Is it customary for plans providing catch-up contributions to automatically provide for or employ a year-end true-up in order for participants to receive full employer matching contributions where matches are made on a payroll period basis?

Plan administrator says their plan / payroll stops permitting any additional employer match once a participant defers maximum 401(k) deferral amount for a particular year (e.g., $17,500). This includes those participants electing to make catch-up contributions and thus attempting to defer maximum deferral amounts for the year (e.g., $23,000). (The Plan in question does not match catch-up contributions.)

As a result, participants who have spread their contributions out evenly across the year reach $17,500 before the last few payrolls and so do not receive any employer matching contribution on the last few deferrals even though a portion of those might generally be thought of as "regular" rather than "catch-up" deferrals. Having the plan stop matching contributions at $17,500 makes sense to me but, strangely, I have not heard of this issue before or found much discussion with respect to the need for true-up adjustments in this context. (I have worked with and have found plenty of discussion of the need for true-ups where participants frontload contributions and so don't defer evenly across the year but, in this case, it's basically the participants' attempts to defer the full $23,000 evenly across the year that causes the problem (e.g., they could try and dump more / most of the catch-up amount in at the very end of the year to the extent possible rather than deferring more evenly but seems they shouldn't have to do that).

Question: Do most plans that permit catch-up contributions include some sort of automatic adjustment provision or perhaps assume a year-end true-up calculation in order to address this issue that the plan administrator may have overlooked in this plan? (If not, it seems this would be a very common and oft discussed issue for participants making catch-up contributions.)

Thanks

IRA owner died in 2013. She turned 70 1/2 in 2013 prior to her death. She took some monthly distributions from her IRA, but not enough to satisfy the RMD. Required beginning date for taking RMDs would be April 1, 2014 from my understanding.

Son is beneficiary of IRA. He would be required to start taking distributions in 2014, based on his age that year, using the single life table. (Alternatively, he could take all within 5 years, but he wants to extend as much as possible).

My question is this: Does anyone have to receive any additional distributions in 2013? Would the estate have to claim additional RMD that would have been required to go to the owner prior to 4/1/14? Does the beneficiary have to pick up the remainder by 12/31/13? I have read some conflicting info on this.

A 401(k) plan permits age 59-1/2 withdrawals from all sources of money. A full-time actively employed non-5% owner age 75 directly rolls over his entire account balance of $50,000 to an IRA on 6/30/13. He continues to contribute to the plan. On 11/15/2013 he decides to retire on 12/15/2013. At the time of the rollover, the employee had not decided to retire. His account balance on 12/15/2013 is $250.00.

His 12/31/2012 account balance was $48,000 and his 2013 RMD would be $1,965.07.

Does the plan distribute the $250.00 as his 2013 RMD and tax report it as such? OR Does the plan need to report $1,965.07 as the RMD, adjust the tax reporting (i.e., $1,965.07 Code 7 and $48,284.93 as the direct rollover) and inform the IRA and participant that $1,715.07 ($1,965.07 - $250) was not eligible for rollover. My gut says to adjust the tax reporting..

Thanks!!

Hi All - I'd love any info available if possible in regards to purchasing a block of business. 22 Years on the business but a 3 year owner at this point. While I'm certainly growing, the new clients are coming in a little slower than one would like and as I go into this year 3, need more of a jump start.

We utilize all the most popular software services for compliance and admin and provide actuarial services as well.

Thank You!!

I can exclude HCE's from SHMAC. Can I provide them with a lesser match instead of no match at all and still maintain the ACP Safe Harbor? I'm trying to maintain the current match for the HCE's and give the NHCE's the SHMAC.

Exequity sells a product that performs the Code Section 280G calculations required for parachute payments triggered by a change in control.

Does anyone have any experience with this tool? Can anyone recommend other programs (applications--I don't know which term the kids use these days) that can do this? Thanks!

Hello all,

I have an owner who would like to enroll in the 401(k) plan, but only defer 100% of his bonus. Is he okay to initially enroll in the plan in January, but choose 0% as his deferral percentage? He would then change it the payroll before the December bonus pay to 100%, and then back to 0% after that paycheck.

I can't think of a reason why he could not do this, but I've never seen someone initially enroll at 0% before.

Thanks!

