Kevin C

Do you still have that letter? It would be helpful to know exactly what they said. It would also be helpful if you tell us the date you took out the loan, the original scheduled last payment date and how often you are paid. If you have any paperwork on the loan, it should address when the loan would go into default. You will also need information on the plan loan procedures. It may be part of the plan document or it may be a separate document. If you don't have a copy, ask your employer for a copy. The IRS regulations spell out the maximum time period for having loans with missed payments go into default and become taxable. The plan can use a shorter time period. See what information you can get and let us know what you find out. In most cases, a single missed payment shouldn't cause a loan to be deemed, but we need more information before anyone can tell you if your loan was handled properly.

There is no formal or informal guidance available on merging safe harbor plans. The safest approach is to merge them at the end of the year. There is, however, some guidance on changing eligibility requirements mid-year in a safe harbor plan. Notice 2016-16 says that you can amend mid-year to restrict eligibility, but only for those who are not already participants. My thought on that is that if you can amend mid-year to keep people from coming into the plan after the amendment, you should also be able to amend mid-year to allow additional people to enter the plan. We have informal guidance (question 37 at the 2012 ASPPA Annual Conference DC Q&A session) that you can amend a safe harbor plan mid-year to allow additional people to enter the plan as long as it doesn't adversely affect those already in the plan. The example was a SH plan covering only salaried employees being amended mid-year to allow hourly employees to participate. If Plan B didn't exist, I think it would be easier to justify amending mid-year to include the former Company B employees in SH Plan A. With your current situation, it comes down to what you think a reasonable good faith interpretation of the existing rules allows. Ask 4 TPAs and you'll likely get 5 different answers. Or, you can avoid it by waiting until the end of the year.

What does the Plan say? Our VS document says that the participant's salary deferral election applies to Plan Compensation. Plan Compensation is defined as Total Compensation actually paid to an employee during the plan year. We use the post severance compensation provision that amounts that would have been received if the employee remained in employment and are paid within the specified period are considered as Plan Compensation. We do not use the few weeks rule that lets you count compensation earned but not paid during the year. Put it all together and for our plans, the compensation and deferrals count in the plan year the compensation is paid. With different plan provisions, you can get a different answer. Whatever provisions you have, you would want to make sure it is applied consistently.

Me? Blunt? I recently did an anonymous VCP filing for a client with a similar problem, but a bigger mess. They had a 3% SH plan with us and without telling us, went to a payroll company who set them up with a new SH match plan mid-year. Yes, the payroll company knew about the existing plan. The IRS allowed us to correct by giving participants the greater of the two SH formulas for the year of the attempted change and they were able to keep safe harbor status.

The way I read the regs, you have a bigger problem than just losing safe harbor status. The second sentence of 1.401(k)-3(e)(1) says "In addition, except as provided in paragraph (g) of this section or in guidance of general applicability published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(b) of this chapter), a plan which includes provisions that satisfy the rules of this section will not satisfy the requirements of §1.401(k)- 1(b) if it is amended to change such provisions for that plan year." 1.401k-1(b) contains the coverage and nondiscrimination rules for 401(k) plans,. So, I read this as saying an improper mid year amendment to a safe harbor plan disqualifies the plan.

Welcome to Benefitslink. Reg 1.401(a)(4)-11(g) allows retroactive amendments to increase benefits, provided they meet certain conditions. Depending on the amendment and the situation, you may or may not be able to amend under -11(g). One of the requirements is a timing restriction on when the amendment can be adopted. In general, you have until the 15th day of the 10th month following the end of the plan year to get the amendment adopted and implemented. I'll also point out that although -11(g) has a heading of "Corrective amendments", you are not required to have a failure to use -11(g). If you are trying to correct a qualification failure from 24 months ago, there should be something under EPCRS that will help.

While in general you can amend a plan to make someone who was eligible no longer eligible, there are special rules for mid-year amendments to safe harbor plans. Notice 2016-16, III.D.2 says that the following type of mid-year amendment is not allowed:

If it is a VS document, I would do some more looking in the document. It may be buried in there. Our VS base document has a section titled "Operational Rules for Related Employer Groups" that contains the sentence "An Employee is not treated as terminated from employment if the Employee is employed by any member of the Related Employer group." The definition of Related Employer also has "For purposes of applying the provisions under this Plan, the Employer and any Related Employers are treated as a single Employer, unless specifically stated otherwise." If you still don't find anything, any chance the related employee(s) you want to add would meet the requirements for an -11(g) amendment?

Based the information you've listed, the participation date was 11/1/09 and the participant had a vested balance. The vested balance means the rule of parity in your document section 3.5(d) does not apply. Then, 3.5(a) tells you immediate participation on rehire, unless the employee rehired in an excluded category of employees.

There is a limit on how late employer contributions can be deposited and still count as annual additions for the year. It includes a rule that applies to governmental employers.

