buckaroo

One of my plan sponsor's has informed me that they accepted an invalid rollover of funds. We have informed them that, based on IRS Notice 2014-9,the funds need to be refunded to the participant (with any applicalbe earngings). The question that is now coming up is what code should be used on the Form 1099R. The Notice does not detail what code should be used. 1) Does anyone know what code should be used on the Form 1099R? 2) Since it is an invlaid rollover, my assumption would be that 10% should be withheld. Does anyone agree? Any help would be greatly appreciated.

Just saw this and wondering if anyone else has anything more on it: http://www.irs.gov/pub/irs-dft/f5500sup--dft.pdf

Just reading this now. I would also be aware of the testing methodology. Are they current or prior? If they are prior and there was no match last year, you should consider amending to current.

I think you are asking if the comps should be limited to 401(a)(17) when determing the TPG. The answer is no. You rank them based on comp without regard to 401(a)(17) to determine who is in the TPG.

I have been under the impression that there are two schools of thought in a situation where a participant was paid eligible compensation, but did not work in the year in question. The first is if a participant was paid during a plan year then they should be included in the testing. The second is that if a participant did not work during a plan year that they should be excluded from the testing. I think the more conservative approach would be to include them in the testing and provide them with the SH contribution. (Especially since they made elective deferrals in the testing year.) You may want to have the plan sponsor confirm in writing whether or not this participant should be included in or excluded from the testing.

I have a client who wants to design the plan the following way: SHMAC 100% up to 4% and an additional match with a formula of 0% of the first 4% and 100% of the next 2%. I believe that due to the increasing match formula on the additional match, the plan would be subject to ACP testing. My colleague beleives that because the entire match is effectively 100% of the first 6%, then no ACP testing is requried. There are effectively no caps on the elective deferral precentages. Opinions would be greatly appreciated.

I have a plan sponsor that wants to amend their plan document (2015) to provide a reduced elective deferral maximum for certain HCEs. For example, the plan covers employees in Division A and Division B. The plan sponsor wants to limit the maximum elective deferral percentage to 5% for HCEs in Division, while leaving a 25% limit for HCEs in Division A. (All NHCEs are limited to 50%.) Does anyone see any issue with this? I see none at this time since it is limiting HCEs and not affecting NHCEs. Thoughts?

Thanks Tom. Appreciate the help.

Does anyone have a good spreadsheet for self employment income calc? Can you tell me where you got it or share it? Thanks in advance.

I do not see any replies to this topic so I thought I would repost with my related issue. We are being questioned regarding the use of plan entry dates vs. statutory entry dates for disaggregation for coverage and carve out of ADP testing. Specifically, the attorney is saying something along the lines that in order to use statutory entry dates, something needs to be in the plan document to this affect. My recollection is that 5 - 10 years ago, an IRS rep made some type of off-handed comment at an ASPPA annual conference to this effect, but I thought that it was just a comment. Can anyone point me to more information on this topic and what needs to be done (if anything) to continue to use statutory entry dates for coverage and ADP carve out? FYI - I have already read through 410(b)(4)©, § 1.410(b)-6(b)(3), § 1.410(b)-7©(3), and 410(a)(1) - 410(a)(4) and it is not clear.

Thanks for your help. We found the same one and a few more. We were hoping for an article that specifically talked about ADP refunds, but there does not appear to be any that we have found. Again, thanks for your help. It is greatly appreciated.

I just got a question from a colleague of mine asking if I knew the default tax withholding on an ADP refund from a Puerto Rico qualified plan. My recollection was that 10% withholding is correct on virtually all distributions from a Puerto Rico plan (except for certain lump sum distributions). Can anyone confirm this? Does anyone have a cite? Thanks in advance.

I have a plan where an HCE died in 2013 and during 2013 the account was transferred to his beneficiary's (spouse) account under the plan. When the 2013 ADP test was run in 1/2014, the deceased ptp was due a refund because of the failure of the ADP test. My question is how is this amount distributed and how should the 1099R be coded? Does the corrective distribution get withdrawn from the beneficiary account and paid to the participant's SSN and taxed accordingly? Or does the corrective distribution get withdrawn from the beneficiary account and paid to the participant's estate and taxed accordingly? Since the beneficiary is his spouse, does the corrective distribution get withdrawn from the beneficiary account and paid directly to the beneficiary and taxed accordingly? Or some other way? Any help is greatly appreciated.

Thanks for the replies. I agree that they should not be in the ACP test and should be included, but not benefitting in the 401(m)coverage testing. As for the system, before I sent the messge, I had already: I went down to the Excluded Classes section and checked the “Other” box. I then filled in “Excluded Group” in the text field. I clicked modified and exited the Plan Specs. I created a DER for SSN, Employee Type Code, and Employee Type Date. I imported the SSN, “O” for the type code, and the first day of the plan year for every participant. I reversed all of the transactions in the plan year being tested (including the eligibility transactions). I checked the box “Compute Comp and Hours” on all transactions that I wanted to post. I then re-ran all of the transactions. I ran the ACP test (including Include in Test for the Statutory exclusions) and it still shows the entire population included in the ACP testing. I have sent this off to Relius for their review. I think I am going to manually code the "Include in ACP" and "401(m) plan" under Benefitting Determination in census. Does anyone have any additional thoughts?

