Gilmore

Is there not also an excise tax if corrected after March 15?

My apologies if the answer is obvious and I'm just not seeing it. The plan provides for a discretionary match which the plan sponsor may make after the plan year has ended (1000 hours and last day required). The plan sponsor wants to wait until later in the year to decide whether or not to make the match, let's say after March 15th. The plan fails the ADP test, and if match is allocated pro-rata over deferrals will most likely fail the ACP test as well. If the match is discretionary, is it possible to allocate the match by reducing the match to the HCEs sufficient to avoid an ACP failure and possible excise tax? I do not see anything in the document that indicates one way or the other. Appreciate the assistance.

Thank you very much for the confirmation.

A one-man company, inception date 12/1/2018, would like to start a 401k with an initial short plan year, 12/1/2018 to 12/31/2018. If the Limitation Year is defined as the calendar year, is it permitted to not prorate 415 and comp, even though the company has only been in existence for 1 month? Thank you very much.

Thanks.

A dental practice is owned by two dentists' individual corporations. In April 2018, one of the dentists sells his part of the practice to another dentist, whose individual corporation now becomes the new partner. The partnership has a 401(k) plan. The new dentist's corporation also has a 401(k) plan. If the new dentist's corporation does not adopt the partnership's plan, can the new dentist operate his existing plan separately under the coverage transition rules? Or does the formation of the new partnership and ASG negate the coverage transition rules? If the coverage transition rules do apply, does the coverage transition period end if the new dentist's corporation adopts the partnernship's plan (that is, before the end of the allowed transition period). Thanks very much.

Hello John, thank you for the confirmation.

A participant in one of our client's 401(k) plans has died. The beneficiary form lists her trust as the beneficiary. The decedent's daughter is the sole beneficiary of the trust. The trust's administrator is asking if it is possible for the plan to pay the daughter directly to an inherited IRA, rather than pay to the trust. The plan document does not have any language pertaining to this particular request. Has anyone run into a similar request? Our thinking, as the TPA, is to have the Plan Administrator refer to their legal counsel. Thanks very much.

Thank you for the information. The plan is not top heavy, and does exclude compensation prior to plan entry. Looking forward to next year, however, do you know how the nonUS source income is calculated? The employee was working in France. Would each payroll paid need to be converted at whatever the conversion rate was for that payroll period? Thanks again.

Company A, with 401(k), excludes nonresident aliens. Employee B, citizen of non-US country with no US Source income, is employee of Company A starting Jan 1, 2018. 401(k) has 3 month wait. Employee B is moved to US and will begin receiving US source income from Company A 12/1/2018. In reading other posts, I believe service is counted since Jan 1, 2018, and Employee B would be considered as having satisfied the 3 month eligibility wait. How about their compensation from Jan 1 to Dec 1? I've seen posts that all non-US source comp is excluded (say for ADP test, determining next year's HCEs). I've seen other posts that indicate the compensation non-US source income must be converted to US dollars and used for plan purposes. Any assistance is appreciated. Thanks.

In this case I do not think there is any question that there is a co-employer relationship, and these are not solely the employees of the PEO. My question was relating more to the actual mechanics of performing combined testing where one of the controlled group members plan is a PEO plan. I was just wondering if anyone had any experience as the TPA that is being asked to administer the non-PEO plan and how cooperative the PEO administrator is in providing the information to perform combined testing. The question may be moot anyway, now that the owner is aware that their non-PEO plan most likely cannot have richer benefits than what is being provided to the employees in the PEO plan.

Thank you Luke. The owner did indicate that their initial impression from the PEO was that the employees were solely the employees of the PEO. We provided some follow up questions for the owner to ask the PEO, who then described the "co-employee" relationship. Thank you Lou. I will see if the owner wants us to review the controlled group issue with their PEO contact. I'm sure this fact pattern must have come up with them before.

