austin3515

Wow, that does not sound kosher at all. 300 plans commingled in one trust account at ABC Bank And Trust? That does not sound right, UNLESS of course we're talking about a regulated financial institution. After they are just recordkeepers at the trust level. They have systems in place to track trust accounts just exactly like a RK does it for participants. ABC Bank and Trust gets one check from Fidelity for $1,275,342.64 for a dividend from Fidelity Magellan Fund. ABC Bank and Trust applies that to each client it has on its system. But because ABC is a regulated financial institution, I need not go that deep into their operations. I can simply rely on the statement I got from ABC Bank.

But those are regulated financial institutions, so if they recordkeep it separately at CUSTODIAL level (not the recordkeeping level) than it's separate by any reasonable definition. Yes of course I understand what you just said is true but you're going one step too deep in the operations of Fidelity in my opinion.

The ABC and XYZ 401(k) Plans. Better check with the recordkeeper though, sometimes even the best plan designs get decimated because of system limitations...

Well you hit on interesting point. The Mutual Fund recordkeepers run a software program that is nothing more than a really supped up spreadsheet. Someone other department maintains a giant trust account with 4,522.454 shares of Fund ABC. So the investments are in a single commingled pool for purposes of being able to fund the benefits of the other. Hence the single plan treatment for purposes of the audit. At least I think that is how the story goes...

It must be Christmas time cuz the Grinch is back!

Wait just a minute... If the assets of two or more plans are maintained in a fund or account that is not a DFE, a registered investment company, or the general account of an insurance company under an unallocated contract (see the instructions for lines 1c(9) through 1c(14)), complete Parts I and II of the Schedule H by entering the plan’s allocable part of each line item. I figured this out. Let's assume all mutual funds. What this note is saying is that you should simply report the mutual fund balance for each plan separately on each plan. If on the other hand the investment was NOT a mutual fund (for example a separate account that is not a DFE) you should instead report each plan's pro rata share of the underlying investments (which might be mutual funds, stocks, bonds, whatever). It is not precluding the commingling of investments, only clarifying how to report on funds that do not meet the nice exceptions regarding MF's and DFE's, etc. But still I come back to the audit question as the only real complicating factor. But the terminology of "assets being available to pay benefits of the other plan" does seem to rign a bell in whatever it is I am discussing. Because that is the only barrier to commingling (in my opinion) assuming you are not approaching the audit requirement I would not worry. Also, check with the recordkeeper as I'll bet you they have a lot of contracts that include more than 1 plan.

Audited plan. What are people doing for the Schedule A?? These are just regular policies with Cash Surrender Value. I have the info on commissions paid but I don't think anything else applies. But then again I'm not sure which is why I ask...

If I had to respond that this was an integrated allocation plan I would be so humiliated I might never post again . So everyone is in their own group and of course all testing passes.

A CPA has suggested that we need to be careful allocating profit sharing to owners in proportion to their ownership for S Corps. So for example, assume Owner A owns 70% and Owner B owns 30% of an S Corp. IF we do $7,000 of profit sharing for A and $3,000 for B, the IRS might suggest (according to this CPA) that this is a disguised dividend of some kind. My proposed response was "So you're telling me every 50/50 S-Corp that is giving the two owners the same profit sharing has a problem?" But then I realized that that wasn't a good argument because it was being allocated based on compensation and not ownership (or at least a per capita allocation if comp was different). In my scheme, the profit sharing is being allocated based on solely ownership. So I need to do my due diligence here. Anyone see a problem?

Hmmm... I hope someone chimes in here. Again, most many plans pre-EGTRRA were done this way, so I hope someone can help out. I will say this though. The site clearly suggests that assets for 2 plans can be commingled and the context is merely referring to reporting.

http://www.dol.gov/ebsa/pdf/2015-5500inst.pdf Page 33 of the schedule H instructions: If the assets of two or more plans are maintained in a fund or account that is not a DFE, a registered investment company, or the general account of an insurance company under an unallocated contract (see the instructions for lines 1c(9) through 1c(14)), complete Parts I and II of the Schedule H by entering the plan’s allocable part of each line item. If you go back before my time this was actually quite common with the paired money purchase/profit sharing plans. One caveat is that it is treated as a single plan for the audit requirement. I tried to find my site for that without luck. Anyone?

If you're in this business it would be silly not to do it now. We had a guy in our office and I said in 5 years you're going to kick yourself for not doing this.