I work exclusively with DC plans. I have virtually no knowledge of DB plans. I do know that if a plan sponsor is needs to run the ABT, the DB accruals are required to be included with the DC conts or EBARs when calculating the ABPT. One of my new clients just informed me that they have a frozen DB plan. My understanding is that when plan sponsors elect to freeze a DB plan they are still required to contribute to it. Therefore, I would assume that the contributions to the DB plan must still be included when calculating the ABPT. Is this correct? Is it correct all of the time? Is there any time when this would not be correct? Is there anything else I should know about frozen DB plans and their effect on the DC plan that I work on?

Any help is greatly appreciated.

Hi,

I inherited a 403(b) plan that provides for deferral, roth, matching and profit sharing contributions. I don't have a lot of 403(b) experience, but am learning. The plan definition of compensation excludes bonuses for allocation purposes. Profit sharing allocation is basically the same dollar amount to each participiant and matching contributions are a formula based on service and percentage of deferrals.

So, my maybe problem. The plan fails 414(s) testing. Plan passes ACP testing using gross compensation with no exclusions. Just for fun, I ran the 401(a)(4) general test on the profit sharing allocation and it passed using gross compensation.

Am I ok, or do I have to worry about 414(s) failure?

Thanks much for any help!

Apparently the IRS is taking its cue's from HHS, throwing a new rule for 2014 SH Notices that people have been sending out since October 1. Bravo IRS. Bravo.

Thank you for adding a terrific incentive for employers NOT to provide a Safe Harbor Plan to its employees by making the burden for discontinuing a costly and generous benefit so high.

http://www.ferenczypaul.com/Documents/FlashPoint/11_15_13_FlashPoint_.Treasury_and_IRS_Finalize_Rules_on_Suspending_Contributions_to_Safe_Harbor_401k_Planpdf.pdf

Can an employer have more than 1 Section 125 plan by different providers at the same time?

I have a client that currently has a 401(k) with the only contributions being salary deferrals and an employer match. The employer match is 100% of their deferrals to a maximum of $2,000. The owners want to get more for themselves by maxing out on their salary deferrals. Without a safe harbor contribution, they would not pass the ADP test. I suggested a Safe Harbor match (100% up to 3% plus 50% of the next 2%). The revised figures with the four owners maxing out their salary deferrals came out great. The owners would receive approximately 75% of the increase to the contribution. Unfortunately, about 20 staff out of about 100 had a decrease in their employer contribution from the current match to the S/H match. One of the owners just does not want to see this happen. Since the accumulated decreases were relatively minor, I suggested making the shortfalls up to these individuals outside the plan. He balked at that idea. Here's my question. Can the plan have an additional matching contribution that would equal the difference, if any, of what each participant had before versus their potentially new lower amount due to the S/H match?

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Here's an idea, what if every participant was put into a separate class? Since the "correction" contributions would only be going to non-highly participants, there would be no discrimination issue. Seems like this approach is alot simpler than the additional matching approach detailed above.

I have a client who requires its HCEs to pay a greater share of the group health insurance plan premium that it requires of NHCEs. The HCEs want to be able to pay their share of the premium with pre-tax money through the cafeteria plan. They are told that this results in discrimination.

When looked at in isolation, there is greater use of the 125 plan and a greater benefit to the HCEs than NHCEs under these facts. However, it seems like a crazy result when they are paying more for the premium than the NHCEs.

I've looked at the regs and I must say I don't understand whether the client can take account of the health insurance premium differential when it measures discrimination in the 125 plan.

Help, please.

For 2014, the maximum amount of compensation taken into account for plan purposes will increase from $255,000 to $260,000.

If one has net schedule C income of $250k for 2012, $255k for 2013, $260k for 2014, does this allow annual adjustments to the maximum plan year annual benefit payable through a defined benefit plan at retirement (currently $210,000 for 2014). Anticipated retirement date is 2033 at age 62.

For example, if the maximum annual benefit adjusts upwards to $255k by 2025 (hypothetically speaking), will the fact that net schedule C income for 3 consecutive years (2012-2014) averaged $255k allow the annual benefit to adjust upward to the new max of $255k, even though the 3 highest year net Sch C income was accrued in 2012-2014?

Appreciate any input!

