austin3515

My client cares nothing for cleaner. They adamantly want as much money on vesting as possible. There is a new regime in town and they are very upset that the old regime gave away the store so to speak. I think there are cash flow issues, and some decent turnover.

I just found this in my Basic Plan Document (Corbel Volume Submitter, PT Formatted): (g) No reduction in Vested percentage due to change in vesting schedule. If this is an amended or restated Plan, then notwithstanding the vesting schedule specified in the Adoption Agreement, the Vested percentage of a Participant's Account shall not be less than the Vested percentage attained as of the later of the Effective Date or adoption date of this amendment and restatement. The computation of a Participant's nonforfeitable percentage of such Participant's interest in the Plan shall not be reduced as the result of any direct or indirect amendment to this Article, or due to changes in the Plan's status as a Top-Heavy Plan. Furthermore, if the Plan's vesting schedule is amended (including a change in the calculation of Years of Service or Periods or Service), then the amended schedule will only apply to those Participants who complete an Hour of Service after the effective date of the amendment.

Plan has immediate vesting. Client wants to amend the Plan to a 3 year cliff vesting. I used 1/1/19 for the change date (first day of next plan year) because I felt like the treatment during the transition stage was just to complicated and not really the crux of the question anyway. Option A: 3 year cliff vesting will apply to all new Employer Match money accrued after 1/1/2019. All of the old money will still be 100% vested for everyone who had it, because their accrued benefit is protected. Option B: 3 Year cliff vesting applies to any new participants who become eligible on or after 1/1/19. All of the employees who are participants in the :Plan on 1/1/19 shall forever be 100% vested in any match that ever is deposited to their accounts because the vested percentage is protected. My understanding from the ERISA Outline Book is that the "ERISA Conference Report" which describes Congress's intent might support Option A. But the IRS through some guideline on their website took the position that Option B applies. According to the EOB, "conventional wisdom" is to use Option B. Has anyone ever used Option A?

If I hear you correctly, as long as my allocation is based on a safe harbor design based allocation, it doesn't matter if the document specifies that allocation? I can just use the fact that everyone is in their own group to do the desired allocation, and then claim exemption from testing because the allocation was based on a safe harbor integrated allocation? If that's what you're saying it would not be correct. The 401l rules clearly require that it has to be written into the Plan. If that's not what you're saying then color me confused.

Larry- That allocation will not satisfy rate group testing, so I'm confused as to why I would not need the -11(g)? The whole point of the -11(g) is to utilize the design based safe harbor and avoid the general test under (a)(4) altogether.

I didn;t want to integrate at 100% of the wages base, i wanted to use 50%. So the owner makes $100,000 for example, and the employee makes $40,000. I want to integrate at say 40% of the wage base. This method of allocating contributions will be much more advantageous for the owner than merely imputing disparity at the taxable wage base (I think you will agree based on my example that imputing disparity does nothing).

Props to Mike Preston for this one! B) Corrective amendment to conform to safe harbor. The requirements of paragraph (g)(3)(v)(A) of this section need not be met if the corrective amendment is for purposes of conforming the plan to one of the safe harbors in §1.401(a)(4)-2(b) or §1.401(a)(4)-3(b) (including for purposes of applying the requirements of those safe harbors under the optional testing methods in §1.401(a)(4)-8 (b)(3) or (c)(3)), or ensuring that the plan continues to meet one of those safe harbors. From §1.401(a)(4)-2(b)(2)(ii) (ii) Permitted disparity. If a plan satisfies section 401(l) in form, differences in employees' allocations under the plan attributable to uniform disparities permitted under §1.401(l)-2 (including differences in disparities that are deemed uniform under §1.401(l)-2(c)(2)) do not cause the plan to fail to satisfy this paragraph (b)(2). Does any shadow of doubt remain that this can be done??

Is based on compensation including taxable fringe benefits even if the plan excludes taxable fringe benefits frm the definition of Compensation, correct? The fact that it is a safe harbor exclusion does not matter. Right? I think so but please confirm!

I'm inclined to agree, but it would be awesome to point something that proves the point... I skimmed through the 401l regs and it does not specify that the it has to be in the document on the last day of the year. Just that it has to be in the document (and it would be).

When the owner makes more than the employee but is under the wage base, it makes a "big" difference. I have the exact same gut reaction...

I'm not sure what you mean. It is probably true that the allocation was so awful that they wouldn;t do it wihtout the 11g. Is that what you mean? 20 / 50, whatever. Are we available to treat it as a design-based safe harbor via an -11(g). That's the real crux of it.

Can we do an -11(g) amendment to change profit sharing allocation method from each in own group, to an integrated allocation with the allocation at 20% of the taxable wage base?

From 1.401(a)(4)-12 Testing age. With respect to an employee, testing age means the age determined for the employee under the following rules: (1) If the plan provides the same uniform normal retirement age for all employees, the employee's testing age is the employee's normal retirement age under the plan. (2) If a plan provides different uniform normal retirement ages for different employees or different groups of employees, the employee's testing age is the employee's latest normal retirement age under any uniform normal retirement age under the plan, regardless of whether that particular uniform normal retirement age actually applies to the employee under the plan.

