Kevin C

I haven't done that, but I read the section you cited the same way you do, as saying a mid-year prospective change to the eligibility service crediting or entry date provisions is allowed, provided it doesn't violate any other rules. Did you see Example 7? It also gives guidance on the SH notice with a mid-year change similar to your situation.

Your description sounds like the attorney wants to file under VCP and propose what he thinks is a reasonable and appropriate correction. The IRS may agree to the proposed correction method, or they may want a different method used. I wouldn't be surprised if it is done as an anonymous VCP filing.

I agree with RBG that the details are inconsistent. What was provided to the plan back in 2003? I've seen a few divorce decrees that had enough detail in them to meet the requirements to be a QDRO.

There is no guidance, either formal or informal, from the IRS regarding spin-offs and mergers of safe harbor plans. Without guidance, you will need to make a reasonable, good faith interpretation of the code. If the safe harbor provisions in the spun-off plan are the same as the original plan and everyone in the original plan is in one of the plans after the spin-off, so that everyone gets the SH and deferrals they would have if the spin-off had not occurred, I think that fits within a reasonable good faith interpretation. Others may disagree. The "safest" alternative would be to spin-off at year end, but that isn't always possible. I agree that employees who move between members of the controlled group would not have a distributable event. Your plan document may already have a provision to let you transfer their balances. Our VS document has a section titled Transfer of Assets that allows such a transfer. I'll let someone else respond about BRF. Have you looked at 410(b)?

It's been mentioned on other threads that the IRS website says that if the participant terminates before the notice is sent that you don't satisfy the safe harbor correction method's notice requirement. It's in the corrective action section on this page. https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-eligible-employees-were-not-given-the-opportunity-to-make-an-elective-deferral-election-excluding-eligible-employees Could the super attorney be referring to a correction method that is "reasonable and appropriate" under Rev. Proc. 2016-51, 6.02(2) rather than one that complies with the special safe harbor method in Appendix A.05 (8)? At least, that's what I would try to argue if the IRS decided a couple of years down the road that the correction method used didn't meet the requirements for the safe harbor correction method.

The easy answer to your question is "what does the plan say?" The terms Employee and Hour of Service should be defined in the plan. With various federal laws prohibiting discrimination on the basis of national origin, immigration status, etc., I seriously doubt you will find anything saying any of this person's service is excluded. The DOL website has some info on the laws against discrimination on the basis of immigration status and national origin. https://www.dol.gov/general/topic/discrimination/immdisc

Any chance the after-tax basis is from pre-1987 contributions? If not, wouldn't it be easier to take an in-service distribution, roll over the pre-tax portion and receive the after-tax basis directly? The pre-tax portion could be later rolled back into the plan, or, I suppose directly rolled back into the plan as part of the initial distribution. There would be 1099-Rs, but no taxable amount for the distribution, since everything except the after-tax basis is being rolled over.

It would be a distribution, not a loan. Is the participant eligible for an in-service distribution of deferrals?

I agree your mother needs to file a written claim for benefits. It would be best to include a copy of their marriage license or other proof of marriage with the claim. If you can't find the SPD, the plan's Form 5500 filing lists the Plan Administrator (and their address) and is available on the DOL website.

What does the plan say? Our current VS 401(k) document has a box to check in the adoption agreement to indicate that the plan will not accept rollover contributions from "former Employees". If the box isn't checked, they can roll in. Our prior documents only allowed Employees to roll in. The plan document will tell you if she can roll the cash balance distribution into the 401(k). If the plan provisions are not clear, the document should give the Plan Administrator the authority to interpret the plan document. If she can roll it in, does the 401(k) document include or exclude rollover balances when determining if someone is under the cashout limit? The terms of the plan will determine whether or not her balance(s) can stay in the plan(s). I can't think of any problem with combining both distributions in the same IRA.

Same answer, but cites included. The definition of a qualified cash or deferred arrangement is in 1.401(k)-1(a)(4). If you go through it, you will see that a 457(b) plan sponsored by a non-profit does not meet the definition of a qualified cash or deferred arrangement, so it would not cause the new plan to be a successor plan.

