Kevin C

The final regs effective in 2006 included this:

I haven't seen the article you mention, but an example in 1.401(a)(4)-5 is very close to the situation you describe. If the former employees are excluded, the timing of the establishment of the DB plan would be discriminatory. You should also look at examples 7-10.

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Sounds like they need a new TPA. If this had been one of our clients, they would have had the amendment and 2020 SH notice by today. The closer you get to 1/1/2020, you will have fewer people agree that the notice was provided a reasonable period before the beginning of the year.

The reasonable time requirement for the notice is determined based on facts and circumstances. Personally, I think you still have time, but you need to hurry. I would get the notice to them today with instructions to distribute immediately. As for backdating, don't do it and don't help them do it. If they insist, it's time to fire a client. I don't see any mention of successor plans in the SH notice timing rule for new plans in 1.401(k)-3(d)(3)(ii). While the regs seem to say adopting a new plan would give additional time to send the notice, I'm not convinced the IRS would agree that it applies in your situation. But, there is no need to go to the expense of adopting a new plan effective 1/1/2020. Most of our small plans are safe harbor, too. But some employers don't want to commit to the needed level of employer contributions for SH. We discuss it with all of them, but it's the client's decision.

There was some old guidance that moving participants from a money purchase plan to a profit sharing plan doesn't necessarily create a partial plan termination, but I don't think that helps here. Rev. Ruling 2007-43 discusses partial plan terminations under 1.411(d)-2(b).

That's not the formula our document uses, but the way I see it described in our reference source, the "relevant time" is meant to be the current time. So, if you are calculating her remaining vested balance immediately after the distribution, AB(1) = 9,000 and R= 1.0 (9,000 / 9,000). That will give you a result of 4,000 vested like you expect.

4 out of 5 dentists may prefer loans treated as pooled investments, but that doesn't make the 5th dentist wrong. I never said your method was wrong. I said it hasn't been done that way anywhere I've worked. It comes down to a judgment call and there is more than one "right way".

An asset sale doesn't necessarily mean the other companies cease to exist, or even that they have no remaining employees.

Yes, both tests are required for the entire plan year using current year testing. See 1.401(k)-3(g)(1)(i)(E) and 1.401(m)-3(h)(1)(i)(E).

If you didn't consider the employees of the other controlled group members when you did your separate coverage testing, you don't know if the plans actually pass coverage testing separately because the testing wasn't done correctly. When you get information on all of the companies, someone can help you with the ratio percentage tests. Being in a controlled group means all the companies are treated as being the same employer, so you can't do coverage testing without having sufficient information on employees of all of the companies in the controlled group.

Does your testing the plans separately take into account the employees in the company without a plan?

Glad to know I'm not one of the "old folks". AK, that may have ALWAYS been the way it was done where you worked, but not everyone did it that way.

A regular match that is 100% immediately vested and not available for in-service distribution is not a QMAC, even though it "behaves" like a QMAC. See my posts above. A QMAC is subject to the distribution limitations that apply to salary deferrals. A regular match not available for in-service distribution can be amended to make it available for in-service distributions before age 59.5. A QMAC can't because of those distribution limitations.

We have a client that asks this every few years. If the answer isn't obvious to you, a distribution from a UK plan doesn't meet the definition of an "eligible rollover distribution" 402(c)(4). From the other direction, a UK plan doesn't meet the definition of "eligible retirement plan" 402(c)(8)(B) that must receive a rollover. Unless the law changes, the answer will remain "No".

I've been handling loans as CuseFan describes for 26 years now. It takes a little extra time, but that's why we charge fees for loan administration. I don't see it as being complicated.

The first required distribution calendar year for a non-5% owner is the year of retirement.

It looks like two different questions are being answered here. One is when can deferrals be effective? The other is when can the plan as a whole be effective? The cited 1.401(k)-3(d)(3)(ii) uses a definition of plan that includes mandatory disaggregation of 401(k) and 401(m) portions, so the timing of the SH notice for a new plan is based on when participants become eligible to defer. The 1.401(k)-3(e)(2) requirement that the safe harbor be in effect for at least 3 months for the initial plan year of a new plan that is not a successor plan has been noted. Deferrals can't be done retroactively, but there is nothing preventing a retroactive effective date for the profit sharing portion of the plan.

The definition of "plan" in 1.401(k)-6 leads you on a trail to the definition of "plan" in 1.410(b)-7 and 1.401(k)-1(b)(4)(iii)(A) specifically says two permissively aggregated plans are treated as a single plan under section 401(k). The 1.401(k)-6 definition of "eligible employee" is an employee eligible to defer under the plan. An "eligible NHCE" is defined as an eligible employee who is not an HCE. The requirements for the non-elective SH in 1.401(k)-3(b) require that each "eligible NHCE" receive the non-elective SH. Likewise, 1.401(k)-3(c) has a requirement that each eligible NHCE receive the SH Match. When you try to permissively aggregate a 3% SH plan and a SH Match plan, the aggregated plan is not SH because neither SH formula is provided to each eligible NHCE. 1.401(k)-1(b)(4)(iii)(B) says you can't aggregate plans with different testing methods. It specifically mentions that you can't aggregate a prior year testing plan with a current year testing one and that you can't aggregate a SH plan with a non-SH plan. If you read it as allowing plans with different SH formulas to be aggregated, the aggregated plan would not be safe harbor and would be subject to ADP and ACP testing.

The PT would involve both the Plan Fiduciary and the TPA. The fee disclosure rules include a way for a plan sponsor to get off the hook if a service provider doesn't disclose direct or indirect compensation received from the plan. https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/fiduciary-responsibilities/fee-disclosure-failure-notice From that web page:

That's how it normally works, but keep in mind that the employee can not be required to work the entire 12 months when service is credited for 1,000 hours. Our document describes it this way: Cite is 2530.200b-1 Yet another reason why rehires are a pain.

The plan document will say how it works. If the adoption agreement isn't clear, you need to look at the base document. Our VS document allows both of the options you mention as separate options in the adoption agreement.

I see the question here as what did the TPA's 408b-2 fee disclosure say about this indirect compensation? If it doesn't clearly disclose it and say the TPA keeps any amount in excess of their contracted fee and the TPA keeps the excess, in my opinion, the TPA is receiving indirect compensation that is not disclosed and their contract doesn't meet the requirements to be considered reasonable. If the TPA contract is not reasonable, any direct or indirect compensation from the plan to the TPA would be a PT. That can be avoided by returning the excess to the plan. I agree with Austin that this should have been addressed previously. If the plan sponsor agrees to a disclosed asset based fee payment to the TPA for the same services rendered going forward, I think the TPA is ok. But, the plan sponsor would have a potential problem with their decision that this fee arrangement is reasonable.

Isn't that what Rev. Proc. 2019-19 Section 6.07(2) says you can do?

And you've turned the $300,000 of appreciation that would be taxed as capital gains outside the plan into a qualified plan distribution that is taxed as ordinary income.