Bird

The at-risk portion is tax-free; that's the face value (proceeds) minus the cash surrender value. In addition, the cumulative PS-58s are tax free. I think that equates to what you said in #1. Everything else is rollover eligible, and no WH if it is rolled over.

You pass the coverage test, but then you have to worry about whether a pattern of amendments has resulted in discrimination, and I think the a4 regs describe the plan's adoption as an "amendment" that would fall under this. I think that's exactly what they had in mind, although it's done all the time, and rarely if ever challenged.

If we're going to compare DB and 401(k) plans, and I'm not saying it is appropriate to do so, the biggest difference in practice is that there's a lot less money going into 401(k) plans. All the talk about investment advice and the market is easier to "solve" so that gets most of the attention, but if the typical 401(k) plan had 5-10% of pay going in as an employer contribution on a regular basis, there'd be a lot more money at the end of the rainbow, duh. I don't think there's any question that the typical employee either 1) doesn't understand the value of benefits accruing in a DB plan, 2) doesn't care, or 3) feels powerless to do anything about the replacement of a more valuable DB plan with a 401(k) plan. That's unfortunate. I'm not saying DB plans are better or that we should make any attempts to bring them back. In fact, since the sentiment coming from the article is "gee, I had a retirement plan, why can't I retire?", I often wonder if we'd be better off with no tax-qualified retirement system at all. At least there wouldn't be false comfort in being "covered" by an employer plan.

He's talking about VEBAPLAN posting and re-posting his own articles, and following up with dumb remarks. I imagine you have an advertising policy and this violates it, although most of the stuff is kind of random and it's really hard to figure out what he's getting at.

We've treated these are 415 excess. I'm not sure if that's right and don't have a cite, but I'm not sure why someone would say you have to have positive income to call them deferrals.

I would have to see the language that says matching contributions are made on phantom contributions before commenting further. It's a foreign concept to me.

I'm not sure I understand. You're saying that if a participant elects, say, 10% for both 401(k) and Roth, and that participant makes $245K this year, that when they hit $16,500 (6.7+% total), that their own contributions are automatically converted to after-tax, right? And those contributions will be matched, up to some percent - what is that, more than 6.7% I hope? And the company wants to stop the automatic conversion to after-tax...so they can make matching contributions on deferral contributions over the 402(g) limit?! I don't get it. I think Sieve is on the right track that these are probably profit sharing contributions but...I don't know. Maybe it's just me but I'd need an example.

It might depend on the vendor's software. The one vendor webcast I listened to, I understood them to say that both we (TPA) and plan sponsor had to "attend" simultaneously. I often have a hard time processing dumb concepts so I only have that vague recollection. I think some software will allow you to forward the return to the sponsor for approval. Sorry for the semi-useless comments, but the point is that you might want to explore the alternatives carefully before renewing your 5500 software.

2%, really?! No.

2%, really?! No.

That's right. In other words, you can keep your same SEP plan/account(s) and just change the eligibility.

That's a little vague...I think you might be talking about the "right to defer" notice; does that sound right? If so, it depends on plan cashout language - if a participant doesn't have to take a distribution, you must explain their right to defer and the consequences, including fees that apply. We're doing a separate notice, but I suspect there is widespread noncompliance.

I think you are right; if it is available as cash it can be deferred and no amendment is needed.

I don't know what that is supposed to mean, sorry. If it is saying that either payroll or annual calcs are ok, I think it could be said better. But on the other hand I don't know what other purpose that sentence could serve.

It seems the informal comments from IRS people are inconsistent; some are saying that participants must be given a choice and others are saying the plan can decide. There's a sentence in the notice that says: "The sample amendments can be used by plan sponsors that are uncertain as to the treatment under plan terms of waived required minimum distributions and certain related payments or that otherwise desire to give recipients a choice as to whether to receive such distributions." The italicized part implies that it is not necessary to give participants a choice, but of course that's not definitive. "Unfortunate" can't begin to describe the consequences of Congress' decision to "do something" when nothing needed to be done. Now we have all this hassle of figuring out how to handle it, plus we have to do yet another interim amendment.

