Bird

ASPPA took credit for this. Reading the brief on this, there was apparently a groundswell of opposition from ASPPA members: ASPPA members, after learning of this deadline change, voiced concern that the new Form 5500 extended due date would create serious workflow problems for them. For example, safe harbor 401(k) notices are due 30 to 90 days before a new plan year begins. Plan design and investment changes are also an important topic of discussion ahead of a new year. If an investment change is made, a “blackout” notice may have to be prepared as well. Finally, many firms use the year-end months to further develop their business. Adding an additional month to the deadline would create unnecessary conflicts with this year-end work without any real benefit to any interested party.

Thanks. In my world, the broker is at least doing some education and meetings and other communication with employees; whether there is true value in that or not is another discussion but now I see why the fees are so low. So much is about perception - frankly I think this "monitoring" is just a lot of BS to show someone in case they ask if you are...monitoring. Anyone can judge funds based on past performance - I'd love to see a comprehensive study comparing replaced funds with replacement funds. Of course it's impossible, and that's why people get paid for this nonsense. At least in your world it's not very much.

All ok in my opinion. The merger can be effective 1/1 with the physical transfer of assets at some later date.

No, it's not common. But we sometimes see (takeover) 5500s signed by the secretary (I don't mean corporate secretary, the office secretary) or other random persons. Of course if the CPA is preparing the return and doing administration, that is a red flag for a problem takeover.

Catch-22. I agree that the rules are very clear about SHNEC contributions being able to be made 12 months after the end of the plan year, and don't see it being reserved for extraordinary circumstances. I found Mike's reference to *not* ignoring Treas. Reg.1.415©-1(b)(6)(i)(B) here, the relevant part being: This 12-month rule does not change the rule under IRC 415, that employer contributions shall not be deemed credited to a participant's account for a particular limitation year unless the contributions are actually made no later than 30 days after the end of the IRC 404(a)(6) period applicable to the taxable year with or within which the particular limitation year ends. See Treas. Reg.1.415©-1(b)(6)(i)(B). I ignore it (shrug). I don't know whether they just didn't contemplate participants not having compensation in the year following the allocation year, or what, but that's one where I'm going to make them do something about it when they catch it. Plus now we have Tom's posted Q&A as support. (Not that it's a common or even a known problem for our plans, although I can think of one or two that do it "late.")

It depends on the loan policy. If the plan only permits one loan, then yes, it definitely must be repaid before another loan is issued. If the plan permits two loans, I'd have a hard time refusing on the second. Our (Fort William) loan policy says: All loan applications will be reviewed on a uniform and nondiscriminatory basis and your loan will be approved if the Plan Administrator determines you have the ability to repay the loan, the loan is adequately secured and the loan meets the other requirements set out below. The ability to repay part might be a hook if you're looking for one but I've never seen a loan denied for that.

The OP asked if it was ok for the spouse to call about the account. I'll usually just ask the participant to shoot me an e-mail saying it is ok. If some "action" is going to result, then the participant can give the spouse the username and PW, if that is sufficient, or the participant can sign whatever forms are needed to complete the action. A PoA is a silly and convoluted way to get there, IMO. If the participant is being pressured or otherwise things are inappropriate, I don't see how a PoA protects the participant or the service provider.

In my opinion, the other participants must retain the option of having a brokerage account. I'd have each one sign some kind of election form saying, in effect "I understand that I have the ongoing option of a brokerage account and choose to use the platform at this time." 404a fee disclosure should cover both options. I'm not saying it's the best way to do things but it is do-able.

I think it is safe to say the regs do not have specific guidance on this fact pattern. But I think they are "periodic payments" where one just happened to be made a few days earlier than usual.

Mojo, those numbers are so far from my league it's hard to wrap my head around them. But, just curious - when you talk about advisory fees, is this the RIA fee for a platform with mutual funds?

