Gilmore

I finally figured out what Derrin Watson was referencing in the ERISApedia webinar when he was comparing the FEMA page for NJ to the FEMA page for PA. If you look at the box to the right of the map that shows the counties affected, it lists the type of relief provided. For NJ, it shows both Individual and Public assistance. The PA map shows only Public assistance. He did mention towards the end of the webinar the Individual assistance would in most cases be limited to "Crisis Counseling" and not dollars, which is why the Individual assistance is not showing dollars in the "Financial Assistance" section.

Can anyone confirm if the disaster area declaration for the state of California is sufficient for the new hardship reason for disaster areas. The hardship reason mentions that the employee's principal residence or principal place of employment was located in an area designated by FEMA for individual assistance with respect to the disaster. When I look up the declaration on FEMA for California I do not see dollars designated for individual assistance, only of Public Assistance. I see in the declaration though the dollars are available for "crisis counseling" for individuals. Does anyone know if we can apply the hardship reason here in California, assuming of course the plan was or will be amended timely. Thanks very much.

Thank you Mike.

Plan's loan program allows a participant to refinance their existing loan. Currently allows for only one outstanding loan. Under the "normal" rules, the participant has a small amount of cash available in a refinance transaction. If the Plan adopts the Covid loan rules, and assuming the participant is a qualified individual, can they refinance the existing loan using Covid expanded loan limits and payment suspension? As a follow up, I've seen it indicated elsewhere that a plan that does not normally allow for loans can adopt the Covid loan rules and allow Covid related loans only. Is it a stretch then in a situation like this, that the Plan could allow for a new Covid loan by adopting the Covid rules and maintain the one "normal" loan restriction? So in the example, the participant would be permitted to have one normal loan and one Covid loan, without having to change the "normal" loan policy and would then not need to refinance the existing loan? Thanks very much.

So you would have safe harbor match for part of the year, which is now ACP tested, and 3% nonelective for the entire year to avoid ADP?

Great, thank you Larry.

Is the following possible? 401(k) plan allows for safe harbor hardship reasons, all sources, includes deferral earnings. Business owner in the state of California has a reduction in business due to coronavirus related restrictions. Needs funds to keep the business going short-term and also owes bills on the building of his primary residence currently under construction. Has $300,000 in 401(k) plan account, split between deferrals, and safe harbor contributions. Is it possible for the business owner to take a covid19 related loan of $100,000, a covid19 related distribution of $100,000, and the remaining $100,000 in a regular hardship as the result of being in a FEMA declared disaster area? Thank you.

Am I correct in assuming if a Plan uses the "W2" definition of compensation that the compensation earned as COVID-19 Sick or Leave Pay would be considered as compensation for plan purposes? Thanks.

I don't know if this helps you Betsy, but we had a similar situation in which auto enroll was being removed. We checked with our document provider who advised that the PA could make the decision on how to handle the default enrolled participants. In our case, the PA wanted the participants to retain their default enrolled deferral percentages, so the SMM was clear that anyone who was default enrolled would remain in the plan at the same deferral rate unless they made their own election. Then of course included information on how to make their own election. You might check with your document or the document provider and see if you have that same ability, then take that to the provider who wants to eliminate the default elections.

I just sent a request for clarification to the author. I will try to remember to follow up here when I get a response. You are correct, though, 2016-16 does seem pretty straightforward.

Not questioning CB at all, but I did notice the other day that the EOB, Ch 11, Section XIV, Part B4 still expresses an opinion that the plan should retain safe harbor status if only HCEs are prospectively amended out of the plan. It's the online version so should be the latest. I'm wondering if that was an oversight not corrected after 2016-16, or if the author still considers that valid.

Do you mind if we tie in loans with this last part of the discussion? Most, if not all, of our plans require that the participant be an active employee to request a loan. I'm assuming section 2202(b)(2) permits the plan to allow a participant who is terminated (laid-off) related to the virus to request a loan with delayed payments?

Thank you Bri.

Plan provides for a safe harbor match, allocated at the end of the plan year (not each payroll). Calendar year plan, calendar year tax year for the plan sponsor. Assuming notice requirement is met, the plan is amended to remove the safe harbor effective May 1, 2020. Here comes the probably dumb question, but... Am I correct that the timing for depositing the 2020 match accrued through May 1, 2020 is still the tax filing deadline for the 2020 tax year to be deductible for 2020, or 12/31/2021 if the year of deduction is not an issue for the plan sponsor? I haven't seen anything that says the deposit deadline is accelerated, but that doesn't mean I didn't miss it somewhere. Thanks very much.

