Kevin C

From the 1998 ASPA annual conference DC Q&A session:

For a 2016 beginning of year participant count for a plan that terminated in 2015, I would say the zero balance people are not included. Plan termination is a distributable event (assuming no alternative defined contribution plan) and unless you have really strange plan language, those with zero balances are deemed to be distributed when the distributable event occurs. For those with balances, they stop being participants when they are paid in full after the plan termination.

John, If you are referring to in-kind distribution of marketable securities that are not employer securities, yes.

I agree with rcline46. And, if this is an ERISA covered plan, they violate ERISA by excluding this person. We had this issue come up in an IRS audit before the final regs became effective and the agent told me that he had never seen a plan that had the <20 hour per week exclusion administer it properly.

Did the divorce decree include the following? 1. The name and last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order; 2. The amount or percentage of the participant's benefits to be paid by the qualified retirement plan to each such alternate payee or the manner in which such amount or percentage is to be determined; 3. The number of payments or period to which the order applies; and 4. The qualified retirement plan to which the order applies. The current addresses can be provided separately. If the decree has these items in it, the divorce decree could meet the requirements to be a QDRO. Some decrees have sufficient detail, some don't.

If the SH match is calculated payroll-by-payroll with no true up, there is no way to get a $340K compensation participant deferring 3% a SH match of $10,600 for 2015 unless you use compensation in excess of $265,000 in the calculation. The SH match calculation is only done on an annual basis if the plan document says it is. Two possible solutions are 1) better communication with HCE to inform them that the timing of their deferrals affects their match and 2) amend the plan for next year to true-up the match calculation.

If you are looking for a cite, Rev. Proc. 2013-12, Section 6.05(1)(b) refers you to 6.05(1) when determining if you need to file for a determination letter on an SCP corrective amendment. 6.05(1) says if you correct using a pre-approved document don't submit for a letter.

I think you are misreading 1.403(b)-5(b)(3)(i). It doesn't say those who do not elect to defer at least $200 are excluded from the plan. It just allows the plan to impose a minimum deferral rate of $200 per year for participants who defer. Those who are not deferring are still participants and can defer if they make an election to defer at a rate of more than $200 / year. The types of employees that can be excluded are listed in -5(b)(4).

For the DOL, it's the mailing date, provided the check clears. It's also a good idea for the client to keep a log of when each deposit check was mailed and who mailed it. That log could be very helpful if the DOL comes to visit. A copy of the regulations may also be helfpul. Footnote #6 from the Final Deposit Regs published in 1996: http://benefitslink.com/src/erisaregs/403.html

Regardless of whether you think the spin-off would be treated as a mid-year amendment of provisions that satisfy rules in 1.401(k)-3, the spin-off would be an amendment that suspends the safe harbor match for some eligible employees. If they want the plan to remain qualified, they will need to follow the rules mentioned above that are in 1.401(k)-3(g). Is it worth losing the SH to do this mid-year? The other option is to do the spin-off at the end of the year, which is what I would recommend.

Sorry, but I read it differently. Employer A is one of the sponsors of a multiple employer plan. That plan terminates and Employer A adopts a new Plan A. It's the same employer. That makes the new Plan A both a "successor plan" under 1.401(k)-2©(2)(iii) which affects ADP/ACP testing and SH and an "alternative defined contribution plan" under 1.401(k)-1(d)(4)(i) which affects distributions to actives upon plan termination. i would suggest a spin-off of their portion of the multiple employer plan into the new plan. If it's a SH 401(k), it could get interesting depending on the timing. We are talking to a prospect that left a calendar year SH PEO multiple employer plan at the end of Oct and their current TPA set them up with a document for a new SH plan with a short initial year of 11/1-12/31. The same TPA told them they could set up a cash balance plan that allows for salary deferrals in addition to their 401(k).

How about this?

If the former client comes back, why not ask the DOL if they qualify for DFVCP? Part of the reason I suggest you ask is because they can also help with corrections outside of the established programs if they don't qualify for DFVCP.

