I have a plan where an HCE died in 2013 and during 2013 the account was transferred to his beneficiary's (spouse) account under the plan. When the 2013 ADP test was run in 1/2014, the deceased ptp was due a refund because of the failure of the ADP test. My question is how is this amount distributed and how should the 1099R be coded?

Does the corrective distribution get withdrawn from the beneficiary account and paid to the participant's SSN and taxed accordingly? Or does the corrective distribution get withdrawn from the beneficiary account and paid to the participant's estate and taxed accordingly? Since the beneficiary is his spouse, does the corrective distribution get withdrawn from the beneficiary account and paid directly to the beneficiary and taxed accordingly? Or some other way?

Any help is greatly appreciated.

Is there any reason an employer participating in a multiemployer pension plan couldn't convert its contribution structure to a defined contribution (money purchase) arrangement?

Plan excludes participants who do not elect to make 403(b) deferral of more than $200 for the plan year. There are no exclusions for purposes of employer contributions.

Do you count these excluded employees as $0.00 for the ACP test?

I have gotten two different answers. Yes, because they could have contributed more if they wanted to and No because they were excluded from making deferrals.

Is anyone aware of any guidance on whether missing participants should be counted for PBGC premium purposes? PBGC Reg. 4006.6 defines a participant as an individual with respect to whom the plan has "benefit liabilities."

As permitted by Treasury Reg. 1.411(a)-4(b)(6), the Plan in question provides that if a participant cannot be located, his or her benefit will be forfeited subject to reinstatement if the participant eventually comes forward. Since the participant's benefit is forfeited once he or she is deemed to be missing, I would think the plan no longer has "benefit liabilities" with respect to the participant, and therefore the participant would not be counted for PBGC premium purposes. However, I can see the argument that the liability to the participant never really goes away, because there's always the potential for reinstatement if the participant surfaces. Even under that logic, though, it would seem that the participant would have to be presumed dead at a certain age, so that the premiums don't continue in perpetuity.

Thoughts on this?

I retired from a company that set up a HRA to reinburse me for medical insurance premiums purchased for me and my family through my wifes employer which is tax free. I was told to submit the payroll stub to MY employer and get reinbursed. What are the rules that would not allow this type of reinbursement. I'm not sure if this is s double dip.

My employer failed their ADP/ACP Test for 2013 in our 401K plan. I have been after our owner to Safe Harbor the plan for the past few years, as I've gotten money back each of the last few years due to failed ADP tests, but he doesn't want to put the extra money into the plan to Safe Harbor it. As a result, the past few years I've gotten a check back for excess contributions.

The owner and I are the only HCE's in the organization currently. Most of our organization doesn't contribute at all to our plan (we have about 50 employees total) and those who do invest a small amount.

My employer ended up matching over $10,000 to my 401K last year but because the ACP test was failed, I'm being told by our plan administrator that more than $8,000 of the matching (and $1,900 in gains) are in excess of the average contribution and are being put in a forfeiture account, which my owner will use to fund the 401K plan for this year (fees and funds). Our plan administrator's response is that this money never should have been put into my account since we failed the ACP Test.

I am essentially having more than $10,000 taken out of my 401K with nothing to show for it. Should I accept the logic our my plan administrator? He's trying to tell me that most companies he deals with have ADP/ACP issues and that HCE's are always having this same problem, yet a good friend of mine who runs a similarly sized business (50 employees) told me that he simply just Safe Harbors his plan to avoid upsetting employees. The plan administrator's response is that I should just do something like an annuity since we're always going to have this 401K issue (feels like he's just trying to sell me something).

I talked to my boss again about my concerns and he doesn't plan on Safe Harboring the plan any time soon. I'm having to cut my 401K contribution to about 4% now so we don't fail the ADP/ACP test again next year, so instead of maxing out at $17,500 each year, my contribution will have to be much less. I already max out on IRA's for my wife and myself and also have taxable accounts for stocks and mutual funds, but am wondering at what point I need to look for a company who doesn't have these ongoing issues.

Would appreciate any insight from others who run into this issue or who understand it from a planning point of view.

This has to be relatively common, but I can't find anything that is clear on the topic (which probably means there is no clear answer)...

Calendar year plan has dual eligibility:

1. one-month eligibility for deferrals, entry on the 1st of the month coincident or next following

2. one YOS (1,000 hours) for safe harbor and profit sharing, entry on 1/1 & 7/1, and uses DOP compensation

The plan switches to calendar year eligibility periods if the YOS is not satisified in the initial one.

