Gilmore

A check of the plan doc should be done as well. Our doc says that any employee that was a participant before an amendment changing eligibility remains a participant after the amendment.

Hey, thanks Lou. Yes the off calendar plans keep you on your toes. The question was prompted by a change in our admin system which I found out is not handling catch ups properly under these circumstances. I appreciate the detailed confirmation.

Plan year end is 10/31. In the calendar year ending 2018 the participant makes deferrals of $24,500. Deferrals from 11/1/2018 to 12/31/2018 are $4655 all 2018 catch ups, used in the 10/31/2019 plan year. Participant defers $20245 from 1/1/2019 to 10/31/2019, with catch up of $1245 for 2019. For the plan year ending 10/31/2019, I believe I need to consider $5900 as catch up for the plan year. Considering the $56,000 415 limit, with the $5900 that are considered as catch up for the plan year, am I permitted to allocate a profit sharing contribution for this participant of $37,400? That is the total plan deferrals of $24,500, plus the profit sharing of $37,400 for a total addition for the plan year of $61,900, which is $5900 over the 415 limit for the plan year. Could the participant then defer the additional $4755 from 11/1/2019 to 12/31/2019, which would then be catch for the 10/31/2020 plan year? Thanks very much!

My apologies if this fact set is covered elsewhere, and appreciate any thoughts. One owner corporation sponsors calendar year 401(k) non-safe harbor plan. No employees until 2018, one employee becomes eligible for plan in 2019, owner neglects to provide the opportunity to participate. Owner has not contributed to the plan yet in 2019. Obviously the plan is top heavy. Assume first that the owner will not participate in 2019. How do I determine the missed deferral opportunity if there were no NHCE deferrals in the past? Can I use 3% (similar to the rate used in the first year of a plan using prior year testing)? If so, is the QNEC 50% of the 3%? Let's assume next that the owner does want to participate, and let's assume the owner wants to defer 10% of their compensation. Is the QNEC now 4% (that is, 50% of the 8% needed to pass ADP)? If any of that is actually correct, does all of the missed deferral correction amount count towards top heavy, or must the top heavy minimum be contributed in addition to the correction amount? Thanks very much.

Couldn't that be accomplished under the old safe harbor that I believe is still available?

Thanks for the confirm EMoney. I've tried now for three days to get through to the number on the notice and do not even get put on hold. It immediately states that they have heavy call volume and to call back later or the next day.

Is anyone else receiving CP259 Notices from the IRS asking for a 945 form for 2016? I received copies of the notices from two completely unrelated clients, both of which have plans on a recordkeeping platform in which distributions are processed under the recordkeeper's EIN. Since we have a small number clients I thought this might not be just a coincidence. Thanks.

Client has a safe harbor 401(k) profit sharing plan with a cash balance plan. Plan and tax year are calendar year; 2018 return on extension. The 2018 required contributions are the 3% safe harbor, the minimum cash balance, and the minimum profit sharing to pass nondiscrim. Client does not have the cash to fund everything. What are the ramifications if the client uses all available cash to fund the cash balance to reduce the penalty, but misses the deadlines for depositing the safe harbor and PS. I know the deadline for safe harbor is 12/31/2019, but not so sure about the PS. I know that the PS can be deposited up to 10/15 and still be allocated as 2018 for 415, but what are the ramifications if say both safe harbor and PS are not deposited until after 2019, especially with respect to the 2018 nondiscrimination testing. Compounding the issue is that most of the SH and PS goes to the non-highly. The majority of the CB goes to the owner. So by not funding the SH and PS and using any available cash to fund the CB does that create nondiscrim issues in itself? Thanks very much.

Colonial Surety will issue a retroactive bond if coverage was lacking in a prior year(s).

Thanks for the replies. We only have a handful of these types of plans. Sounds like we lost track of what was probably meant to be a short-term solution. For starters we will start breaking down the asset classes by % on the statements and re-evaluate going forward.

Mike, or Bird, or Golf, when you say you "fully reconcile" the assets, can you elaborate. Let's say for example that all of the assets are in one pooled brokerage account. Are you providing a breakdown of each investment on the participant statement, or a breakdown by asset class...? Appreciate the information.

