austin3515

Amazing how a different discussion 6 years ago can essentially have all of the same arguments on both sides! I especially like this comment from Bird: Extremely insightful!

If I were the IRS I certainly would have included the requirement that the participant's name be on the deed, but it ain't there. I'm not saying I don;t agree with you but I don't think it is THAT black and white. In fact a purely black and white reading would render it acceptable. I'm stretching the regs to find it to be unacceptable.

Ha! I also began my career in public accounting so had some exposure there too!

(2) Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments); OK so this participant is using the money towards the purchase of principal residence. The problem here is, he won't own the principal residence, his girlfriend will. I have approved things like this before where it is to prevent eviction or foreclosure, where it is easy enough to establish that the person is in fact living somewhere. But this is a new twist. One thing I thought of is gift taxes being a possible issue here. The distribution is about $25,000. Thoughts? Has this ever come up for anyone else??

Good point - how about in-service distributions?

What if a plan offers a BRF but only to employees who are participants as of a certain date, but not to any new participants. For example, participant loans. Is BRF testing required? I couldn't find anything specifically in the EOB.

Maybe you can work something out

Well this is cool... With the help of the attorney I was able to pull the QDRO off of the court's website!!

Participant is telling me that they did not receive an ink/sealed version of the QDRO. She emailed me a pdf that clearly says "ELECTRONICALLY FILED" at the top of the page. What is a plan administrator to do? Generally, the paper signed version with the court seal and everything is received, at least in my experience.

I hate to see people give up a guaranteed pass on the ADP test though. That can be a significant sacrifice, especially if budget cuts preclude safe harbor contributions. I've always been frustrated when people say "they're doing 3% of pay, 100% vested anyway, so let's do a Safe Harbor 401k!" That;s a great short-term plan design, looking ahead just 2 or 3 years. But no non-profit in my opinion can project the budget out in the 10 year horizon (excluding ivy league higher ed perhaps). And non-profits (especially the executive director) tend to have a lot of people between $120K and $150K who contribute the max and will thus never ever pass the ADP test. And the 403b marketplace is opening up enough where there are decent choices.

Let's say for example a non-profit runs a 2 week summer camp that has 45 high schoolers on the payroll. My point is (as I said before) when you have to you have to. If you don;t have to, then by all means, do not!

Just had the same conversation today with a new client. But if there's a lot of people in and out of the building, this may be an indispensable provision. I too avoid it where possible, but if you have to you have to.

Yes but I did find I was able to contain my excitement with really no effort at all!

For those who are interested. https://www.napa-net.org/news/technical-competence/regulatory-agencies/irs-pressed-on-vcp-fee-changes-at-hill-hearing/?mqsc=E3950396

Gross - include taxable fringe benefits if small closely held where only owner has any. Exclude if otherwise. Always comp as a participant. Nothing I need to bother the client with! end of year if pooled or FBO, ASAP if on a platform. Just to be clear, I am talking about the Doctor, or the landscaper with 10 employees. If we're talking about a plan with 150 people (as an example) obviously more detail applies. Those people hired me because they want me to do as much possible for them and recommend the "right" design for them. So I see that as my value added. Obviously my cover-letters etc ask the clients to review the documents closely, and hey, I know some do because I will occassionaly get questions. Lastly, I always summarize in a 2 page word document the most important provisions to make sure they do;t come back to me and say "Hey, I wanted the Safe HArbor Match, not non-elective!" If all I give them is a 40 page adoption agreement, that's not really a great defense.

Here is what I discuss: Eligibility, Contributions, vesting, and in-service distributions/loans. That's it. I hit those topics every time and don't discuss much of anything outside of those. I never discuss for example auto rollovers. I just add them. I never discuss which Death RMD option to choose, how to use forfeitures, etc. Don't discuss distribution options at termination (lump-sum only!). Obviously the level of detail depends on the client and their level of interest. Sometimes General Counsel for a client will dig way down deep, but obviously that is not the norm.

Well that's a position I have never heard before. No one is going to jail over a fidelity bond...

Aha! I see why I screwed everyone up so much! I should have said "when I amend the plan today to INCLUDE bonus" Sorry everyone!!

Hopefully the employees will "just trust you." Some do, some don't. I cant imagine any of my clients signing on for that. The more out of left field the suggestion, the more they get turned off. Plus what do you do in 15 years when the "old plan" has hardly any employees left? Start a 3rd plan?

That was my initial ignorant assumption - your persuasive argument convinced me I was wrong :)

Now your confusing me! For additional exclusions you had me convinced that I had to wait until 1/1? Do you think I need to wait 30 days to make the definition of comp MORE generous? I didn't think so. I can;t tell what you think because you seem to be referring to excluding comp.

As a recap of where this thing started and ended: 1) I initially wnated to amend to EXCLUDE compensation items. Tom made a great point that excluding compensation items is a not-so-thinly-veiled method of reducing the safe harbor contribution. Thus, I am now planning on making the change effective 1/1/19. 2) You indicated that I could not make any change to the definition of compensation during the year which I indicated was not correct. For example, if a plan currently excludes bonus compensation or overtime I can amend the plan during the year to include those items of compensation because adding compensation would be the opposite of a reduction in benefits. I suppose there should be a caveat hear about doing this in the final 3 months of a safe harbor match plan, but I'll ignore that for now (reference the listing of prohibited changes for what I mean). 3) But now when I amend the plan today to exclude bonus from the definition of compensation (which I can do) the question is a) when can it be effective, and b) do I need to redistribute the safe harbor notice? In my opinion the answer is that it can be effective the very next pay-date and no new safe harbor notice is required (an SMM of course is required). Why? I only need to issue the new notice and provide 30 days advance notice for a change to required content in the safe harbor notice. Call me crazy but it seems we all agree that the definition of compensation is not required content. I think your position is that because the SH Notice requires you to cross-reference Compensation in the SPD that this makes the definition of compensation required content. I think that is the issue, and I simply disagree. The required content is the reference to the SPD. The obvious point of redistributing the notice is that you would have different wording in the notice. In my scenario, there is no change in the language of the notice (and thus it need not be redistributed). If there is something else behind our different conclusions do let me know!

You avoid the 30 day advance notice requirement (and you only need to deliver an SMM, not a full SPD).

Well that's not true, I am only barred from a reduction in benefits. I can amend to add compensation. This is just not the same thing as a definition of compensation nor is it materially different from saying "you can make contributions from your Plan Compensation." Obviously you can;t describe a deferral program without a sentence like that. That doesn;t mean the definition of comp is required content because it clearly is not. This of course is only relevant when deciding the timing/need of a new Safe HArbor Notice, and how quickly this enhancement can be effective.

I think one thing that is very relevant and often doesn't get the attention it deserves - how do you explain this to the employees??