OK, he tricked me, especially based on the specificity of every other sentence...

I think this is another example of how ridiculous the IRS position on this is. Personally, it does not bother me in the least because this can only INCREASE a participant's own savings and INCREASE their match. To prohibit this is so contrary to obvious public policy it is ludicrous. I would love see the headlines. "IRS disqualifies plan for adding auto enrollment and dramatically increasing the retirement readiness of their employees." Could you imagine?? This falls in the same camp as amending the plan to eliminate a 1 year wait for the plan. I truly think prohibiting these sorts of changes is so bass ackwards it's not funny. It's downright scary.

I happen to agree that the ambiguity redounds to the sponsor's benefit. The SH rules explicitly state they must be funded by 12/31. So if you comply with that requirement, I happen to believe that you should be ok. The EOB says "The safe harbor contributions must be made no later than 12 months after the close of the Plan Year.... However, if the employer wants to deduct the contribution for a particular taxable year, the contribution must be made by the due date for filing the employer's federal income tax return." Also, the 415 deadline is tied directly to the deduction rules. There is in my opinion a huge unexplained void regarding how you treat 415 limits if the contribution is deducted in the year funded. I really think Sal would have said something about the 415 limit if it was a concern.

We had an ERISA attorney bless us "un-terminate" a plan that was terminated (obviously before it was put into effect). Of course you could not unvest people if there were non-safe harbor dollars. I don't know what public service goal is achieved by prohibiting you from reviving an otherwise viable plan anyway. So I try to envision the audit of the plan, where the auditor says "you didn't terminate this plan and screw all your loyal hardworking employees?? Disqualification!!"

This has been done already. Not sure when it's effective, but it's in the next couple of years.

Medical care under 213(d) is defined as: (1) The term “medical care” means amounts paid— (A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, (B) for transportation primarily for and essential to medical care referred to in subparagraph (A), © for qualified long-term care services (as defined in section 7702B ©), or (D) for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B (b)). So just to be clear because I have actually never come across this. An employee needs to pay premiums for a spouse's insurance policy (or perhaps to pay his or her own premiums while out on an unpaid leave). Is this eligible for hardship? I seriously did not expect to ever learn anything new about hardship distributions!

Fidelity's documents allows all sorts of exclusions for all sorts of things. IT's a table where the rows are the comp items (bonus, overtime, etc), and the columns are the sources, with check marks as applicable throughout the grid. There is one column entiled "401k and SH Match", with separate columns for each of profit sharing, Safe Harbor Nonelecitve, Non-Safe Harbor Match, etc.

Me neither. I know some people do though., For example, Fidelity's preapproved plan does not allow a different definition of comp for SH Match and deferrals. I think the issue is that they are inferring that some NHCE's might end up with an inferior match to some HCE's due to the disparity. So HCE 1 gets not bonuses, but NHCE 1 does get a bonus and defers. The NHCE 1 gets no match on some of his deferrals while all of HCE's deferrals are matched. I think that is a very overzealous interpretation, akin to the IRS's belief that forfeitures can't be used for SH contributions. And I also think it would be ridiculous if federal policy denied the opportunity for someone to defer from a bonus, which I think counts for something. I just lost a plan, and the new provider is questioning whether or not that provision was permissible, so I just wanted to see what others thought.

The question is not just can I exclude bonus for safe harbor match. It is can I a) both exclude bonus for safe harbor match AND b) include bonus for purposes of determining payroll deduction contributions. As I mentioned, I'm passing 414s by a very wide margin. In fact it is specifically because the HCE's are getting such big bonuses relative to the staff that they don't want to match the bonus.

Our Corbel VS PT Formatted appears to me to very clearly allow me to include bonus for purposes of determining the elective deferrals, but exclude bonus for purposes of determining the match. My definition satisfies 414(s) by passing the ratio percentage test. I think some people argue that the issue is that an NHCE who gets a bonus, where an HCE does not, is somehow getting an inferior match as a result. To me it seems contrary to logic that the IRS would insist that employees in such a plan be barred from making payroll deduction contributions. But I do believe that is how some document providers feel. Thoughts?

That is awesome!! Thanks!

I guess I'll take any suggestions.

Good call on the IRS, but nothing is upcoming on their phone forum website... Here is the site for anyone curious to know where it is: https://www.irs.gov/Retirement-Plans/Phone-Forums-Retirement-Plans