Rai401k

We're having a little trouble trying to figure this out. We have 3 separate plans for 3 different companies that are considered a controlled group. All plans have exactly the same provisions (in short they all fund a 3% safe harbor and 50% up to 6% match). We just found out they had a 4th company that they never told us about. The 4th company has it's own plan as well. However it has different benefits. The plan has 183 employees 180 are NHCEs 3 are HCEs. Let's just say the 3 other plans have 1300 participants combined 300 are HCEs and 1000 are non-hces. How do we determine what testing has to pass in order for this 4th company to stand on it's own with different benefits?

Company A was bought out by Company B on April 1, 2018. Company A funded 3% SH and NCPS. The previous owners would like to fund the contributions for their compensation with company A from Jan 1 - March 31 along with the participants of company A's plan too of course. According to Co A, the acquisition was neither a asset or stock sale ?. They said " The entities are LLCs, therefore, the way the merger worked is that Company A contributed all of its assets and liabilities to Company B, and in return it received an ownership interest in Company B". 1. Sounds like an asset sale to me but i may be wrong. Has anyone heard of this? 2. Does the safe harbor profit sharing have to be funded pre merger (1/1/2018 -3/31/2018) for Company A’s Plan? Can a discretionary new comparability profit sharing be contributed pre merger (1/1/2018 – 3/31/2018)for Company A’s Plan? 3. Is it considered a short plan year, does the ER contribution get pro-rated. I feel like this depends on whether it was a stock or assets sale.

Participant in a 401(k) Plan has a life insurance policy and dies. I understand that the difference between the proceeds and the cash surrender value are non-taxable. The beneficiary is getting paid out payments of the cash surrender value how would we report this on the 1099R. Specifically what code do we use? for the tax free portion.

A participant just discovered that her 401(k) deferrals have not been deducted from her paycheck since 2012. Our client has reviewed their files and agrees that they mistakenly did not deduct from her paycheck for that year. They are willing to make up and fund a missed deferral opp. from 2012. However she believes that they should be making up for all year since. The client stated that they will not fund for 13,14,15 and 16 because they email employees every year requesting a new salary deferral form. This is part of their administrative procedures. Our client said that they have emails that clearly state that if they do not receive a new salary deferral form on Jan 1 of each year they will stop deducting and that the prior years form is no longer valid. Questions: 1. Is there a statute of limitation of how long a participant has to bring up a missed deferral opp? Do they have to fund a QNEC for the missed deferral opp from 2012? 2. Aren't salary deferral forms, etc. administrative procedures? In other words, they can argue the fact that the emails they sent out clearly state that prior years form will not be valid and therefore will not need to fund a QNEC for 2013-2016? 3. Finally would we have to submit to VCP? I know there's a 2 year window for SCP, however isn't this considered a insignificant error so we can still self correct? Thanks

not a QACA. Thank you for the link, yes I believe it's permitted. We are increasing the eligibility requirements and therefore it would only keep out employees who are not otherwise eligible for the safe harbor yet. Thanks again!

Now that we can make changes mid year to safe harbor plans can we increase the eligibility requirements? Plan currently has a 6 month wait for all contributions (including sh match). The client would like to increase it to 12 months. from ASPPA (under prohibited mid year changes) - "a mid year change to reduce the number, or otherwise narrow the group of employees eligible receive the safe harbor contribution" from Sungard (under prohibited mid year changes) - " a mid year change to reduce the number, or otherwise narrow the group of employees eligible to receive the safe harbor contribution. However this does not limit the ability of the employer to amend a plan mid year to change eligibility requirements for employees who have not yet become eligible to receive the safe harbor contribution. Sungard is stating that you can increase the eligibility requirements mid year but i haven't seen this anywhere else so i wanted to make sure that it is in fact permitted.

Does anyone know if you can set up payroll deduction IRAs and have a 401(k) plan under the same employer. We have a client that excludes all highly compensated employees from the 401(k) plan. Since the 401k is not offered to the HCEs they are looking to offer the payroll deduction IRAs to the HCEs. Does anyone know if this is permitted, I read on the IRS website that the Payroll Deduction IRAs would have to be offered to all employees of the employer. However they don't want to do this for obvious reasons.

Does anyone know what a QLAC is, we have a client that would like to transfer their 401(k) to a QLAC to avoid taking his RMD. He is 70 1/2 and 5% owner. The plan allows for in-service distributions at age 59 1/2. Can he move his money from the 401(k) in to a QLAC? If so would he be required to take his RMD from the 401(k) for 2015 before doing so?