(Warning - rambling musings follow. May be boring.) This ASPPA news article (I think it is available to non-members) caught my eye. ASPPA said “Another “excessive fee” lawsuit was settled recently — but what’s more interesting than the settlement amount is the speed with which it was reached and how it’s going to be spread among the parties.” I guess that is a valid observation; you can read the article for that take. I’ve never been able to find details on these suits, specifically when they talk about different share classes - but I did on this one, in the complaint itself, not the settlement and found it interesting (in a dry, boring sort of way...). The basis of the first part of the complaint is that they used retail shares when institutional shares were available. Looking at one specific fund, they say that American Funds Income Fund could have been used with R-5 shares instead of A shares. The total difference in fees is .29% (59 basis points vs 30 bps). For those who don’t know (and I think that many in this industry are appallingly unaware of such details), A shares have a built-in trail commission, aka 12b-1 fee, generally .25%, so the 12b-1 fee is part of the total fund fee. R-5 shares have no built-in distribution or 12b-1 fee. They are designed to be used in a fee-based platform, where an advisor charges a separate fee. I think that’s a significant point, and makes the direct comparison tenuous, because they are ignoring those other fees that doubtless would be charged. (Although I doubt .25% is the going rate for such a plan; I have no idea but 5-10 basis points still generates an awful lot of revenue on $1 billion - “One billion dollars, bwa-ha-ha.”) They go further and compare the fund to Vanguard’s “VBALX” (I think they mean VBTLX, Total Bond Market Index), with expenses of .08%. Again, I think it is fair to say that in most plans, there would be some kind of an advisor fee built in, so the direct comparison is at least a bit misleading. And...I’ll be careful not to give investment advice here...let’s just say that there is a difference between active and passive investing, and I think there can be value in paying a manager. For AF Income Fund of America, the actual management part of the fee structure is .22%, and I think that is (more than) reasonable. My conclusion on this part is that the fees were probably excessive, but probably not as excessive as their comparison would lead one to believe. (Incidentally, the complaint states that the institutional share fees were less than the retail share fees in every case, but in the settlement, Novant claims that some retail share fees were less than some institutional. Shrug.) Next (there’s more!) they go on to the recordkeeper, GreatWest. They note that direct compensation to GW increased from $195,000 in 2009 to $2,400,000 in 2010 “without providing additional services.” (And $3,500,000 in 2011.) While I’m sure there were some additional services, I find it hard to argue this point. Then they go on to the broker, and note that commissions went from the $800,000 range in 2019 and 2010 to $1,900,000 in 2011, “...despite Davis’ limited services not changing in any material way...” (Ouch.) I am having a hard time arguing with that. They use the term “kick-backs” repeatedly and it’s pretty ugly. There’s some other nasty business going on with gifts and co-ventures that I won’t get into. Finally, there is a Fraud and Concealment section. Novant apparently bragged that “certain fees were waived” (I guess the reference is to A shares purchased at Net Asset Value, which is no big deal) and that “the checks for all administrative expenses are written by Novant.” I don’t know if they say that any checks were actually written, but I’m sure if they were they were for trivial amounts. Sigh. “Hogs get slaughtered” comes to mind. My take on all of this...I’m not a lawyer, but I think there is a saying to the effect of “bad fact cases make bad law.” That’s in part what I see here; there was some greed (understatement) and they probably got what they deserved. I just have a real bug up my butt about the DOL’s obsession with fees, and they definitely relied on and quoted heavily from the DOL regs in the complaint. I agree that when a broker “takes” 75 bps as a trail commission instead of 25 bps - and that is what really drives the pricing - it might be egregious (depending on plan size). But saying that management fees of 22 bps vs 8 bps is a 175% increase is hysterical and misleading. I deal mostly in the smaller plan market and am pretty confident that we not only have nothing to be afraid of, but are under the radar. Still, there are some things in here that are cause for concern. Thanks for listening if you got this far.

Thanks for the feedback.

Doctor is in a large partnership (100 or so) and gets a K-1. For unknown reasons, they also pay his S-corp for services (he says management but I think it is an arbitrary splitting of income). He wants to set up a plan for his S-corp. I have a vague recollection of "management" being problematic, but also some kind of a percentage threshold...ok, I know nothing. Any thoughts about whether/how this could be or not be an ASG?

