austin3515

Plan has up to ~12% profit sharing (after integrating w/ SS) plus a 6% matching contribution. As a result, after taking into account 401(k) contributions, a handful of participants each year will require a portion of their 401k refunded. 4.04 of EPCRS states: A plan that provides for elective deferrals and nonelective employer contributions that are not matching contributions is not treated as failing to have established practices and procedures to prevent the occurrence of a § 415(c) violation in the case of a plan under which excess annual additions under § 415(c) are regularly corrected by return of elective deferrals to the affected employee within 9½ months after the end of the plan's limitation year. So I'm ok with this policy, correct?

I think forever now I am going to be asking "Where are the sodas for next year?" I like that a lot... I have a sneaking suspicion the Secretary of the Treasury reads these boards (because why wouldn't they after all (isn't that the new standard for truth?)) and picked up the phone and made this happen. A lot of people are saying that's what happened.

Are they waiting until after the mid-terms or something??

Ahh yes. But hopefully the IRS guidance in response Trump's Exec Order will alleviate that even for these.

That's actually an interesting point. But interestingly if we "insist" that we only allow clients with few than 100 participants, perhaps we can avoid the worst part of sponsoring a MEP anyway which would be the audit? If we have all of the records to do the SFs wouldnt be THAT much extra work if we're already doing client level testing/allocations, etc. Is anyone out there doing this?

OK, got it. This is what I skimmed over.

Well we do have commonality if we operate in say "Alaska" and have only Alaskan businesses as clients. They list geography as a commonality?

What do you think about this language though (italics)? That seems to provide a way? "The group or association is not a bank or trust company, insurance issuer, broker-dealer, or other similar financial services firm (including pension record keepers and third-party administrators), or owned or controlled by such an entity or any subsidiary or affiliate of such an entity, other than to the extent such an entity, subsidiary, or affiliate participates in the group or association as an employer member of the group or association."

https://content.next.westlaw.com/w-017-1687?isplcus=true&transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1 So can we sponsor a MEP as long as our own company's 401(k) Plan is a participating employer?

Tom I knew I had seen something somewhere! Thanks!

Yes but by not using the example of X% of $360,000 they seem to be uncomfortable writing down on their website that any contributions can be determined by referencing comp >$275K. Do you agree? Why else wouldn't they be explicit about that?

Bump up. Any uodates to this conversation? Just seems hard to believe that this was not addressed yet. At first when I saw this link by the IRS I thought, "great, they finally addressed" https://www.irs.gov/retirement-plans/401k-plans-deferrals-and-matching-when-compensation-exceeds-the-annual-limit Except that they almost intentionally did not use the most apporpriate example which would have been someone electing 3% of $360,000. Instead they said she could elect $1,500 from each paycheck all year. I guess that helps a little, but still leaves open the question if "3% of $360,000" is an acceptable deferral election. Anything? Anyone? Or is the most recent guidance the Q&A above?

If you want to know the truth I wish all of our plans were balance forward. The number of things that clients can screw up is decreased dramatically versus recordkeepers!

We don't have our consultants doing any of those things. They do of course end up "servicing" the client, which takes time. I just don't think you can do anything more than process data at those levels. We spend a lot of time fixing stuff like "Johnny's money is in Susans account." My point is with 120 plans you're not even checking to see if Johnny's money went into Susan's account. We ask "Total wages on the payroll report are $1MM but on the census file it's $950,000 (which we see a lot)". With 120 plans you're not even getting a copy of the payroll report. We're asking "you said Johnny worked 1,000 hours, but he only made $3,500". At 120 the expectation/assumption is the client gave accurate data. I get that this is a different business model than ABC Bundle Co. I'd be curious to know if anyone agrees with me :) (the dissenters are on record!). We're more 60 to 80 at the top and no one is slacking off.

I'll say this: 120 plan case load is a data processing shop. You're not asking any questions, you're not scrubbing data. The assumption is the client sent you good quality data. You're not doing participant level deposit reconciliations; you're assuming the client sent in everything correctly. These are bad assumptions but we charge our clients accordingly. So this gets to the heart of what others have said before me. I wanted to clarify that 60 vs 120 is the difference between a consulting service and a data processing service (assuming of course similar books of business). OK fine if it's 120 safe harbor plans with no more than 15 or 20 people, maybe you can do a bang up job.

Plan excludes Taxable fringe benefits and bonus from Comp. Problem is, I don't have them segregated from the client. Client has a straight 5% profit sharing contribution. I can probably get away with rate group testing using the total comp, but can I try and pass the 414s testing, by dividing eligible comp by total comp (including taxable fringe?). My denominator is a safe harbor 415 definition of comp so I suppose so. Agree?

You know I would be glad to, except that I would not have written it the same way now that I know what I know from the previous posts. I would have talked to the CPA about the 1040 to see if they prepared it correctly with the indicated notice--if they did(which let's assume most do it correctly) I would certainly like to mention that to the IRS.

Thanks! This is great information, I never knew how it worked before! Thanks!

This is ridiculous and almost suggests that the IRS doesn't understand their own rules. This has happened to us 3 times in the last 4 or 5 months. Client rolled money from an IRA into a 401k plan. IRA sends out a 1099-R with a Code G. The IRS sends my client a letter that he owes $X Thousand in taxes (which of course the client freaks out about) claiming that they received no corresponding 5498 confirming the rollover. But of course 401k plans don;t send 5498s when they receive rollovers. Can anyone else see the flaw in the system? Has anyone brought this to their attention? We literally have a template letter that we use now to respond. That's ridiculous.

Who come sup with these rules??? :) OK, I'll do it...

You're joking, right? I have to D them and C them? Shouldn't one take care of both?

OK you talked me into it. I don;t know why but I hate doing them :)

Ahh, ok, I see "will now be receiving future benefits from this plan" BUT the first word before that phrase is AND. And it's not a different sponsor so it doesn;t apply?

I don;t follow you. Am I misreading the instruction? If so, how? I don;t see any reference to which plan will pay the benefit?

Code C Purpose: "Use this code for a participant previously reported under the plan of a different plan sponsor and who will now be receiving a future benefit from the plan reported on this form. Also complete columns (b), (c), (h), and (i)." So a client is merging Plan A into Plan B. Plan A happened to be an employee contribution only and Plan B happened to be Employer contributions only. Both are sponsored by the same plan sponsor. Based on the instructions above, I am planning on NOT reporting these folks as a Code C on the surviving plan. Do we all agree?