I have a plan that has employees in multiple divisions. The plan allows all of the employees of all of the divisions to make elective deferrals (when the meet eligiblity and entry dates). The plan allows employees of only two of the divisions to receive matching contributions. The plan's definition of an eligible employee specifically excludes all but two of the divisions from the matching contribbutions. My issue is how should these people be treated for ACP testing and coverage testing. My thought process was that they are excluded from the matching source via the definition of eligible employee and therefore should be excluded from the ACP and in the coverage, not benefitting group in the coverage testing. From my reading of the EOB, it says that when there is a discretionary matching contribution and one group is given zero, there are two possible options available: One is as I have thought above and the other is to include them in the ACP as zeros and include them in the benefitting group for coverage. My issue with this is that this talks about a discretionary matching contribution that can be give at different levels. My thought is that this may different as my situation specifically excludes them from the testing. I use Relius and I posted a matching transaction for the each specific division that was to receive the matching contribution. When I run the ACP, it includes the folks who are not eligible for the match as 0%. It also includes them as benefitting for the covereage testing. This seems to support the second theory, but I may have a coding issue as to how I have set-up Relius. Does anyone have an opinion regarding the which methodology is correct or even preferable? Any thoughts are greatly appreciated.

I work exclusively with DC plans. I have virtually no knowledge of DB plans. I do know that if a plan sponsor is needs to run the ABT, the DB accruals are required to be included with the DC conts or EBARs when calculating the ABPT. One of my new clients just informed me that they have a frozen DB plan. My understanding is that when plan sponsors elect to freeze a DB plan they are still required to contribute to it. Therefore, I would assume that the contributions to the DB plan must still be included when calculating the ABPT. Is this correct? Is it correct all of the time? Is there any time when this would not be correct? Is there anything else I should know about frozen DB plans and their effect on the DC plan that I work on? Any help is greatly appreciated.

Thanks for the replies!

Has anyone heard when the 2014 COLA limits are going to be released? If so, when? Related to the delayed 2014 COLA limits, we are discussing how we are going to craft our Safe Harbor notices if the 2014 COLA limits have not been released, but we do not have a concensus. (At this point, we are going to wait as long as possible and hope that the 2014 limits are released.) Has anyone else had any discussions related to this topic? If so, what ideas have been discussed?

If the staff members are made up of seperate groups of some kind, perhaps you could include some of the staffers in the owners plan. In your detail, if you have 4 HCEs (2 of which are owners), and 7 NHCEs, you could make 3 of the NHCEs eligible for the owners plan and the remaining 4 NHCEs (and 2 HCEs) eligible for the other plan. The owner plan could be safe harbor and the other plan can be non-SH plan. You would pass coverage and even if the owner plan was top heavy, it would (most likely) satisfy the TH min, even if the owner plan wanted additional NEC. The tough part may be determing the groups and drafting the plan doc. The other consideration is the cost of maintaining two qualified plans.

I agree that the determination for OEEs is the based on the maximum possible eligibility of age 21 and YOS. However, there are options as to which entry date is used to determine OEEs. A few of the possibilities are statutory entry date (semi-annual), plan entry date, and 18 months following the completion of age 21/1. If I utilize the semi-annual entry dates, then it would appear that I have the same OEE group for each source. If I utilize the plan's entry date (monthly in my example), then I would have different OEE groups for different sources. Thoughts? In addition to this, if I use 21/1 and semi-annual entry dates for the determination of OEE group, how/why can I determine statutorally excludable employees on a source by source basis? Continued discussion is greatly appreciated.

It is only one staff and one owner, correct? Amend to New Comparability then the owner has the right to receive a cont in the future.

Just to clarify, are you telling me that I can have a participant classified as a statutorily excludable employee for ADP purposes and not for ACP purposes? Quick example justs to make sure that I am following: Elig and Entry date for Elective deferrals: immediate with monthly entry Elig and Entry date for Match: 3 months and quarterly entry Elig and Entry date for NEC: 1 YOS and semi-annual entry Ptp is hired 11/1/2012 The person meets the age 21 and 1 YOS on 11/1/2013. I am using plan entry dates for determination of the OEE group. In this case, PYE 12/31/2013 the person would be an Statutory employee for the 401(k) portion as they would be treated as entering on 11/1/2013. the person would be an OEE employee for the 401(m) portion as they would be treated as entering on 1/1/2014. the person is ineligible for the NEC portion as they would be actually entering on 1/1/2014. So, the population for the Stat EE ADP test would be different than the Stat EE ACP test. Correct?

Can the person in your office provide details regarding their opinion? Perhaps a citation?

One additional issue to consider is the 415 Limit. In general, employer contributions must be made within 30 day of the tax filing deadline to be counted in the testing year's 415 testing. If the contribution is deposited later, it is counted in the current year. This will present problems when a participant is receiving a QNEC and terminated in the testing year.

Thanks for the reply. Does anyone else have an opinion on the OP?