Kevin C

What is the deadline for making the investment election? If it can be made after the end of the plan year of the contribution, they will at some point have Section 415 issues. I'm thinking of : However, I think this falls under the category of "just because you can do it doesn't mean you should". Pick a QDIA that satisfies the rules, provide the proper notices and forget about this ________________.

The cite for eliminating optional forms of payment under a DC plan if certain conditions are met is 1.411(d)-4 Q&A 2 (e).

The special rules for coverage requirements when there are acquisitions or dispositions affecting the controlled group are in Section 410(b)(6)(C). You'll also want to read 1.410(b)-2(f).

So, would funneling personal assets into an asset 95% owned by the plan be considered a PT, contributions subject to Section 415 or both?

If the funds you received were part of your vested benefits in the plan, you don't have to do anything. The self correction method for an overpayment includes trying to get the overpayment returned to the plan. They also have to notify you that the overpayment was not eligible for rollover. If you don't repay the distribution (adjusted for lost income), the next step depends on whether or not the overpayment was part of your vested benefits. If the distributed funds were part of your vested benefits but were just distributed early, a repayment is not required. They will adjust your balance / benefits to reflect the amount you have been paid and move on. They also have to change their procedures, but that's not your problem. However, if you were paid an amount that was not part of your vested benefits, if they can't get you to repay it, the company or another party will have to repay the overpayment (adjusted for lost income) to the plan.

C.B. gave you the cite for hardship distributions not being eligible for rollover: The part about 10% withholding on a hardship distribution unless the participant elects otherwise is in 3405(b). You should be concerned about not doing the correct withholding on hardship distributions. It may not come back to bite you, but it should be done correctly going forward.

That rule only applies for Parent - Subsidiary controlled groups. While not specifically mentioned above, "unrelated" also means not part of an affiliated service group.

I think you are looking for 1.401(k)-1(a)(4)(ii). But, I don't see that it helps you. However, unless that contract is a one-time irrevocable election as described in 1.401(k) -1(a)(3)(v), the contract you describe meets the definition of a cash or deferred election under 1.401(k)-1(a)(3)(i) and the contributions are salary deferrals.

At low levels of compensation, you should also keep in mind that deferrals plus catch-up for the taxable year can not exceed the participant's 415(c) compensation. I don't think you have a problem with your fact pattern, but you would if he tried to make the maximum deductible employer contribution and defer $25,000 into the SE plan.

You can't remove it for benefits already accrued. Optional forms of benefit are 411(d)(6) protected benefits. 1.411(d)-4 Q&A 1.

The safe harbor rules specifically require the use of a compensation definition that satisfies 414(s) for the safe harbor contribution. A plan can base other contributions on a contribution definition that does not satisfy 414(s). See 1.414(s)-1(a)(2). However, discrimination testing must be done using a compensation definition that satisfies 414(s). See 1.401(a)(4)-2(c)(2) and 1.401(a)(4)-12, definition of "plan year compensation". Some plan documents allow the use of any definition of compensation that satisfies 414(s) for testing. Others may require the use of a specific testing compensation definition for testing. So, check the document before proceeding. In a pre-approved document, it will probably be in the base document.

Don't be surprised if they send another letter before they get around to looking at your response.

The compensation definition used to calculate the safe harbor non-elective contribution must satisfy 414(s). 1.401(k)-3(b)(2). If it doesn't, a different definition that satisfies 414(s) must be used. Check your plan document first. The current pre-approved documents were written when there were still widely differing opinions about amendments to safe harbor plans. Our VS document (ASC) for example has a provision that reverts to total compensation if the safe harbor compensation definition elected doesn't satisfy 414(s). If your document doesn't have a similar provision, an amendment will be needed.

The redacted IRS approval letter linked in that ASPPA article can go in the Humor section. The letter dated 7/30/2018 says the extension requested for the plan year ending 11/30/2012 has been approved to 9/16/2013. I've had them take 4 or 5 months to process an extension, but not years.