I say that the "reasonably expected" requirement is all you need. Failure to meet a dollar limit later is irrelevant. Certainly you don't say yes to deferrals and no to match.

Next year - 2016.

Here's my 2 cents on this subject... In my perfect world, my clients sign something before the end of the year to make their election. We all agree that the election must be in place by then. Again in an ideal world, they are making the maximum contribution and have the cash flow to get the money in within 7 business days of the end of the year, the date their income is determined. If they are not doing the max, them I recommend they pick a dollar amount for their election, and not a percentage. There is enough nonsense going on around Oct 14 that we don't need to be waiting for an accountant to get us info and calculate a percentage contribution (along with possibly a profit sharing contribution). But going "there" means there is no reason not to put the money in "right away" (after the end of the year). What difference does it make if someone's income is not determined if they want to put in a dollar amount? (Except to the extent that they need enough income to permit the contribution.) I guess that might make a case for doing a percentage ("I can't put the money in because I don't know the amount") but that is the tail wagging the dog, IMO.

Wow, thanks R. Butler for posting about that study. "Unsettling" just begins to describe my thoughts. I understand the part about TPAs is speculation but it seems like a reasonable conclusion.

Agreed. But at that point, you would simply issue two 1099-Rs indicating that the RMD part of the distribution was "Normal" and part was rollover, instead of one (all rollover). The normal is not eligible for rollover and the recipient would request a distribution of an excess contribution.

It's not their job to investigate but it is their job to report properly based on the type of distribution you requested. I think it should be Code P. I can tell you for sure that if it is Code 7, then they are reporting it as a normal distribution subject to income tax in the year distributed. Either way, report things as you believe/know them to be correct, and if necessary, deal with the IRS correspondence later. Believe it or not, that will be easier than trying to deal with the custodian ahead of time. (In my opinion.)

I say no. There is no triggering event (termination of employment) that would require an RMD. The question is really whether there is an RMD from the plan and that is, IMO, clearly no. The IRA had no assets on 12/31/14 so no balance on which to calculate an RMD, and therefore, absent an improper rollover, no RMD.

A medium sized company (500 participants) acquires a smaller company (70 participants). The plans are similar, and we were planning on merging them. There are a few differences that need to be kept different: different matching formulas for the two companies different profit sharing formulas (actually one company won't have PS) different vesting schedules (more generous in the smaller plan) We can do all this in the document, but it's starting to get ugly and are considering maintaining two plans. (I think) that 410(b) testing on the contributions will yield the same result, so the result doesn't impact the decision - I think it is easier to run that testing in one plan but it's probably not a big deal to run a combined test on two plans. For the vesting, I'm not sure whether to keep it separate (in one plan or two - then I think we have a potential benefits rights and features issue) or just preserve the vested benefits and change everyone to the more restrictive (2/20). Blah blah. I guess I'm just looking for feedback on what is "normal" or "typical" in these scenarios; it's not something we see all the time but I'm sure others do. I imagine it comes down to the individual situation but thought I would throw it out there.

We've set up plans late in the year and had the owner(s) defer 5% using the deemed 3% for NHCEs rule, and kicked in with a safe harbor the next year. Never gave it much thought as not being ok.

I can tell you that most, or at least some, recordkeepers will just default on the outstanding balance (no interest). If it's a plan where there is no (platform) recordkeeper, then we (third party administrator) will definitely just default on the principal balance if the loan default occurs in the same year as the last payment. Probably the same result if the default occurs in the next year, although I might have to look it up. Something about deferring the default for a year makes my Protestant upbringing want to add a little bit of interest as a pound of flesh but I can't say for sure if we've done that, or done it consistently. I don't know if there is a "right" answer but maybe somebody else does.

Thanks. I'm not sure that Q12 applies; I'd think it is for correspondence in the nature of "you didn't file yet." Anyway, not my client; I will pass on the info.

Sigh. Accountant tells me about a client that filed their 2013 5500 a couple of months ago and got a bill for $8800 or so from the IRS for late filing penalties. Can they amend and file under DFVC? Might it be worthwhile to just beg forgiveness?