Revisiting this question. What do I do if Plan A and Plan B are in a controlled group and one has an NRA of 62 and the other NRA is 65? I was hoping testing at SSRA would be a perfect solution, but obviously no luck there...

I think you have it backwards - service firms are not eligible for that kicker. So accounting firsm, law firms, medical practices, and us, would not be eligible. That's my understanding so far anyway. Please Lord let me wrong :)

Funny you should say that because that's who asked me! Anyway, the auditor who asked me, their firm does hundreds of audits and they had never heard of it before. But we all look at the plain English rule, and there it is. Curious if there any other thoughts out there...

a) Do you agree that the short plan year reg requires 103b financials for the "first of the 2 years" (the short plan year reg is referenced in the instructions) b) Do you agree that 103b is a "full-blown" financial statement complete wit disclosures like whether or nott he plan has a determination letter, a description of the Plan, etc. These things simply are not part of the 5500. I too thought initially that what you are saying had to be the case. It just HAD to be. But if you read the rules, it just does not say that.

OK, I can't argue with a good suggestion! The only exception in the 5500 instructions is the IQPA Report - NOT the fianncial statemetns, just the related opinion letter. And it reference the same DOL Reg I included above. Empahsis added below accordingly. Line 3d(2). Check this box if the plan has elected to defer attaching the IQPA’s opinion for the first of two (2) consecutive plan years, one of which is a short plan year of seven (7) months or fewer. The Form 5500 for the first of the two (2) years must be complete and accurate, with all required attachments, except for the IQPA’s report, including an attachment explaining why one of the two (2) plan years is of seven (7) or fewer months duration and stating that the annual report for the immediately following plan year will include a report of an IQPA with respect to the financial statements and accompanying schedules for both of the two (2) plan years. The Form 5500 for the second year must include: (a) financial schedules and statements for both plan years; (b) a report of an IQPA with respect to the financial schedules and statements for each of the two (2) plan years (regardless of the number of participants covered at the beginning of each plan year); and (c) a statement identifying any material differences between the unaudited financial information submitted with the first Form 5500 and the audited financial information submitted with the second Form 5500. See 29 CFR 2520.104-50.

The regs say you must nclude 103b financial statements. A quick review of 103b suggests that that is not the case. Look at the required disclosures under 103b. I saw a lot of familiar items there - items that are included in auditors footnotes to the financials (but are not anywhere on the Schedule H). Example: Information concerning whether or not a tax ruling or determination letter has been obtained;

DOL Regs 2520.104-50 regarding short plan years/deferral of audit report. (b) Deferral of accountant's report. A plan administrator is not required to include the report of an independent qualified public accountant in the annual report for the first of two consecutive plan years, one of which is a short plan year, provided that the following conditions are satisfied: (1) The annual report for the first of the two consecutive plan years shall include: (i) Financial statements and accompanying schedules prepared in conformity with the requirements of section 103(b) of the Act and regulations promulgated thereunder; See 103(b) from US Code (definition of financial statements) https://www.law.cornell.edu/uscode/text/29/1023 Taken from this link: (2) With respect to an employee pension benefit plan: a statement of assets and liabilities, and a statement of changes in net assets available for plan benefits which shall include details of revenues and expenses and other changes aggregated by general source and application. In the notes to financial statements, disclosures concerning the following items shall be considered by the accountant: a description of the plan including any significant changes in the plan made during the period and the impact of such changes on benefits; the funding policy (including policy with respect to prior service cost), and any changes in such policies during the year; a description of any significant changes in plan benefits made during the period; a description of material lease commitments, other commitments, and contingent liabilities; a description of agreements and transactions with persons known to be parties in interest; a general description of priorities upon termination of the plan; information concerning whether or not a tax ruling or determination letter has been obtained; and any other matters necessary to fully and fairly present the financial statements of such pension plan. So it pretty much sounds like in the first of the 2 years you need to include full financial statements? I have never done this, and my 5500 software has never provided a validation error and my filings done based on this rule have never been rejected? Anyone have any thoughts??

I don;t understand how a non-profit could be subject to prevailing wage laws,, but it has something to do with their clients working on federal projects under some "put people to work" program. Anyone see any reason why this cannot be done in a 403b plan?

Probably not the document person's fault if I had to guess. I'd be looking up top for where to lay the blame. If it were my firm for example I would be horrified with myself. If you're running a TPA shop these are the sorts of things that you should be talking about and keeping up on.

Have that person add you as a user on the site. It is super-easy, no additional charge, and you will receive their technical update emails which are awesome. Among other valuable information you would have received the article in your original post when it was issued (and of course the amendment). It should be as easy as submitting an "incident" and requesting access.

I still think if this will get them going, I'd advise my clients not to poke the bear :)