Our EGTRRA and PPA VS documents don't allow a choice. Alternate payees can receive a distribution at any time, unless specified otherwise in the QDRO. If we had a choice, that's what we would have used anyway. I've never seen a plan document that varied (or allowed you to vary) the distribution timing based on the type of QDRO.

Bonding is only required for those who handle plan assets. The lack of access to plan assets is the important part, not that they have a corporate Trustee. These are daily valued plans and this Trustee does not accept any instructions from the client. We did have a DOL agent on an audit disagree with our interpretation of handling plan assets because she felt the client handled plan assets between the deferral on the pay date and the deposit date. With the bond premium being so low, we decided not to argue and started recommending that these clients get a bond. Some of them have, but some have not, despite annual reminders. It will be interesting to see how many of them without bonds get a letter from the DOL.

It will be interesting to see if any of our clients get the DOL letter. We have several without bonds that use a Trust Co as Trustee and have no direct access to the funds in the trust account. As for the Colonial Surety marketing e-mail we received, I have it on good authority that it was neither reviewed nor approved by the DOL and they did not have permission to use the DOL shield in their advertisement.

We had two clients purchase annuities in 2014. One was a 4 life $152,000 and the other was a 5 life $387,000. The only problem we had was with the 5 life annuity that included 1 deferred vested participant. Principal and Mutual of Omaha were the only ones who would bid on it because of the deferred annuity. What would the lump sum value be for those 7-12? Are they all currently in pay status? If you are talking about immediate annuities, I would expect the $ to have more impact than the # of lives.

And in some cases, plan-to-plan transfers come with 411(d)(6) protection for the sending plan's features. Our VS document has a section on Qualified Transfers and rules for other transfers.

I think I found one of the advisory opinions you mentioned in post #5. Among other things, it says the DOL views a child support withholding order issued under the rules you cited as a domestic relations order under ERISA. They caution it must meet other requirements to be a QDRO. http://www.dol.gov/ebsa/regs/aos/ao2001-06a.html

The cure period starts with the date the missed payment was due. [1.72(p)-1 Q&A 10 (a)]. If they were current on payments going into the suspension, the next payment would be due after the end of the suspension. I'd say 6/30/2015.

Mbozek, thank you for the info. If the benefit is not in pay status, could/would the state order fit under the QDRO provisions?

Take a deep breath, it isn't that bad. Let's use some numbers. Say they deferred $17,000 for 1/1/2014-9/30/2014. After the reclassified $1,000 refund, their calendar year 2014 deferrals through 9/30 are $16,000 of regular deferrals and $1,000 of catch-up. Then, they defer another 6,000 in the 4th Q of 2014. After $1,500 of that $6,000 has been deposited, they hit the 402(g) limit and additional 2014 deferrals are catch-up when contributed. So, the last $4,500 of deferrals in 2014 is catch-up. For calendar year 2014, they end up with $17,500 of regular deferrals ($16,000 + $1,500) and $5,500 of catch-up ($1,000 + $4,500) for a total of $23,000. The catch-up limit is not exceeded and there is no double taxation. For details on how the calculation works, see 1.414(v)-1. Another fiscal year example with explanation is here: http://benefitslink.com/boards/index.php/topic/55492-another-fiscal-year-catch-up-question

With all of the plan expenses already paid, this may provide some help: http://www.dol.gov/ebsa/regs/fab_2006-1.html The last paragraph before the Conclusion section reads:

The Colonial Surety e-mail included a sample DOL letter addressed to "National Paper Supply Company" and listing an EIN and AckID for the filing. The DOL website shows no 5500 filings under the company name, EIN or AckID listed in the letter. Is that the letter you saw, or a different one?

We received the same Colonial Surety e-mail. According to their e-mail, the DOL reviewed and approved their advertising copy that includes a prominently placed DOL logo. My BS meter broke before I got all the way through the e-mail. I'm also curious if anyone can confirm an actual DOL e-mail.