Dan was hired on 4/1/09 and left in 2011. He had never completed a YOS while employed (generally working about 100 hours per year), so never became eligible for safe harbor or profit sharing.

Dan is rehired in January 22, 2013, and works more than 1,000 hours in 2013. For deferrals, he has to be eligible right away (there's no "hold out" rule in the document). For the employer contributions, is he treated as a new employee and therefore becomes eligible on 7/1/14? Or because he's already a "participant", we just look at the calendar year and since he completes a YOS in 2013, he is eligible for those sources on 1/1/14?

Thanks...

Hello;

My employer has a Safe Harbor 401k plan with a 3% non-elective contribution made to all employees each year. After having been under this plan for a many years, I've recently noticed that the contribution is based on the value in box 1 of the W2 form. This value is amount I earned for the year less the contributions I made to the plan. Is this an error on the employer's part? Put another way, suppose I made $10k in a year and put $3k into the 401k. This leaves $7k. Should the employer make the non-elective contribution as 3% of $10,000 or 3% of $7,000?

If the employer is making a mistake in how they are determining the non-elective contribution, how can I prove it? Are there IRS regulations that I can point to? And how do I go about getting any money owed (plus earnings on that money)?

Also this plan has been in existence for over 10 years, has the rules about this 3% non-elective contribution? If so when?

Thank you for any assistance...

Sincerely;

Michelle

Hello, everyone

A question. Two companies in a controlled group don't have a high deductible health plan (HDHP), nor a corresponding HSA. A third company, to be acquired, offers a fully insured HDHP to its employees. It's thinking of offering them an HSA as well.

IRS Notice 2011-1 doesn't require compliance with controlled group nondiscrimination test in respect of insured group health plans. Does adding the HSA option somehow take away that exemption, so now we have to offer the HSA to the other two companies as well? Note that the HSA isn't likely to be offered through a cafeteria plan.

Any thoughts you have would be much appreciated. Thank you!

A SH 401(k) plan was terminated effective 12/31/2013. The employer continued to deposit deferrals and match beyond this date. What is the appropriate correction? Should these amounts be refunded/forfeited?

Is there any overall age discrimination issue in

Choosing the youngest ees to meet the 40% test in a combo plan even if only using the .5% accrual?

Sole proprietor with no employees made improper elective deferral of $17,000 to SEP/IRA on 2012 tax return. Employer contribution OK. Error discovered after October 15, 2013.

Can I get a confirmation that this is the correct way to remedy this?

Amend 2012 tax return and remove excess elective deferral of $17,000 from line 28 of 1040.

Pay 6% excise tax on 2012 Form 5329. Include form and payment with 1040x.

Excess contribution remains in the SEP/IRA account, and there are no reporting requirements on custodian's part to the IRS (other than the 5498 which reflects the total contributions made for 2012, including the excess contribution).

Carry forward $17,000 to 2013 as a deduction, subject to the 25% limit .

Is the 5329 the proper form to report and pay this 6% excise tax?

If the $17,000 is completely applied on the 2013 tax return, does that mean there is no more 6% excise tax required to be paid?

This may not be that uncommon, but I can't say I've seen it.

403(b) plan has custodial accounts only - not annuities. Plan provides for hardship distributions on deferrals. So far, so good. However, the employer allowed hardship distributions from employer contributions, as well, and disn't restrict it as they were told to do.

This happened on 5 out of 60 or 70 participants. There's no allowable SCP correction by amendment on this, as there might ordinarily be on hardship issues, because the plan can't provide for hardship withdrawals on employer contributions in the custodial accounts. So, this is an overpayment that would need to be corrected under Section 6.06(4) of Revenue Procedure 2013-12. This means the employer must take "reasonable steps" to have the overpayment

returned, with interest. Well, since these were hardship, chances of getting it returned are about nil. In this situation, there's no requirement for the employer to "make up" any overpayment that isn't returned.

So here's my question - it seems like the only "piece" of the correction that still applies is the notification to participants that this wasn't an eligible rollover distribution. Well, they already know that - they were informed at the time that they took the distribution that it would be subject to 10% penalty tax if they didn't meet one of the other exceptions. So really, what is the actual correction here? I can't see what it might be, other than to "NOT DO IT ANY MORE."

Is there any actual correction that can be done, other than a basic letter attempting to recover the impermissible distribution plus interest? And when that doesn't happen, end of story? Anyone had any experience, or audit experience on such a situation?

