austin3515

So this is great new client new 401k and they want to know how to operate this thing and the upshot is no one knows :(. I'd rather have guidance!

Mine does indieed include that catch-all language, and the question I have submitted to Corbel concerns wheter or not, if I use that exclusion, i have any issues with 414(s). So that's another question related to this topic! My plan is going to be a safe harbor match plan. What do you think about that? I had said to FIS, so lets suppose somoene contributes 10% from their $1,000 weekly wage, and based on this exclusoin contribute nothing form their $1,000 of tips. So they are contributing 5% of eligbile pay and getting the full 4% match on $2000 of pay,. So would that mean I'm OK with 414(s)?? Someoe has to write something about this topic!

So a waiter gets a paycheck for wages of $800 plus two crisp $100 bills. Total taxable income = $1,000. They elect 10%. You're saying that their 401k can only be $80, and not $100? But if on the other hand, the waiter gets $800 and an allocation of tips for $200, and their gross paycheck is $1,000, their 10% contribution would be $100. Is that right? And where would one read about all of this stuff? I could not anything specifically on point. But as I drive through, well, everywhere, there are a lot of restaurants out there (hence this must come up literally all the time).

OK proposing on a plan where tip income is a large chunk of their pay. What do I need to know? I "always" use the w-2 definition of wages, so I should be able to easily identify the comp number at year-end. I think the biggest question I have is, if someone wants to contribute 4% of pay, how does that work? Does anyone have an article about tip income and a 401k plan?

Well, just be careful. To me it sounds like a w-2 employee. If you hire someone to process data, you're going to have complete and total control over how they do their work, when they do it, which clients to work on first, they're going to do it on your computer systems and of course you're going to train them. BUT as I tell my clients all the time, all I know is that it is an important issue, I don't have the right skill sets to know one way or another (except that I do know the risk lies on classifying them as independent contractors!). https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee Common Law Rules Facts that provide evidence of the degree of control and independence fall into three categories: Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business? Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

I think MAYBE you are talking about paying them as a 1099 contractor (of course I am only inferring from your use of the term "contract employees"). I would NOT recommend that path. What you are describing to me sounds like something the IRS would definitely conclude is a w-2 employee.

I was thinking calendar year would make a lot of sense, but alas not elected (I could easily amend). But let;s say I did not. Plan A look back year is based on 6/30, Plan B on 12/31. So when I'm doing coverage testing, who's a highly and who isn't? Whose lookback year controls? Or is it based on the plan year ending within the plan year of the tested plan? This is the first time I was ever in this situation....

2 Plans in a controlled group. Plan A is a 6/30 year end, and Plan B is a 12/31 year end. How do I determine who is an HCE?

This was a long time ago but there was a plan we were involved in that permitted an in-service distribution when they were not eligible. The correction (accordign to the ERISA attorney) was for the employer to deposit the amount of the ineligible distribution to a suspense account? I did not look back through EPCRS to see where that was referenced. Thankfully, the employer contributions consumed the "suspense" account so it was more of an advance funding for money they were going to spend anyway. Anyway perhaps that correction is no longer in EPCRS but thought I would mention it.

If the IRS grants a waiver then thats what you would tell the DOL if they ever called. But as someone has already said it needs to be something really excpeitonal. The purpose of the DFVC is to cover the crazy stories already. So for example, if the business owner died on October 10th they would definitely waive everything because only a monster would not appreciate the impact of that. If Sally was on vacation and forgot to read her emails before she left it's out of the question. "I've never missed a filing before in 15 years so please just waive it this one time pretty pretty please" also is out. BUT if you ask the IRS to waive and they say no, then I think you just do the DFVC and then right back to the DOL and ask them to waive their penalties because you filed under the DFVC and that would work (in my experience, though it has been many many years).

