austin3515

Does anyone have a sample participant fee disclosure for an FBO account option? Participants can xfer balances between the main recordkeeper and "external" FBO accounts (still part of the Plan). If you'd be willing to share I would appreciate it!

Have a situation where a missed deferral opportunity was corrected in such a way that very closely resembles the EPCRS pre-approved correction. They calculated the "missed match" in such a way that some participants will end up wth slightly more than a 4% safe harbor match. The specifics are not relevant to my question so I'll forego a detailed explanation. The question is EPCRS Section 6.02 (Correction Principals) says "(a) The correction method should, to the extent possible, resemble one already provided for in the Code, regulations, or other guidance of general applicability." The correction method they used is resemble, and does resemble very closely what EPCRS says (including notice requireements, making up for missed match etc). It is just that the method of calculating the missed match provides them with a little bit extra than the EPCRS methodologies would have. Is this still a suitable correction under EPCRS SCP? Or is their essentially a "Do it this way or it's or you don't get any reliance"? We are capping anyone over $275K (in 2018) at the maximum match based on the normal formula. So this new approach will not allow anyone to get more than the match based on max comp. For whatever that is worth.

Even still, I can't see why that would be an issue? Owner takes a loan, owner loans the money to the business. There's no way to "prove" that the $50,000 that was deposited to the Plan by the corporation was sent to the plan, or if the $50,000 is still seitting in the checking account for working capital (or it it was used for last week's payroll).

Where is there an extension of credit?

If he is 70.5 then all balances are distributable. You don;t have to restrain yourself to the RMD. I agree with taking the loan first becaus it is not taxable, if you make payments. But the balance can be taken as an In-Service Distribution. And again you should be able to deduct the DB payments in 2019 even though they are being made on account of 2018. In this way really all you are doing is funding the DB from the 401k plan. Will someone please tell me if I'm missing something here?

Yes but not even one single payment? And isn't my idea "better" since they can amend the plan to allow for an in-service distribution from profit sharing after 5 years of participation? That seems like a zero risk alternative. I mean take the loan for $50K if you can make the payments of course. But if you need more, or if cash flow won;t support the payments, then I vote for an in-service from the currently distributable sources. I just add that pretty much every cash balance plan I ever started began with a client who had a LOT of money in profit sharing. That's generally the chronology - they are maxing out in profit sharing and want to contribute more...

Surely you wouldn’t advise a client to take a loan and advise them as part of the transaction they can just not repay it? too cute by half means of circumventing distribution restrictions on 401k

Well that is true but presumably he has some profit sharing and as you know that would be quite accessible. I mean if the plan were amended obviously.

Is the shortfall much more than $50,000? Start with a participant loan. Then he's gonna have to take the money ouyt of the 401k plan as a taxable distribution. What's that you say? The contribution to the Cash Balance plan is tax deductible? In that case, perhaps it will all net to zero (perhaps a 10% penalty tax would apply, no mention of age). You might even be able to take the deduction for the funding in 2019 to make sure the two offset each other more precisely. Sounds like he doesn;t need the deduction in 2018 anyway. AmIRightPeople?

Reminds of my experience with asking clients if they want us to e-file the 5500's for them, even though their signature will be on-line. 100% of those whose identities have been stolen say "absolutely not."

Well if they moved, the package we are sending would most likely not reach them anyway.

We have the ability to pre-fill Fund Company distribution forms with names and addresses before sending to terminated participants using an in-house software program. We would NOT enter DOB's or SS#'s. Just names and addresses. What are others doing? We had been including Names/addresses at one point in time but decided to stop because we felt like once that information was on the form, it was that much closer to being susceptible to theft. Do others have any insight regarding security audits, etc., that have done studies/analysis on this stuff? I'm sure others are putting a lot of thought into this. Part of the discussion of course is that we are mailing them the form, so the envelope and cover-letter does already have their name and address.

Polite on message boards?? That's novel concept :) I think I like that!

I want to be very clear about something. I would NEVER say yes to that question if there was no bond in place for the plan year (unless the effective date was retro). The question is "Was there a bond in place during the Plan Year." In my example I am indicating Yes which is completely not controversial. As to the Amount the question has but one word and no explanation. Anyway, I think it was an interesting discussion...

Internal memo, just in the files. In the old public accounting days for me "Memo to file" was a thing. The language you referenced seems to be discussing how you determine whether the bond is adequate. i.e. the determination of the adequacy of the bond is based on the reporting year. Does it preclude reporting the value of the bond as of a different date?

I recently wrote this memo regarding reporting a fidelity bond increase that took place in 2019 as of 12/31/2018. I'm less concerned with whether it is what you would do, and more concerned with whether or not it fits within the gray zone of opinion. Before I started writing the memo I was unsure, but as I completed it, I became convinced that not only was it ok, it was likely a preferred approach as a matter of providing valuable information to the reader. Anyway let me know what you think, The 5500 asks "during the plan year" did the Plan have a fidelity bond. We answered yes to that question because during the plan year there is a bond. The instructions are not specific regarding what bond amount must be reported (i.e. as of which date). For example, they could have said "enter the bond amount as of the beginning of the year” or “… as of the end of the year", etc. but they make no reference. In fact they provide no guidance on how to report a bond that uses the ERISA Inflation protection (if anything required explanation as to applicable dates it would be this). Based on this lack of guidance we are in a position where reasonable alternatives must be considered. One other reasonable approach would be to allow the Employer to report the bond in effect as of the date of the filing of the 5500. If a reader of a 5500 has more recent information regarding the value of the fidelity bond he or she will better be able to determine the level of protection the Plan has acquired.

So RBG, would you approve the request in my situation?

Personally I think you are inserting a threshold that is not in the regs. If it "could be done" then by complying with their wishes you are "preventing foreclosure." I personally don't think you have to wait until the very brink of disaster - you only have to be on the path to disaster. But anyway, the regs are not crystal clear on what "prevention of foreclosure" really means. So when there is flexibility I tend to give the benefit of the doubt to the participants.

Apparnetly in the bylaws to the condo association it says non-payment can result in a foreclosure on your property. Has anyone approved a hardship based on a delinquent condo fee? They have the nasty collection letter from the condo associations attorneys threatening that foreclosure is one of the remedies they will pursue. This is a first for me...

The promise that was made was "If you stay with us for 4 or 5 years" THEN we will give something to you. There was nothing of any value provided on day 1. Only the mere possibility of value in 5 years time. And the IRS says that's not anything at all. That's the whole point of the language "substantial risk of forfeiture."

It's not "another deferral." If something is not vested (i.e., someone has absolutely no right to it) it's not a deferral at all. The only deferral is the delay between the date the benefit vests and the date it is paid.

To be clear, an ERISA attorney wrote me a fairly lengthy email explaining her position as described above. Because it is both more conservative and generally better for the participant, it seems like a good approach!

Yes - and as someone pointed out this is a good thing! You typically delay payment like this to defer payment into a year when there is no other income. And if you defer payment into a year with no other income for FICA then all of a sudden you owe SS taxes. If on the other hand you pay FICA taxes there is no longer a substantial risk of forfeiture, the exec will "almost certainly" be over the SSTWB. You get the best of both worlds!

[I re-worded because I didn;t like it before!] I worked on a DC Plan with a "big law firm" and their position is consistent with EBECatty. In other words, if you are deferring payment/taxation for a "short-term" that is ok. If it were taxable immediately even if paid a short time later, there would be no value (or really meaning) to the rule.

I sent that link to a large actuarial firm we work and said "hey this would be perfect for DB plan terminations." The response was "That's who we already use." So that's two substantial endorsements!