austin3515

I don't understand where the concern comes from. Did you notice I mentioned a Match? They are doing it specifically because the Employer will give them more. So they can get a $5,000 bonus, or make a $5,000 deferral and receive a $2,500 match. They increased what they get out of it by 50%. That's pretty much the ratios that are being discussed in my example.

Plan design is this: Participants are able to choose between a cash bonus today, or an Elective Deferral to the Plan in the same amount as the bonus PLUS a matching contribution. The idea is that if people would prefer the cash in their pocket they can take it, but if someone is comfortable with a 3 year rolling vesting schedule they will get the extra match as a kicker. Anyone have a problem with the participant signing this election form on or before the date the contribution is funded? 1.409A-2(a)(5) seems to suggest that this is ok. Now I also have a provision that the participant will vest upon termination without cause. I believe in order to comply with the above, I have to "insist" that the termination without case take place greater than 12 months after the initial deferral election. Thoughts?

Well, but there was no new promissory note or anything...

Participant repaid a loan for $3,000. The Plan allows for just one participant loan outstanding at a time and his intention was to take out a bigger loan after repayment. He subsequently found out that he could not take the bigger loan he wanted because the plan does not allow for loans from Roth (due to a recordkeeper limitation). Since his plans were foiled he demanded that his loan repayment be returned to him, and the recordkeeper complied because the transaction was based on bad information that they provided. The money was in his account for a week. Now the client meanwhile thought the loan was repaid and so has not collected any loan repayments for almost a year and of course now the loan is in default. We were recently engaged to file a VCP application. Question: Was the loan fully repaid with a subsequent impermissible distribution? Or would it be fairly easy to suggest that the loan was simply "reissued" after discovering a misunderstanding?

yes, but 4/15/16 is a federal holiday. I'm willing to chance it knowing full well they will never match it up! I swear I've heard that even if I had said March 15, the mere fact that I sent in an extension means that I have until 4/15 (at least operationally).

Was it pushed back to 4/18/2016 like the 1040's?

Ahh, I bet that's it. You're saying he recordkeeper is going to treat 100% of the loan as taxable? I buy that for sure, especially considering the recordkeeper in this situation. They're good, don't get me wrong, but it's not Empower-grade technology.

I think there is a school of thought that says it is very bad to take a loan from Roth accounts. Can someone point me to an article that explains this, or please enlighten me on the logic? I have a client whose prior provider said it was a fiduciary violation to allow for Roth loans.

I do not recommend an -11g amendment to correct an egregious coverage failure with the stroke of a pen and nothing more. "My plan fails coverage because I left out 100% of the NHCE's, so the NHCE deferrals are zero, so no correction" just doesn't seem reasonable. Does it follow the letter of the law? Sure, I suppose, but we are still left with a plan that benefitted 50% of the HCE's and zero NHCE's. I think there needs to be some pain here.

No 410(b)(6)© transition period I take it? It would seem to me that you would use the ADP for the non-SH Plan. Seems hard to argue with that approach. Probably a candidate for VCP.

https://www.barracuda.com/products/emailsecurityservice/features/#section_8 Sounds like this is it. Believe it or not, we currently use Barracuda so I'm thinking we can just flip a switch... Thanks!

What are they using for those scans? Is it a particular software?

HAs anyone ever heard of an outlook plug in that will scan emails and attachments and warn you if it finds SS#'s?

This would be hugely helpful if you have this in writing? Was it a Q&A or something?

Wow, that one goes back a while Kevin!

Thoughts on my theory that it needs to be a classification determined based on business principles? So here is an example I thought of. You have two employees who are both nurses. The two nurses both work for the same Doctor. They are both salaried and have the same experience. They are both hourly employees. They are indistinguishable except by name and hair color . The only difference is that one was hired 10 years ago and one was hired 2 years ago. (assume 410a is not an issue even though as discussed I do personally think it is, but I have a leading industry expert telling me it is not). Assume further that the employer wants to exclude people with less than 5 years of service from the contribution. That distinction is not made based on business level criteria. It is based on an individuals particular circumstance. Therefore, length of service is not a business classification, inasmuch as the examples in the regs would suggest. If on the other hand, RN' were entitled to a greater contribution than CNA's, that would be legit because job description is specifically listed as a reasonable classification in the regs.

EWveryone is in there own group. You can do ANYTHING. That's the point and that's where this 410a thing gets more complicated (though I reiterate my agreement with Mike Preston). Of course you need to pass coverage and that's when the reasonable classification thing comes in to play.

FWIW, our recommendation is going to be to add a 3% SHNEC since they also have testing issues. Then we all go home happy...

I agree with you 100%. But he was VERY adamant... I even pointed to the example in the regs where only employees if Division B are elgible for the plan, and to be in division B you have to be employed for 5 years, but he was not swayed.

I did, certainly. I was totally floored by their response. One thing they pointed to was the match section of their document that allows different matches based on years of service, and there was no stipulation that each level "must" have a match. And if I told you the vendor I think you would agree that they have a lot of sway.

(b) Reasonable classification established by the employer. A classification is established by the employer in accordance with this paragraph (b) if and only if, based on all the facts and circumstances, the classification is reasonable and is established under objective business criteria that identify the category of employees who benefit under the plan. Reasonable classifications generally include specified job categories, nature of compensation (i.e., salaried or hourly), geographic location, and similar bona fide business criteria. An enumeration of employees by name or other specific criteria having substantially the same effect as an enumeration by name is not considered a reasonable classification. Here is what the regs say. One thing I notice in the examples is that the classifications do not seem to be determined at an individual level, they are at a business level. It seems to me that something like an individual's status or an individuals years of service departs from the business level classifications like hourly/salary, department type. Maybe someone can articulate it better than me what I'm saying...

Don't be silly, its to reward long-term employees!

I have a plan where the following groupings are used in a "everyone in their group" plan: Department Heads (probably ok!). People w/ More than 5 Years of Service People who terminated AFTER the end of the plan year People who work less than 30 hours per week. For those of you who read this and say "hey, is this the same plan he was posting about a couple of weeks ago?" the answer is yes, but my specific question here is, can I use the Average Benefits test. I should point out that I have it from a very very trusted ERISA expert that allocating a zero % contribution to people with less than 5 years of service does NOT violate 410(a) as long as the plan otherwise satisfies coverage and nondiscrimination. So, can I use the average benefits test with these groupings dictating whether or not people actually get contributions. It seems to me that a reasonable business classification can either be interpreted very broadly (hey, of course it's business!) or very narrowly (e.g., business lines, geographic locations, position)...

I don't think so because of the 12 month plan year requirement. You can't add safe harbors mid-year. What you want to do is change the plan year-end. That's the ticket for you. The only requirement there is that be a safe harbor (does not specify which kind) for the next "12 months."

I'm not with you on that. The regs talk about how to suspend or reduce the match (and now the nonelective too). You are wanting to suspend one and add another. But the latter is beside the point because your suspending one. If you are suspending the match, you must follow the rules regarding suspending the match. I don;t think I'm oversimplifying it.