Has anyone ever seen a document for people getting ADP/ACP refunds that addresses the following critical point: What you do with the refunds dictates the ultimate impact. So others can probably write more eloquently (and with more expertise) than me on: -Availability of deductible pre-tax IRA's -Availability of current year 401k contributions for you or your spouse to offset -Availaiblity of Roth IRA contrbiutions (if not over limits) -Availability of back door Roth IRA contributions -Simply ivnesting in an after-tax account (capital gains, municpal bonds,etc). It seems to me that if there were such a document it would go a very very long way... I could probably write such a thing with all appropriate disclaimers. I could even do a bit of a choose your own adventure (whats your AGI? Are you married? etc).

yeah to be clear it is the "Signature" feature within the software. I suppose Docusign is more robust becauyse the signature is maintained by a 3rd party but this system is more robust than an ink signature because you can 100% verify that a particular user signed the document (it's someone how tied to my windows log in). I don;t profess to fully understand it which is why I was also hoping some law firm wrote an article about this...

I'm just discovering the "signature" feature in my pdf software (I use Kofax f/k/a Nuance). I am curious to know if we can tell clients it is ok to sign plan documents using this feature. From my brief readings what I am finding is that it is actually much more secure than a regular ink signature because the signature itself is able to tied back directly to the signers own credentials (some crazy encryption-like key). I'm curious to know if anyone has ever researched this or has found an article about its use in legal documents, whether the IRS will accept it, etc.

If I was looking for somoene to blame that's where I would start. You sell health insurance, you own the 125 plan, period. I'm not saying Anthem Blue Cross/Blue Shield owns it, but the advisor getting paid boku-bucks in commissions sure does. And if I'm that person, I should know my clients will blame me, and I'm going to take care of it. As it turns out I am not the person. But what is shocking is that no one is. This is important. It's someone's responsiblility. You can;t count on your clients knowing these requirements. That's why they hire brokers in the first place./

But only if they have an FSA? Not everyone does. I'm talking about the small employer with a health plan taking medical premiums out on a pre-tax basis. I swear the health providers never provide the 125 document.

What vendor is responsible for this? Why is this not standard for whomever sells health insurance? I feel like no one ever addresses these documents the way us 401k geeks do for ours...

Ha! And I've seen nothing that says it has the same characteristics! Thanks!!

I can use the SHNEC towards all of my nondiscrimination testing, right? i..e, new comp/cross tested, gateway minimum and the like?

Important aspect of this to note. It IS available for failures that began on or before 12/31/2020.

Oh good for him!!

yeah it does! I actually found a thread with you and Mike Preston from like 10 years ago where you said it just as eloquently... I am puzzled as all get out as to why the Nondiscrimination Answer Book would have said that though. Where is Tom Poje, I never see him anymore, LOL...

I get this all the time with Fidelity and TIAA-CREF. Clients often cannot believe that these giant behemoths could possibly be wrong about anything.

I've seen multiple reputable sources say that you really do have to hit the 70% ratio percentage if you're cherry picking who is in what plan. CuseFan, any additional insight provided? Is that the end of the question? It's just not very detailed and the case in favor of having to pass the 70% threshold seems pretty compelling...

I wish they explained why they came to that last sentence but that is definitely my question. Seems like there is lot to that conclusion left unsaid...

When running component plan testing, we're supposed to make sure the separate plans would pass coverage testing as though they were separate plans. The divvying up of participants would generally not satisfy the nondiscriminatory classification test. 1.401(a)(4)-9 (c)(4) indicates that the average benefits percentage test is deemed to pass for each component plan if the test is passed for the plan as a whole. However, this "deemed passing" does not cover the nondiscriminatory classification test. As a result (so the story goes) the Average Benefits Test is not available to pass coverage for the component plans and therefore they need to pass the 70% ratio percentage. I'm curious to see if others have found differing interpretations. In reading through the ERISA Outline book for example, you would have thought there would be a big disclaimer "Average Benefits Not Available for Coverage!!" but nothing... So for example, Component Plan Testing is being run for nondiscrimination, so perhaps one could argue that the reasonable business classification test doesn't apply (perhaps the IRS came to the same conclusion when they didn't mention this in aforementioned "deemed to pass" reg). I note that my "normal coverage testing" of course is passing no problem. That's the kind of interpretation I am curious to know is out there. Now as many of you have likely discovered, because of the patterns of including/execluding HCE's and NHCE's to pass things, getting the ratio percentage above 70% is not particularly challenging, but I do question whether it is even necessary.