although at one time, my firm was more than twice as large as it is now, I think the firm and myself are worth a look. I have extensive experience, am highly educated (MBA from U of Michigan), fully credentialed (Certified Pension Consultant and many more), founded a local bank that we took public onto the Nasdaq at 36 years old and on the Bank's Board for 23 years until we sold it for cash before the bank crash of 2008), am considered an innovator and am also an idea a minute kind of guy.

Do you think I should use an M & A firm to find a buyer or should I try to find buyers myself. If you have any recommendations, please let me know.

You may reach me at 248 342 9500 because I do not know how people communicate with each other that meet on this forum.

You can use SCP to correct by plan amendment in just a few circumstances specified in Rev. Proc. 2013-12. One is where you have allowed hardship withdrawals (on a nondiscriminatory basis), but the plan didn't permit hardship withdrawals. You can amend retroactively to permit the hardship withdrawals allowed, without going through VCP.

What if the plan did allow for hardship withdrawals, but in operation you allowed them on a more liberal basis not permitted by the plan (but still consistent with the applicable rules for hardship withdrawals and on a nondiscriminatory basis). Can you amend your existing hardship withdrawal rules retroatively to match your plan operation without going through VCP, or can you do this through SCP ONLY if your plan didn't allow for any hardship withdrawals? Read literally, it looks like you need to go through VCP, but the logic of that escapes me.

I hypothetically make $400,000 and I complete a deferral election form stating that I want to defer 4.375% of pay with the intent to max out at $17,500 for 2013. 2013 ends and I defer $17,500. The auditor says no, your deferral can only be $11,156.25 (4.375%*255,000).

Who is correct? I understand the match can only be calculated on the max comp limit, but does the salary deferral election only apply to the first $255,000 in comp?

Thank you

I have a new twist on holding out part-timers until they actually complete a year of service.

This employer would like to have a 30 day wait for managers and 1 year wait for everyone else. Everyone involved are NHCEs.

What do you think. Could this be legal?

Are people finding that the brokerage houses of the world are sending out their 408b2 disclosures to the plan sponsors of plans whose participants invest in individual brokerage accounts?

Or perhaps the answer is that they had already been disclosing everything that required disclosures due to existing SEC regulations?

Plan has auto enrollment. Rehired employees become participants on the date of rehire. Must the auto enrollment start with the first paycheck, or must the employee be given a window to opt out before it begins?

The record keeper says that 30 days notice is mandatory and they will issue the notice 7-10 days after the first payroll that includes the rehired employee. That means the auto enrollment would actually not begin for about 60 days, unless the employer handles it manually rather than through their usual automated process.

I have a client who wants to implement a policy mid-year by where participants can elect to waive their salary reduction for premiums on a pre-tax basis and re-characterize it to after-tax.

Won't the employer lose their FICA/FUCA savings?

The salary reduction is to be in place for the entire Plan Year - allowing them to waive it mid year violates this correct?

Any other issues you guys see?

Thanks!

I feel sorry for this lady so I am trying a long shot. Would anyone consider a washing machine and dryer for a Hardship withdrawal?

The Plan doc says safe harbor rules?

Participants became eligible as of 04/01/2013 and began 401(k) & roth contributions at that time.

Employer changed payroll companies some time in May, 2013.

New payroll vendor DID continue deductions for a few weeks and then abruptly stopped on four participants. (one actively enrolled and three auto enrollees)

Fast forward to now. Employer discovers this issue (none of the 4 participants has noticed or brought this up to the Employer as of yet).

So....a year has passed. The Employer must provide the 50% QNEC for these participants as well as the match (which is allocated and deposited annually at year end), yes?

The participants have been receiving quarterly statements but I seem to recall as much as we might like to think the participants bear some responsibility after this amount of time, the onus is still on the Employer to properly correct.

Also is it really the 50% QNEC - wouldn't I use the participants' actual contribution percentage since we know that?

Additionally I believe the Employer needs to correct the 2014 year-to-date as well with the QNEC?

Much has been written with respect to the IRS clarification that pre-tax reimbursement of individual employee health insurance premiums violates ACA and can invoke the $100/day/participant nuclear penalty.

I'm concerned that even post-tax reimbursements can be troublesome based on the following sentence in the recent Q&A:

An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation.

Consider a scenario where small employer says "I'm dropping group coverage but encouraging all employees to obtain coverage individually so I'm willing to reimburse you (on a taxable basis) up to $500/month if you prove to me you have coverage."

If I don't give them the $500 if they don't have coverage haven't I violated the "cash compensation" proviso above and IRS would consider my program an "employer payment plan" subject to penalties?

I have a participant who moved from "regular" employee to union employee, and thus now ineligible for the plan. She has a balance from deferrals and ER contributions.

Can she take a hardship distribution?

A recent BenefitsLink discussion considers whether a "3(16)" service for an organization unaffiliated with a plan's sponsor to serve as a plan's administrator would or wouldn't result in a meaningful reduction of liability that an employer-associated fiduciary otherwise might bear alone.

Assume a situation in which the employer's owner and chief executive is restrained by a court order that bars him or her from serving as a fiduciary of any ERISA-governed employee-benefit plan. Assume further that none of the employer's employees is willing to serve as a plan's administrator.

In those circumstances, could appointing (with court approval) a "3(16)" service provider as a plan's administrator help?

What do BenefitsLink commenters think about this?

Is it possible for a large controlled group to offer different (self-funded) health plans at its different locations or to diffirent branches of the company without violating the nondiscrimation rules? Similary, can they vary benefits based upon salaried or hourly status at the locations? Seems like many employers do this but I can put my finger on how they make it work. If testing is done on a controlled group basis, how does this work?

A single participant plan has option for voluntary non-ded EE contributions. Guy makes first and immediately converts to Roth. So non-taxable event.

Is a 1099 required?

Code G with taxable amount = $0?

thank you