Gilmore

I found my answer in some presentation material that Sal Tripodi provided in a webinar that he did, I think for FT William, on the SECURE Act. He provides an example of a new calendar year end plan adopted 11/1/2021 with a retroactive date to 1/1/2021 (401(k) portion effective 11/1/2021). Sal offers that the plan could not be a safe harbor plan for 2021 since the 401(k) portion is less than 3 months, regardless of whether the safe harbor is a match or nonelective. Makes sense. The intention of the 3 months is to allow everyone the chance to make 3 months of deferrals regardless of a match or 3% non-elective. Without the 3 month requirement I guess an owner could set up the plan for 12/31 and give himself a bonus to defer from and no one else gets that opportunity.

Thank you Kevin. I forgot to respond to my own post that I found the same answer that you concluded.

CB, I got sidetracked and could not get back to this. Thanks very much for the information.

With the new Secure Act provisions for 3% non-elective plans, is a new 3% safe harbor non-elective plan still required to be adopted by October 1 (assuming a calendar year end). Could the plan be adopted for December 1, 2020 as a 3% non-elective? What if the plan was adopted on December 1, 2020 as a non-safe harbor plan with a calendar year end, but amended in 2021 to be a 4% safe harbor? I guess what I'm really asking is, if the plan is a non-elective safe harbor, must the first year still be at least 3 months long? Thanks very much.

Thanks CB. Would the 11g amendment work if these were the only two that received the "profit sharing" contribution. In other words, everyone else with an overage would have their overage forfeited but these two who were inadvertently paid out. The errors involving these two allow for the use of the 11g amendment, which is permitted because they are both non-HCE? Thanks.

A plan moved from a 3% nonelective safe harbor prior to 2019 to a basic safe harbor match for 2019. Through some miscommunication with payroll they continued to allocate a 3% nonelective during 2019, so some participants received too much safe harbor and some not enough. The net effect is an overcontribution to the Plan as the participants who received too much exceeded the participants that need more. There are two participants who received too much who took distributions before the error was realized. One took a distribution in 2019 and one in 2020. The amounts are not huge, $500 for the 2019 distribution and $1500 for the 2020 distribution. Since the plan sponsor already has an excess in the Plan they would like to use some of the excess to treat the ineligible distributions as non-recoverable from the participants. Am I correct, however, that in both cases the participants need to be informed that the ineligible portion of their distributions were not eligible for rollover and must contact their new custodians to distribute the ineligible amount plus earnings, corrected 1099s will need to be completed, and in the case of the 2019 distribution, the participant will most likely need to amend their tax return? I was trying to think of a way in which the contributions could be considered as actual contributions for these two non-highly compensated employees to avoid further correction. The Plan does allow for profit sharing in which each ee is their own allocation class, but also requires last day of employment (which disqualifies the 2019 distribution ee), and the 2020 distribution ee would not be fully vested in profit sharing. Thank you.

Is anyone (TPAs I mean) concerned that after PEPs are up and running it won't matter what we call ourselves, or do you think a small TPA firm will still be relevant? Just curious. Keeps me up at night sometimes.

Has there been any discussion as to how the long-term-part-time participants are going to effect employers with similar demographics? It is my understanding that even though the LTPT participants are not counted for coverage, they are counted for determining if the plan will require an audit. Is this the case, and if so, any speculation on the rules being modified to allow a plan like this to operate as a small plan filer? Thanks.

Just curious why they want to remove Roth mid year? Were there payroll errors or something they want to avoid in the future?

Getting into the weeds on this one?

I think FAB 2012-02R, Q39 was the revisioDOL 2012 FAQs for 404a and 408b Updated with Q39.pdfn.

Actually, having letters after your name also means you have to stay logged in for the entire webcast.

Peter, this is from the 5500 instructions in the Signature and Date section: Note. If the plan administrator is an entity, the electronic signature must be in the name of a person authorized to sign on behalf of the plan administrator.

Just to clarify because I should have been clearer originally, I'm referring to the copy that either the plan keeps in their files or gets uploaded along with the electronic filing if filed by a third party. I'm thinking along with you C.B. that manual signature means you signed it in ink, but I'm getting old and what is defined as a "manual" signature may have gone right past me, especially with the rule bending for the pandemic. Thank you.