I don't know a reg for this but you're right, it's not supposed to be done but is all the time. Yes, net the comps - we would normally make the self-employment tax adjustment on positive profits; I guess you just leave the loss as it is; they probably overpaid on those SE taxes and it serves them right for doing it the wrong way. I hope it was a lot because they made your life miserable. ADP test should not have been run on W-2 comp; that's nobody's fault and everybody's fault depending on who knew what when. Should be re-run properly now.

There should be a Brokerese/English dictionary for this sort of stuff.

It might be ok. I wonder if the PS plan should be amended to accept matching contributions? I'm at least a little uncomfortable with a plan that only permits PS transferring that money out and being used for another purpose, especially since it is the last day of the year and it seems most participants still employed would have satisfied any possible PS allocation condition. Just thinking aloud for now; I know you are in a hurry for feedback.

Works for me.

It all depends on the investment arrangement. Certainly, funds can be transferred from one brokerage account to another, unless they are proprietary funds. But if the plan is using a platform, the new platform may or may not support the old funds. In any event, the concern about selling funds "at a loss" is misguided and should not be a factor. If you sell a fund or funds at a low price, and turn around and buy the same or similar funds at a similarly low price, there's no harm done.

As Mike notes, you're not entitled to some of, if not a lot of, these questions. If it makes you feel any better, I would not worry at all about the IRS disqualifying the plan. I would just zero in on how you were disadvantaged, if at all, by the improper implementation of a deferral restriction after taking a loan, and the annual vs. payroll match issue, and be content to fix it going forward and maybe for the recent past. FWIW. And do keep us posted.

Wow. I may be confused but it sounds like some language regarding discretionary matches is getting mixed into the equation here when we should be talking about a safe harbor (required) match, and whether it is determined on a payroll or annual basis. I don't think that language about "the matching contribution amount may be determined by the employer at any time during the Plan Year so long as the amount of the matching contributions is determined in a uniform and nondiscriminatory manner” is relevant here at all. I still think that eventually someone is going to find language specifying that the match is either annual or payroll-based (my money is on annual), period. But if your safe harbor match can really have an optional true-up, I don't think the true-up would be considered a discretionary contribution subject to vesting. I'm quite sure it is meant to still be safe harbor. (I really dislike the idea of an optional true-up on a required match!) - Sieve, was that provision about an optional true-up specific to a safe harbor match? I'm curious to see how quickly this will be addressed by a service provider handling 20,000+ plans.

That depends on a lot of things, ultimately the agreement in place with the old adviser. Are the old investments on a self-directed platform? 30 days seems like a standard notice for that kind of scenario. If the old investments are held in a single brokerage account, or self-directed in FBO brokerage accounts, the new adviser will often have the trustee sign a form to ACAT the money/securities directly to the new brokerage account(s) in a day or two.

I vote for "poor operation with lots of pitfalls - but valid."

If HR doesn't have a personal contact at the document provider's office and they just left a voicemail, I wouldn't be confident of receiving an answer sooner than a few days, if at all. It sounds like you have a big enough company to have an HR department, and it sounds like they are working without the assistance of a third party administrator/consultant (or "service provider" as we like to call ourselves these days), but it sounds like they are not quite big enough to make running the retirement plan a full-time job, so...they're not fully cognizant of the insanely technical nature of running a retirement plan. Sieve's statement probably gets to the heart of the matter: It is likely that your HR department thinks that because they are calculating and depositing matches with each payroll, they have a payroll-based match, but that's not necessarily true and in fact I doubt it. Their ongoing matches should (probably) be considered estimates, likely pretty good ones, but they should (probably) be doing an annual calculation of the match and then comparing the actual deposits against it. The only thing I can suggest where we might help you is to ask HR the name of the document company - possibly Corbel, Datair, Accudraft, or some other vendors might be recognized, and maybe, just maybe, someone here could tell you where to look for the payroll match provision. This is interesting (we are, truly, a dull lot) - you are the rare layperson who has the inclination to dig this far.