We have a plan in place for Company A, they are a Management Company and wholly own Company B which is a Dentist Practice. Company B is currently and adopting employer of Company A's plan. Easy right! But now they have restructured the company and want to split everyone in to separate plan. I think we're ok but any advice would help. Company B (the Dentist Practice) was dissolved and 3 new companies were created as of 6/1/2015. The employees from Company B will be split up amongst these companies. Although there's common ownership between Company A and the three new companies (Let's call them Companies C, D & E) they are not a controlled group. However A (B dissolved) C, D, & E are considered an affiliated service group. Company A being the Management company and services provided amongst the C, D, & E which are all Dentist Practices. Company A will leave the current plan in place, but they want to create separate plans for C, D, & E. I think we are ok here, as long as testing etc. passes separately. Let me also state that all provisions amongst the separate plans will be the same. Here's what we aren't sure about. 1. Company C, D, & E will set up as of 6/1/2015 and as i stated employees will be moved over from Company B that was dissolved. Although the companies didn't exist effective 1/1/2015 can we still set up the new plans with this effective date to avoid a short plan year. 2. No employees are terminating they are simply moving from one company to another so do you agree that this can be done by a trust to trust transfer and would not constitute a distributable event?

The definition of compensation under the plan document is W-2 however there is self employed income language in it. We use Relius IDP V.S. (See definition of comp below). 1.22 "Basic Compensation" means the Participant's wages as defined in Code §3401(a) and all other payments of compensation by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Participant a written statement under Code §§6041(d), 6051(a)(3) and 6052 (Form W 2 wages), as well as amounts that would have been received and includible in taxable compensation but for an election under Code §125(a), Code §132(f)(4), Code §402(e)(3), Code §402(h)(1)(B), Code §402(k), or Code §457(b), plus, effective for Compensation Computation Periods beginning on or after January 1, 2009, Military Differential Pay. Compensation must be determined without regard to any rules under Code §3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code §3401(a)(2)). Basic Compensation for any Self Employed Individual (with respect to the Employer maintaining the Plan) shall be equal to such individual's Earned Income. Basic Compensation shall not include amounts paid as Compensation to a nonresident alien, as defined in Code §7701(b)(1)(B), who is not a Participant in the Plan to the extent the compensation is excludable from gross income and is not effectively connected with the conduct of a trade or business within the United States. The partner is part of an adopting employer of the plan. Would his 1099 income be eligible? He does not receive K-1 only 1099.

We have a new comp plan and each employee is in their own group. Each year the sponsor will inform us what percentage or dollar amount each HCE and Owners should get. We then test the plan and determine what the NHCEs must get. In most cases even though the NHCEs are all in their own group we will give them the all the same %. Enough to have the test pass. The IRS agent said that she's never seen so many different %'s across the board and that she usually sees three or four separate groups. I explained that all are in their own group and that the HCEs are able to get different percentages actually even the NHCEs are. However she wants us to demonstrate how we get to the % amounts for each HCE. I guess this is more of a "what would you do" than a question. I think we are just going to give her what the sponsor provided us to show what the HCEs are to get and then show her what we proposed to give the NHCEs and that's it. I don't think we did anything wrong here.

I've never heard of this for a non-elective contribution, only for matching. I was going to say to check the definition of compensation and to see if it excludes prior to plan entry but it seems that they are not even going by that they are strictly giving the SH based on the plan execution date. I would say that they have to true up from 1/1/2014.

Plan allows for hardship distribution based on safe harbor standards. A participant wants to take one to prevent foreclosure (as stated under the sh reasons). What constitutes as preventing a foreclosure? Actually receiving a foreclosure notice and then taking a hardship. OR Can he take a hardship because he is behind on his mortgage by two months. He is preventing foreclosure by taking the hardship to get caught up.

That's correct, participants are eligible for the contribution. It's sh profit sharing so it's based on their annual comp they are just funding it on a payroll basis And that's correct BG5150, we don't know if it's better to have them true-up when they enter or if it's ok to wait till the end of the year. So far, we've been doing it at the end of the year so we will leave it as is, we just wanted to get an idea if it was ok to wait. Sound like everyone agrees as long as we keep it consistent it's ok. Thanks!

We a plan that funds the 3% SHPS contribution each payroll period. All compensation is used, in other words they are NOT excluding comp prior to plan entry. Are there any problems if the client waits until the end of the plan year to true up new hires 3% safe harbor. Right now they start the 3% upon plan entry and then we calculate the true up. However should we require them to true up the 3% from the beginning of the plan year as soon as the participant enters the plan?