Is the DOL accepting electronic type signatures on the form 5500, such as an Adobe signature? Or are hand signatures the only signature method? Thanks.

Interesting. Thank you.

Revisiting my catchup issues with an off calendar year plan and ADP catchup. Plan year ends 4/30/2020. The only deferrals made to the plan for a participant are made in December, 2019, in the amount of $23,300. No deferrals prior in 2019, and no deferrals in 2020 before 5/1/2020. My admin system is treating $4300 of the deferrals as catchup for 2019, and using $19,000 in the 4/30/2020 ADP test. So far so good. Plan fails the 4/30/2020 ADP test and the participant needs a refund of $9,000. The admin system is treating all of the $9,000 as a distribution. The EOB has an example that says it is not directly from the regs but is an extrapolation of the rules. (Ch 11, Section 11 Part C.1.e). This example has a plan year ending 10/31/2016. Participant defers $22,000 from 11/1/2015 to 12/31/2015. $0 from 1/1/2016 to 10/31/2016. $18,000 used in the 10/31/2016 ADP test, with $4,000 catchup for 2015. 10/31/2016 ADP fails and participant needs an $1800 refund. EOB says to treat the $1800 as catchup for 2016 even though no 2016 deferrals were made for the plan year. This then reduces the total amount the participant can defer in 2016 after 10/31/2016 by $1800. The EOB says the total would be $22,000 but I think it might be $22,200. So going back to my 4/30/2020 plan, I'm thinking $6500 can be used to reduce the $9,000 refund and be treated as catchup for 2020? And the participant could defer no more than $19,500 for the rest of 2020? Has anyone treated catchups in this manner? Thanks very much.

Ok, great, that's what I thought but appreciate the confirmation. Thanks very much.

I was looking back in the volumes of CARES Act webinars and other material on discontinuing safe harbor match mid year and I think I know the answer to this one, but just want to double check that I did not miss something along the way. If a plan discontinues the safe harbor match mid year due to financial downturn, can they amend before the year to a safe harbor non-elective (as permitted under the SECURE Act). The information that I have from when the CARES Act first came out was that this was not permitted, but again, there have been so many updates I just want to be sure this is still a "No". Thanks very much.

Thanks Bill. I was so concerned about attributing the father's ownership, that I forgot you don't make the attribution in the first place. Appreciate your response.

Am I thinking this one through correctly? Company A is owned 45% Husband, 45% Wife, 10% adult child. Company B is owned 100% by adult child. If I attribute the mom's ownership to the adult child, then adult child owns more than 50%, so would then be attributed Dad's ownership, therefore being 100% owner of Company A? Adult child now has 100% common ownership and 100% identical ownership so Company A and Company B are a controlled group? Thanks very much.

Another good point.

The light bulb finally went off. Thanks very much for your time and patience.

Thanks Kevin and Lou. So Kevin, in effect what I think you are saying is that, with an off calendar year plan, as long as the ADP correction amount is less than or equal to the catchup limit for the calendar year in which the plan year ends, the HCE will never have to take an actual ADP refund distribution even if they have deferred the full 402(g) and catchup for the calendar year? Or did I just oversimplify that?

Hi Kevin, I did not ready those examples specifically, but I did see the extrapolation of those examples in the EOB. First, I see an error in my original post. I meant to say that the $3000 recharacterized catch up from the failed 4/30/2019 ADP is catch up for the 2019 calendar year, not the plan year, but I'm sure you already knew that. The part that I'm struggling with, is if the $3000 was recharacterized in lieu of being distributed, doesn't that take that $3,000 off the table as far as being able to defer the additional $16,400? It seems that I would be double dipping the catch up. I recharacterized the $3,000 deferral for 2019, but then deferred a full $25,000 for the 2019 calendar year anyway? If this was a calendar year plan and I deferred the full $25,000, but had $3,000 recharacterized as ADP catch up, the $3,000 would have to be distributed since I had no more catch up available. BTW, the plan year ending 4/30/2020 also fails and the admin system is rechararcterizing $6500 of that refund as catch up for 2020.