Was there a change in EIN from the previous filing? The ones we've had where the sponsor changed EINs, the IRS has been sending letters saying the 5500 wasn't filed under the old number. They either are not getting the information on the prior filing in line 4 from the DOL, or they are just ignoring it. This has been a problem for a long time.

Using elapsed time to determine service includes a service spanning rule that gives the employee credit for a period of severance not exceeding 12 months if they rehire within 12 months of their termination date. In your example, she was gone less than 12 months (5/31/19 - 8/19/19), so service is credited the same as if she was continuously employed from 3/11/19 - 9/6/19. 6 months of service would have been satisfied on 9/10/19, but she was not employed on that date. When she rehires less than 12 months after 9/6/19, the service spanning rules will give her credit for the time from 9/6/19 through the rehire date. She gets credit for that service when she rehires again, so I would say she will satisfy the 6 month of service requirement upon her pending rehire.

Are you are asking about Schedule H, line 3d(2)? It's not an audit waiver, it just lets you delay attaching the audit until the second year. The audit will cover both the short year and the full year. The instructions for Sch H describe when you can do this and include a cite.

Sounds like someone at the IRS messed up. The 5558 instructions say: Do you have proof of when they were mailed? I haven't had that problem, but have in the past had clients receive "your 5500 is late" letters when an extension was timely filed. A phone call to the IRS resolved it each time. Of course, I had to get a 2848 signed and wait on hold...

It sounds like the auditor wants to treat it as a corrective contribution under EPCRS to avoid Section 415 issues with the timing of the deposit. I wouldn't feel comfortable doing that with a discretionary contribution, but others might.

A plan can be set up using entry date compensation for the safe harbor contribution, but it isn't required. Our VS document has an option in the safe harbor section that very clearly allows the use of compensation earned while not eligible for the safe harbor contribution when using compensation for the entire plan year. That is something we always discuss with the employer when setting up a new SH plan mid-year and the document will clearly reflect how the employer decides to do it. As for a special effective date, it would depend on the plan language and the timing. The default in our VS document is that participants are eligible to defer on the later of the effective date of the plan or the adoption date of the plan. If the document was adopted 9/10/19, effective 1/1/19 and deferrals were to start 10/1/19, a special effective date of 10/1/19 would be needed. If deferrals don't start when the document is effective, I use the special effective date section to specify when deferrals start for clarity.

Would the part-timers still be under 1,000 hours for 2018 if you use an equivalency method for Jan and Feb and actual hours for the rest of the year?

Some things for the OP to consider: Failure to follow the plan document disqualifies the plan. That's why we have EPCRS. A safe harbor plan can't be amended mid-year to make someone who is eligible for the SH contribution become ineligible for it. 1.401(k)-3(e)(1) and specifically mentioned in Notice 2016-16 III.D.2 One of the requirements for the non-elective safe harbor is that all NHCE's who are eligible to defer must receive the SH contribution 1.401(k)-3(b)(1). 411(d)(6) prohibits amendments that reduce benefits that have already accrued. So, no retroactive amendment to make someone ineligible for deferrals or SH.

Wouldn't it be easier to just grant service credit for eligibility for service in January and February 2018 with the previous employer for those included in the asset purchase and then apply the regular 12 month / 1,000 hour with dual entry?

Do they want to stay safe harbor for 2019? You haven't mentioned a 410(b)(6)(C) transaction, so they can't terminate a SH plan with a short final year and remain safe harbor. 1.401(k)-3(e)(4). The new plan would be a successor plan, so it can't have a short initial plan year. 1.401(k)-3(e)(2). Unfortunately, there isn't any guidance on spin-offs or mergers of safe harbor plans. The couple of times we've had this come up, I did the new document as a restatement of their existing plan, effective the first day of the current plan year and mirrored the existing safe harbor provisions, so they remained in effect for the full 12 month plan year.

The current EPCRS Rev. Proc. is 2019-19, but it doesn't look like there were any changes to that correction method. I think either compensation definition would work. Although, if the plan definition doesn't satisfy 414(s), I think I would lean towards using total [415(c)] compensation.