austin3515

Well if they had ended it there, but they felt it necessary to expand. FWIW, I feel strongly (I am convinced actually) that the date is 4/1/17.

That's the best non-answer I've ever seen. They really went out of their way to not answer!

jpod, who suggested that? I merely asked a question, and for the record I have been telling people for years the due date was 4/1/17, but I just wanted to poll the community.

Participant's last day of employment is ON 12/31/2016. He worked ALL DAY 12/31/2016. He is 74. When is his first RMD due? Discuss!

I've always been uncomfortable with this. I was never able to put in writing what it was, but Tom you hit the nail on the head. I had another client ask recently (thankfully they asked first) if they could let a new executive in right away (and waive the 1 YOS requirement) because the CEO had, as part of the negotiating process, told the executive he would waive the eligibility. I'm glad I wasn't the person charged with telling the CEO it wouldn't work, but let's say I hadn't been able to nip it in the bud. I think Tom's point about facts and circumstances, and the fact pattern I just outlined, is clearly suggestive of a problem. Now, interestingly, we did address with a top ERISA attorney who was comfortable recognizing service with the executives former employer based on the "He is not an HCE" argument (they opted NOT to set the precedent in the end). But does a different standard apply to an EPCRS retro amendment? Should the IRS issue some clarification on this point? It comes up all the time!

Ee is a new hire in 2016 and thus an NHCE in 2016. Allowed into the Plan early. Today we want to amend the Plan retroactively to allow him in. The problem is he made $130,000 in 2016. He would have entered 1/1/17 absent the EPCRS amendment, so the amendment would only affect the period of time that he was an NHCE. What do you think? Can we use EPCRS SCP for the retro amendment to make him eligible in 2016?

I had to look up what tautology meant, but now that I know, I also agree with Mike. The point is, there are no PLAN ASSETS. The employees already have the money. FYI: "the saying of the same thing twice in different words, generally considered to be a fault of style"

CuseFan, my coverage came out at 98.5% :) I don't know if you read through RBG's excerpt from the EOB, but I have concluded that the scenario is close enough to use the same methodology. Don't forget it's just a question of where they hurt me - ACP testing or coverage. I'm including a lot of zeros in my ACP test based on this methodology/ Tom, its enough work to do one test a year, let alone 4!

Well that will cost everyone payroll taxes too though, which have already been paid.

If the employee doesn't care I would personally let it ride. If they are upset, you should be able to reverse on payroll (negative 401k deduction) to get him his money back, and the recordkeeper should be willing to refund the plan sponsor based on a mistake of fact. Certainly easy enough to fix.

So this would not be relevant, fyi. When you have a compliance failure you can;t go to your employees and say "are you ok that I didn't follow the terms of the Plan"? I only mention it because it seems like your suggesting that based on this fact (and based on good communications that there was an ongoing failure to follow the terms of the Plan) there really is no correction required. My bottom line would be (from a technical perspective) you do have a compliance failure because you HAD a document that said people had a right to defer and you didn't do that. You excluded them when they were eligible, and EPCRS has a specific correction for precisely what you have. But to answer your question, your prior year ADP is zero. The 3% rule is only for the first year of the plan, and this is the second year of the Plan.

Yeah, I think that works! Thanks RBG!

I'm sorry, but can you clarify one thing - I assume that the only amounts deposited to the Plan were amounts that were withheld from the individuals paycheck? It's just that in the first pay-period, they withheld (and deposited) more than he/she had elected?

Question: Plan has a quarterly matching contribution with a requirement that participants must be employed on the last day of the quarter to get the match for that quarter. Problem is they might match one or two quarters during the year. Anyone have any suggestions for how to run coverage? Can I treat anyone employed on 3/31/2016 as benefitting in the Plan, even if there was no match in that quarter? What is someone terminated 4/15/2016, but there was no match until the 3rd quarter? Can I treat that employee as benefitting?

Interesting though because it makes it sound like I can use a free pass on testing since this was the only HCE in the Plan. If I can disregard anyone effected by this failure, I can disregard my only HCE. Sometimes I wish they would just write this stuff in plain English.

Question: HCE's 403b/match was miscalculated. So we under-withheld for a period of 18 months or so. The Plan has a matching contribution too, and pursuant to EPCRS we are contributing the match he missed as well. The question is: How does this affect the ACP test? if you haven't already guessed, we historically have testing issues. I read through EPCRS and it does not mention this at all. Do we need to back and run ACP testing? Do we include in the current year ACP test? Or do we just not do anything because, hey, I corrected in accordance with EPCRS.

OK maybe I see what you're saying - less than or EQUAL to, but the OP did not specifiy when in 2017 they began, and I'm assuming it was sometime after 1/1. I suppose if from the first pay-date in October through the first pay-date that deductions began was less than 3 months you could make the case for it.

BG, they said nothing was withheld in 2016 - 10/1/16 to 12/31/16 is 3 months. Perhaps you inadvertently subtracted 10 from 12? Or maybe I'm missing something...

Don't you have a operational failure here for not giving participants the opportunity to make 401k contributions? I certainly think so. I'm assuming the failure was longer than 3 months and as such the QNEC would be 25% of missed deferrals and 100% of the match. Interesting question is, 25% of what? Perhaps 25% of the election the ultimately made? Perhaps 25% of 3% (even though EPCRS is clear that it is based on current year activity). But 25% of zero hardly seems appropriate.

OK, but when I do my taxes I have to type in all of my Box 12 numbers, so the software WOULD know if I went over and presumably adjust accordingly. Is your position that TurboTax would not know to cap the deduction at $18,000/$24,000? I don't know one way or the other but I do find it hard to believe. If it's true, shame on them.

It's not a theory? It's what the rules are? And any tax software should do this automatically. I have never prepared a tax return other than my own, and I've never exceeded the limit, so hard to say. I do have a hard time believing a tax program would not limit each individuals 401k in accordance with 402g.

Geeze, I would just be REALLY careful that maintaining the plan itself does not blow the spousal exemption. The rule is each spouse cannot "participate in the management of such corporation at any time." I could see a picky auditor picking you apart over that. Since the stakes are high, I would not commingle anything. i.e., even if technically correct, you might be in a position where you have to prove your point. (5) Spouse An individual shall be considered as owning stock in a corporation owned, directly or indirectly, by or for his spouse (other than a spouse who is legally separated from the individual under a decree of divorce whether interlocutory or final, or a decree of separate maintenance), except in the case of a corporation with respect to which each of the following conditions is satisfied for its taxable year— (B) The individual is not a director or employee and does not participate in the management of such corporation at any time during such taxable year;

Please note that EPCRS has been re-written as Revenue Procedure 2016-51, fyi (I think original posts pre-dated its release)

What do the voluntary contributions have to do with it? After-tax contributions would only reported in Box 14, apparently on an optional basis (not box 12). But I'm with QDRO... Do not redo the W-2 if they are accurate. If a 45 year old contributed $20,000, then the W-2 should say $20,000. His or her CPA would only deduct $18,000 on their 1040 due to the cap. A $2,000 distribution must be processed by April 15th 2017 must be processed. The participant will get a 1099 in January 2018 with a code P indicating the amount is taxable in the prior year. No action is required, because the participant DID pay taxes in 2016 (i.e., because he only deducted $18,000 on his taxes).

Spirit rider, what about my follow up question?