BG5150 it was elapsed time - anniversary to anniversary. I think I agree with you Tom

We have a plan that used elapsed time for vesting, however effective 1/1/2015 the plan was amended to change vesting to counting hours. The vesting schedule was also amended from a 6 year graded to 25% a year effective 1/1/2015. If we have a participant that was hired 6/13/2011 for example (this is a calendar yr. plan) what would there vesting be as of 1/1/2015. Based on elapsed time the vesting prior to 1/1/2015 was: 6/13/2011-6/13/2012 - 1 year 6/13/2012-6/13/2013- 2 years 6/13/2013-6/13/2014 - 3 years Prior to the amendment this person would be 40% vested. Does this person become 75% vested on 1/1/2015 (based on 3 years) OR is this person now 100% vested since it's counting hours. In other words since we changed it to hours do we now look at the fact that this person would have 4 years of service as of 1/1/2015 (2011,2012,2013,2014 - lets assume this person is full time and would have completed 1,000 hours in all years).

I'm curious about what other TPAs are doing about the recent hype about after-tax contributions. We have received so many phone calls in the past month asking us to amend client's plans to add after tax contributions because of notice 2014-54. We do not want to add them to our plans for many reasons but the main being the ACP testing and of course top heavy problems. Is there anyone that is adding after tax contributions to their plan? If so, what are you doing to remedy issues with ACP testing and top heavy issue. I understand this can work for owner only plans but we are getting requests from small plans where the HCEs and Owners want to put in the after tax contributions and take an in-service to roll it in to a Roth IRA!

Thank you, this is what we have been telling them but they don't seem to get it. I agree that the spin off plan is starting off on the wrong foot. Thanks!

We have a client that has an adopting employer. The adopting employer will cease participation in the plan as of 12.31.2014. (Ownership will changed and no longer a controlled group). The current plan is a definite safe harbor plan (3%) however the adopting employer does not want to fund it for their employees for 2014. What are the repercussions for the plan if the adopting employer does not fund the safe harbor for their employees. Even though the employer/plan sponsor will be funding it for their employees, it still puts the plan in jeopardy. Has anyone had this situation? The adopting employer doesn't seem to care that the plan will be in jeopardy since they are going to be spinning off on to another plan starting 1/1/2015. Also because they have no association with the current employer going forward.

We are in the middle of restating our 401k plans for PPA and realized that it has been a while since we restated our cafeteria plans. We don't administer any of them however we have our own and were wondering if we are required to restate that any time soon. It looks like the last update was at the end of 2012. An amendment to change the Health limit to $2,500. We've recently updated our forms for the $2,550 Health limit for 2015. But that's about it.

We have a client that would like to rollover a substantial amount of money from his IRA to his 401(k) plan. However he would like to be able to access this money by either taking a lump sum distribution each year if needed or rolling it back to the IRA. The plan document states that a participant may distribute all or a portion of the amount credited to the participants rollover account at any time. He is under age 59 1/2, i understand that he could take lump sum distributions from his rollover source from the plan based on what the document says. However can he roll it back to his IRA? Is it considered an eligible rollover? I believe it is but i just want to make sure.

Distribution from a NQDC plan for active employee. The document states that an employee can take a distribution from the plan upon emergency if approved by the employer's committee. How are distributions taxed from a NQDC plan? Do we withhold 20%? I know that there's no 10% withholding even if under 59 1/2. There's some places that state it's done via W-2 if the person is an employee? Not 1099. What if they are terminated is it true that we have to report it on the 1099 Misc. (Is there 20% wh though?)

I'm not sure if this is going to help, but we submitted a document to VCP for a client that never restated for EGTRRA. They did have a GUST doc and GUST determination letter. When we took over the plan we restated for EGTRRA and then submitted the EGTRRA document along with all the required amendments (PPA, HEART, 415, etc.) and sent the VCP submission with a copy of the GUST determination letter. After we mailed it in, I decided to call the IRS....to my surprise the agent I got on the phone was very knowledgeable about the process . He said although he doesn't think it will be a problem with just the determination letter he believes I should have included the GUST information with the submission. He went on to say that as long as the submission includes the VCP fee and you have attempted to put together an accurate submission they will not reject it. The point is i think you should include GUST and EGTRRA BUT if you don't submit everything they need they will most likely come back to you for what they are looking for.

We have a client that received the same CP220 notice as well with the same language. Makes no sense? It has to be a glitch or error on the IRS's part.