Those must be some really large bonuses. You should check your plan document language. Our VS document applies the same rule quoted in your post #2 to deferral compensation for all safe harbor plans, not just those using the SH Match. I looked at the LRMs and they do the same. From the safe harbor plan section of the CODA LRMs: It's on page 31 (page 33 of the pdf) of: https://www.irs.gov/pub/irs-tege/coda_lrm1017.pdf

First, let's make it clear that we are discussing the definition of compensation for deferral purposes in a SHNEC plan. I expected to find something similar to the restriction on deferral comp when using the SH match, but don't see anything. For all 401(k) plans, I think BRF is one issue if you are trying to exclude large portions of compensation from being eligible to defer. Universal availability of catch-ups is another, probably more serious issue. How much compensation can you exclude from being available to defer before the NHCEs lose the effective opportunity to get to $6,000 of catch-ups? In the real world, why would you want to severely restrict the deferrals of the NHCEs? One purpose of the plan should be to help their employees save for retirement. If I had a client ask about doing this, I would ask what they are trying to accomplish and then try to not laugh at their answer. TGIF

If you used that comp definition for deferrals, you would likely have a problem with BRF under 1.401(k)-1(a)(4)(iv)(B). The example given deals with deferrals allowed only from comp in excess of a certain amount, but I think you would get the same result restricting deferrals to be from bonuses only if the HCE bonuses are larger than those for NHCEs.. A more likely problem is the universal availability requirement for catch-ups in 1.414(v)-1(e). How many of the NHCEs would be able to defer enough to get to the full catch-up limit if they are limited to only deferring from bonuses?

ESOPs typically pay large distributions in installments. If this one doesn't, ESOPs do have an exception in the 411(d)(6) rules about changes in forms of payment. That can help spread out the cash requirements, but they still need to start saving what they can. Have they made any cash contributions to the ESOP in the past that were not used to purchase stock? Paying the distribution with a note requires adequate security. See 54.4975-7(b)(12)(iv). Our ESOP clients have company accounts dedicated to accumulating funds to cover their future repurchase liability. The best time to start planning for the eventual distributions is when the ESOP is set up. If not, then better to start late than never.

You can call the PBGC and ask. They are actually very helpful when you call.

You might also want to check the plan's QNEC provisions to see if an ADP or ACP testing failure is required before a QNEC can be made. Our VS document does not require a testing failure. You might be able to use a QNEC to get additional contributions in the TH test without increasing the balances of the Keys.

I'm also curious about how close they are to 60% at 12/31/2017. There was a question at the 2002 ASPPA Annual IRS Q&A Session about receivable contributions and top heavy testing. The IRS response indicated that a profit sharing contribution deposited after the end of the year, but allocated and deducted for that year was included in the account balances for the top heavy testing at year end. If they are close to 60%, it might be worth looking at additional contributions for 2017.

For your worst case, if they do not at least have SSNs for these individuals, it may be hopeless. With SSN typically used as an identifier in valuation systems, I would hope the recordkeeper has it in their records. I would expect them to have the DOB too, because it should have been loaded while they were employed. If they have at least the SSN, some $ and some time could get the missing DOBs and addresses. We use Millennium Trust for auto rollovers. They also have a reasonably priced search service that does a good job of finding missing participants. Their search results usually include DOB and an address. Sometimes, they even find a phone number. Other search services could probably do the same.

What does the plan say? Our VS document has the following to start the definition of Plan Compensation: "Plan Compensation is Total Compensation, as modified under AA §5-3, which is actually paid to an Employee during the determination period (as defined in subsection (b) below)." In other words, you count compensation based on when it is paid (not when it is accrued). Does your document have similar language? If you are using the "few weeks" rule that counts amounts accrued but not paid, it will affect the answer. But, I've never met anyone who uses that option.

EPCRS has correction methods for overpayments. The overpayment references are scattered around Rev. Proc. 2016-51, but most refer you to Section 6.06(4) for DC plans. Note the exception to the make-whole contribution for payments made in absence of a distributable event, but otherwise determined in accordance with the terms of the plan. You said it started a couple of years ago, so they may or may not be eligible for SCP. Even if they are eligible for SCP, this would probably be a good one to submit under VCP to get IRS approval.

The cite I posted above was in response to C.B.'s post. Luke, I agree the regs aren't as clear as they could be. After some searching, I found the same "participates" language in 1.416-1, T-10 in plan language requirements for specifying which non-key employees receive the TH minimum. When you put this together with M-10, I think it means that not deferring doesn't make a non-key fail to "participate". The same should apply to a key employee. The Internal Revenue Manual uses different wording:

It's been a long time since I've dealt with 204(h), but let's see if we can get a discussion going. The only thing I see that addresses the timing of the amendment is I think I would consider the amendment being signed on May 10 instead of March 31 as being a modification of the amendment even though I doubt the amendment language actually changed. Is changing the effective date of the amendment from March 31 to May 10 a "material change"? I think probably not. Bottom line is the accruals are stopping, the only difference is the date they stop. But with the considerable difference between outcomes of the two possibilities, I think this would be a good one to get an opinion from an ERISA attorney. Anyone else?

The regs are more clear that non-deferring participants are not excluded from the TH minimum.

The exception you are referring to is for a mid-year termination in connection with a 410(b)(6)(C) transaction. An asset sale is a 410(b)(6)(C) transaction. Probably not an issue, but 1.401(k)-3(e)(4) also requires that the safe harbor provisions are in effect through the date of the plan termination.