Folks, I'm on the Corporate side of the aidle now - been out of consulting for awhile. We have a new match in our plan and we use prior year testing. Last year's NHCE ACP was 0.42% from after-tax contributions and one member of the controlled group that had a match, but I'm expecting the introduction of the match (50% up to 6%) to the larger population to significantly increase the NHCE ACP. Since we use the prior year method, I expect HCE's will be signficantly limited from an ACP perspective. I think we can shift a full percentage point from the ADP test, but if that is not enough and we want to use a bottom-up QNEC to pass the test, can we use the forfeiture account to fund the QNEC? Is it permissable to use a combination of methods to pass ACP, i.e. shifting AND QNEC.

Are there any testing gurus that can offer advice?

LL&P

Spock

A participant retired in 2013. He was over 70.5. He took his 2013 RMD and rolled over the balance to an IRA. He is now getting a contribution for 2013 in March of 2014, i.e. the 2013 receivable. Does he have an RMD for 2014 to take first before rolling this amount over? If they ignore the receivable for 2013, then his account balance was zero on 12/31/13.

Just wondered if anyone had any thoughts on the following - excerpt from a discussion among "DB people" - which I am not!

A little background - fairly young - mid-30's S-corporation owner, no employees, app. 200,000 in high 3-year average compensation, looking to potentially start a DB plan. The discussion was on which method to use to get maximum contribution, and whether there are any potential downsides to using the 10 year approach? I'd appreciate any thoughts.

When designing a new plan, and coming up with a formula, I have usually been taking the conservative route and using a unit credit formula that funds for 100% at NRD when taking into account the number of years to retirement.

So for example, if a 40 year old was interested in setting up a one-person DB plan, and wanted to know what type of annual contribution he could expect, I would probably set up a 4% per year formula for 25 years of participation assuming NRA of 65. My question is in this example, could I do 10% for 10 YOP? This person would be limited by the 415 $ limit and I'm just trying to figure out what the plan would look like once he's accrued the full benefit. There may be COLA increases for the 415 $ limit, but otherwise wouldn't he be keeping the plan for 15 more years (age 50 to age 65) with the chance that there may not be much in the way of deductible contributions during those years? I just don't know if I have flexibility to use a formula that accrues the benefit quicker than the number of years to retirement. If so, would it make sense to do so if someone is interested in higher annual deductions now.

Response:

The formula is limited by IRC section 415, which phases in the DB dollar limitation over 10 YOP and the 415 percentage of compensation limitation over 10 YOS. For a very-high-paid owner, the DB dollar limitation will be lower, and hence will apply. Thus, even if you give a 100% per YOP formula, the 415 limit regulations effectively converts the formula into a 10% per YOP formula for the very=high-paid participant.

The 10% x (YOP not > 10) x AvgComp is the most common formula I see for one-person plans. It is simple, easy-to-understand, and it corresponds approximately to the DB 415 limit phase-in.

After representing the Pension Board for nearly a decade, the attorney in question admitted his law firm had previously represented the Plan Sponsor during a restatement of the Plan Document.

Several months later, when the attorney was asked to provide written disclosure of the services his law firm had provided the Plan Sponsor, he now claimed his law firm had always represented the Pension Board. The attorney added, the prior Pension Board had authorized his law firm to work with the Plan Sponsor's representative to restate the Plan Document.

However, provided that prior Pension Board was a public body, as defined by Michigan law, the public record of that Board should support the attorney's written disclosure - but does not. Nowhere in that Pension Board's public record does such an authorization exist.

This may be a ridiculous question, but is this a conflict of interst the current Pension Board should deal with?

Previously, the Pension Plan Document (governmental plan) provided for a 5% COLA benefit, which, on an annual basis, was factored into the Plan's Normal Cost. Employee contributions (5-6% of their pre-tax gross wages) were deducted from that Normal Cost, and the employer paid the balance in the form of Annual Required Contributions (ARC). This process had went on for 15 years when the employer successfully reduced the COLA benefit from 5% to 2.5%, retroactively.

As a result, Plan assets that were reserved for a potion of the 5% COLA were now used to offset the employers future ARC. This description may be over simplified, but did this offset violate the Exclusive Benefit Rule?

I should add, because this Plan is situated in the State of Michigan, there are statutory requirements that require Plan assets to be held for the exclusive benefit of Participant's and Beneficiaries (PA 314).

Pretty sure I've researched this in the past but is there a de minimums refund limit that you don't have to make? We have 2 ACP refunds, one for $1 + earnings and another for under $100.

Unfortunately I think the answer is we need to make these refunds but just wanted to know if there was something I was missing.

Is there a listing of who the eligible employers are for a SEP? We're looking at a quasi-govt that has a SEP.