To implement the requirements of PPA, particularly as it related to participant statements, we consulted with an ERISA attorney for guidance. Until further specific guidance was given by the DOL, we were instructed to include a line in the participant statement that says the participant's account value reflects a proportionate share of each of the individual investments held by the Trust, as of the last day of the plan year, and that the participant is able to contact the Plan Administrator (contact info included) if they want to request a copy of the Trust's investment holdings. Ten plus years later I do not believe we have ever heard of a participant requesting the asset statement.

Thanks again for the information. Unfunded, thank you for that clarification.

Thank you for the replies. My only contact is the advisor who sold the policy, who is trying to be helpful. I do not know if the commissions were paid in 2018 or 2019, that's what I've been trying to find out, and so far just received the reply that the Sch A would not be prepared until this year. I'm assuming that since the insurance was purchased in November 2018, the contract year ends November 2019. I will keep pushing for clarification on when commissions were paid. Thank you.

A small, calendar year cash balance plan purchases life insurance in November 2018. The insurance company says a Schedule A will not be completed until November 2019. Assuming the 2018 commissions will be listed on the Nov 2019 Schedule A, is it acceptable to wait until the 2019 5500 to enter 2018 commission amounts on Line 10e Part V of the SF? Or do we press the insurance company to provide the commission amount paid in 2018? Thanks very much.

Would agree that 0 times 1.25% or 2% would still equal 0 for the the HCEs. But you can check Ch 11, Section III, Part A of the EOB for a description of applying the 1.25 and 2x or 2 plus tests.

So in a scenario where this is not the first plan year, and there are eligible NHCEs that are not otherwise excludable, and none of the NHCEs contribute, at what rate could any HCE contribute that would satisfy the ACP test?

Just wanted to follow up on ACK's original question because we too have run into similar situations in which an owner or other HCE wants to add ee voluntary contributions to the plan. In the original post it is unclear I guess if there are any NHCEs eligible for the employee contribution portion of the plan. If there are eligible NHCEs, and none choose to participate, is it possible to pass the ACP test, assuming that they are not otherwise excludable, if any of the HCEs make ee contributions? Thanks.

Are there 0 eligible NHCEs participating in the employee contribution portion of the plan, or are there 0 NHCEs eligible for the employee contribution portion of the plan?

Thank you.

Calendar year 401(k) plan terminates 1/24/2019, final distribution 4/5/2019. Am I correct that a 50+ year old participant has a 415 limit of $10,666.67? Thanks very much.

Thank you very much for the replies.

Under the revised rules for amending a safe harbor plan mid year, the plan may not reduce the number of employees eligible to receive safe harbor contributions. What if the mid year amendment were to exclude only the owners from receiving the safe harbor match? Would that be possible, and if so, I'm assuming this would need to be a prospective amendment (not eff 1/1/2019)? Owners have not deferred yet in 2019 anyway. Thanks.

Thanks for the confirm Bird. BG, most of the recordkeeper excess forms that we use do have a section to include withholding info, but those forms often do not require an ee's signature so we like to have a form that the ee signs with their election.

For the past 20 years of ADP testing, when refunds are necessary, we provide the client with a form to give to the HCEs that explains the reason behind the refund, and a place for the HCE to make a withholding election. The form offers them the choice of, 1)normal 10%, 2) a percentage or dollar amount over 10%, or 3) no withholding. The form also comes with a W-4P and option 3 includes instructions that if no withholding applies then the W-4P must be completed in addition to our form. We then use this information to complete the recordkeeper's refund distribution form for the client. We now have a recordkeeper that is insisting that for ANY withholding amount that is not 10%, they want a signed W-4P. Additionally, if the participant wants, for example, 20% withholding, they want the participant to change the $ sign on line three to a % sign and indicate 10%, as that would be 10% additional to the normal 10%. Notwithstanding how confusing that would be for the participant. They are insisting that the IRS requires W-4P not just to elect to be exempt, but for anything other than 10%. I do not see anything in the instructions on the W-4P that requires the form to be used if a participant elects say 20% withholding, and do not see why our election form would not satisfy that purpose, especially since our form is much clearer in the instructions for the participant. Do others require a W-4P in all situations? I do not mind changing our procedures if we are not doing it correctly, but just want to be certain first that we actually aren't doing it correctly. Thanks!