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?

Is it correct that the only CE credits I can count toward my ERPA requirement are those that are provided by one of the providers listed on the IRS website? If I am a member of a local educational organization that sponsors monthly educational programs, but that organization is not on the list, I can't count those hours?

We have a davis bacon plan that exceeded the deduction limit. What do we do to correct it?

Plan definition of compensation is W-2 plus 401(k) and 125 elective deferrals and reduced by the safe harbor taxable fringes in IRC Section 414(s) regulations. This includes "deferred compensation". The plan sponsor has an elective deferred compensation plan ("SERP") in which senior executives participate. The 401(k) master plan document (national prototype) allows the sponsor broad discretion in designing procedures for participants to make elective deferrals and limit is the 402(g) limit. The sponsor's payroll dept has been applying 401(k) deferral election percentages by the senior execs to their gross pay, before the SERP deferrals. The match is fully discretionary - no formula or limits in the document. Company announced that it would match "100% of deferrals up to 4% of pay". Sponsor also uses gross (before SERP deferrals) pay for applying the match.

Recordkeeper believes sponsor needs to do voluntary correction under EPCRS as it was using a compensation definition not in the plan. The recordkeeper uses the 414(s) definition of compensation for ADP and ACP testing and the plan passes both tests every year. Code section 401(k) and (m) cite to 414(s) compensation in describing the ADP and ACP test. For deferrals, section 401(k) just describes a plan that allows an employee to elect cash or deferral into the plan. 1.401(a)(4)-1(b) regs say that deferrals and matching contributions are deemed to pass 401(a)(4) if the ADP and ACP tests are passed.

Does the sponsor have a good faith argument that its administrative procedures and practices are not violating the plan document and 401(a)?

I recall that on a previous post it was suggested that the sponsor amend the plan to adopt Medicare Wages to solve this issue.

Concerning the kinds of everything-but-the-name marriage that some States' laws provide, the Treasury department stated as its view for Federal tax purposes that marriage does not include a relationship that State law does not label as a marriage. That view seems to apply even if State law expressly provides that the relationship gets all the benefits, burdens, and other legal consequences of marriage.

I'm trying to size how big the exposures are if a 50+-States employer chooses to treat as not spouse those who have an everything-but-the-name status. Doing so might lead to challenges, legal and otherwise, from participants and beneficiaries. Likewise, I'm trying to size how big a fight such an employer takes on if it asserts, with Form 8275 disclosure, a tax position that an everything-but-the-name relationship that also is recognized under the law of the State in which the participant resides as providing all the legal consequences of marriage is a marriage for Federal tax purposes.

Although several States had an everything-but-the-name status, how many of those States still have such a status AND how many of those do not provide with-the-name same-sex marriage?