SR

Can anyone comment or provide direction on what happens if you are required to aggregate for testing two separate plans (by the same plan sponsor due to an acquisition) where your eligible employees then end up being over 120 employees - which presumable means you need an independent audit but as separate plans you would not? Is our premise correct that we then need to do an audit? Any guidance would be greatly appreciated.

Thanks!

So we have a safe harbor matching 401k plan with discretionary profit sharing language.

Client has been funding the safe harbor match for year and never utilized the profit sharing until now.

The current profit sharing provision state the allocation is comp to comp, no last day rule.

Of course they want to fund a profit sharing but do not want to do a % of comp and do not want to fund to terminated employees for 2013.

No way we can amend this document 1 - it's safe harbor and 2 - participant have already accrued the benefit of the profit sharing.

So that's that. HOWEVER we read somewhere that one way of solving this problem is to start a new profit sharing plan for the year. (no 401k provision)

Has anyone done something like this?

Client is really insistent about putting in this contribution for 2013 and not giving it to term as well as doing a per capita allocation.

Dr A's PC is a partner with two other Dr PCs in a medical practice. The medical practice sponsors a plan benefiting all four members of the ASG (the three PCs and the medical practice).

Dr A's spouse, DR S is also a Dr in an unrelated field and has his own PC, with no employees. Drs A and S live in a common-law-state, and have minor children.

So it appears that Dr A's PC creates an overlap between the ASG and the CG.

If Dr S becomes an employee of Dr A's PC, Dr S will become eligible for the plan of the ASG.

If Dr S adopts a plan for his PC, and assuming Dr A's PC does not adopt Dr S's plan, does Dr S's plan affect the plan of the ASG?

I know that Dr S's plan must consider the employees of the controlled group (meaning Dr A's employees), but does the overlap extend to the ASG employees?

I've received one opinion that, because Dr S is an employee and HCE of the ASG (by being an employee of Dr A's PC), then his separate plan under his PC cannot benefit him without taking into consideration the other employees of the ASG.

I've also read, however, that there does not appear to be any requirement for the members of the controlled group to consider the members of the ASG even if there is an overlapping member. I could see an issue if Dr A's PC adopted Dr S's plan, but not so clear if Dr S's plan is NOT adopted by Dr A's PC.

I appreciate any thoughts.

according to the preamble that just came out

The final regulations make two changes in response to these concerns about demonstrating compliance with the requirement that the employer incur a substantial business hardship (comparable to a substantial business hardship described in section 412©). First, the requirement has been modified by replacing the standard in the proposed regulations that the employer have a substantial business hardship (as described in section 412©) with a standard that the employer be operating at an economic loss as described in section 412©(2)(A). This new standard eliminates the requirement to determine the health of the industry (as described in section 412©(2)(B) and ©) or whether the reduction or suspension of safe harbor nonelective contributions is needed so that the plan will continue (as described in section 412©(2)(D)). Second, the final regulations permit an employer to reduce or suspend safe harbor nonelective contributions without regard to the financial condition of the employer if notice is provided to participants before the beginning of the plan year which discloses the possibility that the contributions might be reduced or suspended mid-year. The notice must also provide that a supplemental notice will be provided to plan participants if a reduction or suspension does occur and that the reduction or suspension will not apply until at least 30 days after the supplemental notice is provided. These regulations do not alter the existing ability of a safe harbor plan to use a contingent notice (as described in § 1.401(k)-3(f)(2)) before the beginning of the plan year where the contingent notice indicates that the plan may be amended during the plan year to include safe harbor nonelective contributions and that, if the plan is amended, a follow-up notice will be provided.

so I guess I need to add a blurb to the safe harbor notices we are getting ready to send out.

Client tells us that they have changed the name of their legal entity. Is an amendment necessary for the existing plan to change the plan sponsor name? If so, when does the amendment need to be done?

We have a participant that applied for a loan in early 2012 (March), somehow he was able to apply for a home loan (30 year) on our website with ANNUAL repayments. (Glitch that we haven't figured out yet). Unfortunately the mistake was not caught until now. This means he is in default because loan repayments should be at least quarterly. Since the amortization schedule was set up on an annual basis he has had only 2 payments since March 2012.

Any idea how to fix this? We are being told that we have to submit to VCP?