We've done something similar many times. For the initial safe harbor year, we've used compensation for the full year to determine the 3% SH instead of using entry date compensation. Later years use entry date compensation. Our VS document has a special effective date section that makes it easy to have the document be clear about how it works. The SH was still effective on the same date that deferrals started, so those who terminated before deferrals started were not eligible for the SH. Whichever route you take, you will want to make sure the document is clear about what will be done.

I'm not sure about the answer to your question, but do the plan documents of the respective plans allow a transfer of the participant's benefits between plans? Our volume submitter document allows this kind of transfer. If allowed, that might be a better solution than what you are asking about.

Are you saying the default investment is money market?

Prior discussion on the topic, including a cite and differing opinions.

If you are looking for a cite,

Missed Roth deferrals are treated the same as missed pre-tax deferrals. See Rev. Proc. 2016-51, Appendix B, 1.03 for your situation and Appendix A .05(3) for an improper exclusion.

I don't see anything in 1.401(k)-3(e)(4) that prevents the termination date from being more than a certain amount of time before the transaction date. It just specifies what applies if the termination is in connection with a 410(b)(6)(C) transaction. So, facts and circumstances? There was a question at the 2012 ASPPA annual conference DC Q&A session dealing with voiding a mid-year amendment to suspend the SH contribution. You probably barely have time to do so and fit in the situation mentioned in the question that received informal blessing. I would be inclined to void the termination amendment and re-adopt closer to the transaction date for a couple of reasons. First, what happens if the transaction doesn't happen (or if it gets delayed further)? Second, I would prefer to have the participants be able to defer as continuously as possible during the transition to the acquiring firm. Anyone else have an opinion?

Welcome to BenefitsLink. There is no guidance, either formal or informal, regarding mergers or spinoffs of safe harbor plans. There was a section for it in the 2006 final regs, but it only said "reserved". In absence of guidance, a reasonable, good faith interpretation of the code is your best option. It would be helpful to know your role in this. It may affect the advice you will get from others. You'll also want to keep in mind that whatever route they take, they will need cooperation from the new service providers and probably the old ones, too. If the new service providers don't have someone qualified to assist them, the plan sponsors may want to reconsider their choices. We have, in the past, handled similar situations and continued the safe harbor for the participants for the entire plan year, with the understanding that we might have to justify it to the IRS at some point. That's a judgment call and not everyone will make the same decision. Hopefully, we can get a discussion going.

You've probably gathered by now that the accountant is wrong. In addition to the safe harbor rules, I'll point out that the safe harbor contribution is required under the terms of the plan and any attempt to amend to reduce or eliminate the safe harbor contribution retroactively would violate 411(d)(6). Not making the safe harbor contribution timely would also be an operational failure. The only way I've heard that you might be able to get out of safe harbor contributions already accrued is through a bankruptcy court ruling. I've never had the situation happen, so I don't know if that actually works. We had an attorney client several years back who refused to deposit two years of safe harbor contributions. A participant filed a complaint with the DOL and they got involved. I don't know what they told the owner, but he deposited the amounts owed so the plan could be terminated.

It simply says a "former employee" may roll in unless the box is checked. There are no restrictions, not even in the base document. I was really surprised when I saw it and made sure all our restatements had the box checked. Yet another reason to "read the fabulous document". You never know what you might find.

You might want to check the plan document. Our VS document has a provision that allows rollovers into the plan by "former Employees" unless a box is checked in the adoption agreement. I can't imagine why anyone would want to allow this, but it is allowed in the document.

Notice 2016-16, III D 2 says that the prohibition on a mid year amendment that reduces the number of employees eligible for the safe harbor does not apply to amendments that make otherwise permissible changes to age/service or entry date for employees not yet eligible. If you can amend to keep someone out, I don't see why you can't amend to include additional employees. Discriminatory timing [1.401(a)(4)-5(a)] of the amendment could be an issue, but doesn't sound like it based on your description. But, with these employees not having a year of service in time to enter the plan in 2017 under current provisions, are they really HCEs for 2017?

My experience is different. Every new client we've had move their plan to us has been charged a deconversion fee by their prior service providers. The worst one was a $1,200 fee for a deferral only plan that had 2 participants with balances and total assets of $600.

Depending on the ages of the deceased participant and surviving spouse, there may be reasons to either leave it as an inherited account (exempt from the 10% penalty) or to roll it into an account in the spouse's name. Unless you have unusual plan language, it should be the spouse's option for which happens. If the surviving spouse elects to roll over into the same plan, I would do the same distribution paperwork that you would if he elected to roll it elsewhere. Does the plan apply the 5 year rule to surviving spouses? If not, the statutory required beginning date should apply.

If they want to set a new % limit and not worry about allowing catch-up eligible to exceed that limit, the limit needs to be at least 75% of pay. See 1.414(v)-1(e)(1)(ii)(B).