Thanks for the input. I will review with the client.

Sorry, questions 1 and 2 are not related. Just been one of those weeks. Safe harbor was discussed, but not wanted. ADP/ACP testing is not an issue. I suspect the ratio test will also not be an issue as I believe it is mostly HCEs with excluded compensation. The main concern in this case is that the definition of compensation for the match is different from the compensation that is allowed for deferrals. My concern was whether or not a BRF test had to be performed since the difference in the compensation could cause different match rates. There was a Relius Technical update a few years back that discussed this issue which seemed to indicate that a BRF issue existed, but upon closer reading I see that the issue was also that the base pay failed 414(s). Thank you for your responses.

Client would like to allow employees to defer from all compensation, bonuses, etc. Client wants to match on only base compensation, however. The match is 100% of the first 3% of compensation deferred. Since the match would be capped at 3% of base compensation, I'm assuming I have testing issues? If the allocation compensation passes the compensation ratio test, am I good at that point? Or do I need to test the match rates for BRF? Thanks very much.

Client would like a two tiered match formula in which up to the first 4% of compensation deferred is matched at 0%. Second tier 4 to 6% of comp matched at 50%. Since each participant is matched the same at each level of deferral, is this an effective availability issue? And assuming the match is communicated to all participants, an acceptable match? Thanks very much.

Sorry for the late followup, bogged down with testing. Thank you for the responses. I was thinking more in terms of the owner possibly getting compensation from both companies and then started wondering about other employees with compensation possibly from both. I will go back and revisit the document language and check with our document provider. Thank you.

My apologies if this has previously been covered. It is my understanding that 10% withholding is the default on ADP refund distributions, as a non-periodic payment. Most of the recordkeepers we work allow the participant to elect the default, no withholding, or withhold an amount other than 10%. My question is, is the Plan required to allow the participant to make an election? We are working with a new recordkeeper whose process for refund distributions is a spreadsheet that has no option for withholding. Upon questioning they have responded that 10% applies with no other options for withholding. Thanks very much.

An individual owns is 100% owner of a company sponsoring a non-elective safe harbor 401(k) plan. After several years the same individual starts a new company in in which he owns 85%. The new company will not be adopting the existing 401(k) plan and will not adopt it's own plan. The plan document defines compensation as all compensation paid by the "Employer" and references the controlled group/affiliated service group code sections. Am I correct that for allocation purposes, if a participant earns compensation in both companies, all of the compensation would need to be included unless the plan was amended to specifically exclude it? Further, if the compensation from the new company was to be excluded under the plan, the compensation would need to be tested for it to be used for testing purposes and the safe harbor contribution? Thanks very much.

Had a quick question on the withdrawals for birth or adoption section of the Secure Act. Is this intended to be another in-service withdrawal option, or does the participant need to have a distributable event available? Also, in reading the section of the Act it does not appear to say anything similar to "If the Plan permits", or something to the effect so I'm wondering if this is available even if the Plan does not otherwise allow for withdrawals until, say normal retirement age, for example. Thanks very much.

Waiting on clarification from the potential client's CPA, just trying to cover the bases. In this case I'm assuming the former as the worst case scenario. Thanks.

Would appreciate any opinions on a new employer using a plan effective date prior to the start date of the company. I know the EOB says it may be possible but recommends requesting a determination letter which is not likely possible for a pre-approved plan. Say the employer (in this case a one-man company) start date is November 1, 2019, and the employer wants to start a calendar plan for 2019. If we make the plan effective for November 1, 2019, but define the limitation year as the calendar year, are we still good with not having to prorate limits? Thanks.

Hi Nate, Thanks. With respect to the 3% deferral rate, would the QNEC then be 50% of the 3%? My question regarding the owner was with respect to the ADP test. Assume the owner that has not deferred so far in 2019 decides to defer 10% before the year is out. The ADP test would need to be satisfied by an 8% NHCE ADP. Under those circumstances is the missed deferral opportunity now 50% of 8%?