I guess my question is the logistics of the testing. Does the PEO plan test Company A's contributions with Company B's? In our experience, a PEO type administrator wants nothing to do with testing plans outside their plan regardless if there is a controlled group that requires combined testing. If the combined testing is done by another administrator outside of the PEO, what are the pitfalls to watch out for with respect to the fact that Company B participates in the PEO plan?

Husband and wife jointly own Company A. Company A's employees are being moved to a PEO, and will be participating the PEO plan. I'm assuming the existing Company A plan is being merged into the PEO plan. Husband and wife jointly also jointly own Company B. They will be receiving compensation from Company B. Does anyone have any experience that they could share with the testing involved if Company B sponsors a plan that would cover just the husband and wife? I understand the combined testing that would be involved if Company A had its own plan and B had its own plan, but I'm not sure how it works when Company A is part of a PEO plan. Does the PEO use the Company B contributions in its testing of Company A? Seems more likely that the PEO wouldn't even ask about any controlled group members. Thanks.

We have a couple of clients that are going to add safe harbor to their existing 401(k) plan for 2019, and at the same time remove auto enrollment provisions. Question is, what do we do with the current default enrolled participants. Just continue to provide an annual notice each year until they either elect in, elect out, or terminate? Or does eliminating the auto enroll provisions mean that their default deferrals should stop as of 1/1/19? Thanks very much.

Got it. So while in the forfeiture account, not included. When reallocated to participant accounts, back in the determination, if the participant's account is included in the determination (ie, not a former Key, for example).

I believe the ERISA Outline Book indicates that with a new plan, the notice can be provided no later than the effective date of the elective deferral portion of the plan.

Are funds in the Plan's forfeiture account added into total plan assets when determining top heavy status? For example, assume the Plan provides that forfeitures are used in the plan year following the plan year in which the funds were forfeited, and allows the Plan Administrator to use the funds for any permissible purpose (reduce fees, contributions, or reallocate). A participant in 2018 terminates, takes a distribution and forfeits $1000 which is now in the forfeiture account as of 12/31/2018. Do we include that $1000 in the total plan assets when determining the top heavy ratio? Thanks.

Hello Tom, thanks for the response. Yes, the intention is to get the assets out of the Plan as soon as administratively possible, which will be further delayed if we have additional forfeitures to reallocate.

Appreciate some insight into this situation. Calendar year 401(k) plan. Company is sold in March, 2018. Company terminates 401(k) plan effective 3/18/2018. A participant had already earned over the annual comp limit, deferred the max, and received the max match based on the annual limit, prior to plan term. I believe due to the short plan year that we now have to prorate limits, including the comp limit? If that is correct, the participant's match deposited exceeds the allowable amount using the prorated comp limit. If that is all correct, is it acceptable to treat the overage as a mistake of fact, given that the match was calculated using an incorrect compensation amount, and return the overage to the employer? Or must the overage be moved to the forfeiture account. Thanks very much.

After upgrading to version 2018.01 (and again still with 2018.1), statutory excludables are not being determined correctly when eligibility is run. The issue appears to be limited to employees hired in the first half of the prior plan year, and whose stat entry would be in the second half of the current plan year. After the initial eligibility run, these ees are incorrectly included in the excludable group. Running an ADP/ACP with the "Recompute statutory exclusions prior to test" checked correctly puts the ees into the non-excludable group. (We are using stat entry dates for the determination.) However, if you have to run eligibility again the same ees are back in the excludable group. At first we thought this was limited to our 2018 mid year tests, but in going back to clients for whom we prepared a 2017 ADP test earlier this year, and now are going back to recalculate a profit sharing contribution, for example, we are having the same issue. Support has determined that this is an issue that is being worked on, and hopefully a fix will be coming shortly, but I was wondering if anyone else was having this issue, and if so, how you are dealing with it in the interim. Thanks.

Thanks for the replies. Will look into both.

The IRS told us to ask another TPA that may have run into a similar situation. So I've come full circle.

PBGC responded and told us to call the IRS.

We are following up again with the PBGC and will let you know if we receive a response.