legort69

If a plan has a per-payroll fully vested match subject to deferral withdrawal restrictions, is the match deemed to be a QMAC?

Is there any resource, link or website I can visit to verify?

Can someone clarify if the partner/member contribution for the deferral + match cannot > 402g limit?

Tough crowd. Okay, was worth a shot. thanks everyone!

Its really for administrative convenience. If the client pays the match but could have credit the funding from the forfeiture, then why can't we just return the forfeiture balance to the client (up to the amount of the ER contribution). In the end, its really the same result. Client funds less to the plan and uses forfeiture account, or client funds full amount and requests the forfeiture back.

The client is the plan administrator for a multiple employer plan, and they currently do not have a good system for administrating forfeitures and crediting the plan adopters on their payroll invoices. They asked if we could facilitate the forfeiture process and issue a check for the use of the forfeiture balance each quarter directly back to the adopter in lieu of taking the forfeiture credit at the time of the contribution with the ER contribution. Of course the amount to be refunded would be limited to their ER contribution, (but not to exceed the available forfeiture balance). Will administrating forfeitures in this manner violate the rules of forfeitures being reverted back to employers? Thanks for any input you have on this.

A few 401k participants withdrew their accounts on December 28. They subsequently received a dividend in their 401k account < $100 on December 31. Is there anything to support saying that they are not in the 5500 participant count as of the subsequent 1/1/XX? I assume no, but I wanted to see if anyone has run into this situation in that including them in the count will trigger an audit.

A plan sponsor has participants that missed 5 months of deferral opportunity due to a technical payroll glitch. The Sponsor wants to know if the Rolling Three-Month exception can apply to the last 3 months of the missed 5 months, where they would only have to fund a 25% QNEC for the first 2 months and not for the full 5 months. Rolling Three-Month Exception. The Revenue Procedure converts the existing three-month exception into a rolling three-month provision. So long as elective deferrals commence within three months of when they should have commenced – regardless of where that falls during a plan year – an employer need not make up the missed deferrals. (

Thank you Mike. He wants us to cancel the RMD and restore his account. He is not interested in the 60 day rollover since it was 'our fault'. Now I have a 1099R and tax withholding issue since these are 2017 transaction adjustments. Lastly - lets say he took the RMD from the IRA prior to the rollover. Would that still be a legit RMD?

An RMD eligible 5% owner participant has a 401k balance 12/31/2016. July 2017 - They rollover their balance to their IRA . Sept 2017 - They make a lump sum contribution to the plan . Dec 2017 - We force out RMD from the balance created by the contribution. Participant adamantly stated that they took the RMD from the IRA rollover and that we were not supposed to force his RMD. Any support to the rules would be greatly appreciated. I will need something to cite.

A participant leaves one adopting employer under a Multiple Employer Plan (MEP) for another adopting employer under the same MEP. The participant has their 401k balance transferred from the first group to the second group. Assume that the employers are not a control group or an affiliated service group and that their only nexus is that they are a part of the MEP. Question. Would the second group need to include this balance in their own top heavy ratio? Any response would be appreciated.

Thank you Tom as always. In my particular situation, it was just an owner who had already contributed < catch up. So to amend the plan retroactively during the plan year would not have required a removal of deferrals and there were no other key employees. Rather, it would just require that we cap the owners contributions up to the catch up. Not sure if that changes anything?

Would it have been too aggressive to get an amendment before the end of 2013 to limit key employees to 0%. therefore, if they only contributed up to $5500, then they did not trigger the top heavy penalty if those were the only key additions in a top heavy year?

Simple example: Plan allows loans and hardship only from employee deferrals (no gains). EE contributes 10,000, balance is 12,000. Received a loan for 50% VB, or $6,000 total. EE qualifies for a $10,000 hardship (for example). I compute that the EE can receive $6,000 in hardship. Agreed?

A sponsor is top heavy in the initial plan year (i.e. 2015). We accrue an end of year match to reduce the TH ratio below the 60% threshold that would in effect, get them out of top heavy for both the initial and subsequent plan years. They neglect to fund the match. During 2017 can they still fund the end-of-year 2015 match to reduce the TH ratio, or does that option go away and they now must fund the 2015 and 2016 3% top heavy allocation? Thanks for any input.

There is also another consideration. If the person does not make the distribution by April 15, then the funds have to stay in the plan assuming they are not over 59 1/2. However, they will have to report the taxes in the excess year and at the time they withdraw the money at some future date. If they don't mind paying double taxes then I guess they could keep the match. Also, what if the person did not have a match in the former plan, and then rolled his funds to his new 401k plan, would the 402g refund could come from his rollover money and he gets to keep the match?

Participant leaves company mid year and joins new company. Contributes 18k in first plan and 10k in new plan. They are not catch-up eligible. They receive match in both plans. First plan balance rolled out to IRA. When they contact the TPA to request the excess 402g refund, do they get to keep the match attributed to their excess deferral in the new plan or does the match have to leave their account (forfeited)?

Thanks everyone. It just seems that providing no recourse in the top heavy year is very draconian and maybe the regulations should be revisited. I would be in favor of the rules incorporating plan asset size thresholds or even higher TH % for smaller plans. I mean the punishment should fit the crime.

Thank you Mr. Bagwell, But when you say its not allowable, is there a regulation that addresses this circumstance? My position would be that you can unravel the contributions because its basically an administrative error in that the client was not notified timely or was not aware of the unexpected financial cost of being top heavy. I mean shouldn't the punishment fit the crime? In reality, and from time to time the last payroll (bonus etc) of the year can kick up an officer or 1% owner into key status for the upcoming plan year. Or that the client remits their payroll records to the TPA in Mid February (for example), or the TPA did not timely test the plan just after the final contribution of the prior year, or a key child is making small contributions unaware that their contributions are creating a financial penalty. This may not have been foreseen and the client does not want to be on the hook for a top heavy funding and there can be a lot of finger pointing about the protocols. That is why I believe that we can treat this as an administrative error. There should be some recourse in the regs that allow for the key EE current year contributions to be returned to the employees through payroll. To not allow this would be very un-American.

401k communication about DC plan's top heavy status came during the year in which a plan was top heavy and key employees had been making contributions during the top heavy year. Is it allowable to unravel their current year contributions (EE/Matches etc) and run it through payroll so that their effective contribution rate is 0% in order to avoid owing a top heavy contribution?

A plan was set up with a start date of 5/1/2015 for purposes of processing a plan transfer in from a multiple employer plan (MEP). However, per the document, contributions were stated to start deductions on 6/1/2015. This plan had only 15 participants transfer money from their former plan under an MEP. The plan has > 150 people eligible on 6/1/15 (even though maybe 10 people actually contribute). Would this plan qualify as a large plan and therefore have to have an independent audit for 2015, or do we say its a small plan for the initial year by using the 5/1/15 start date? Thanks for any feedback.

Thanks Tom. The QNEC was funded early in the year before the deferrals started. I don't believe that it was communicated to the participant that his 402g limit would be adjusted to account for the QNEC. If we attempt to remove the QNEC from his account (and attributed match) after the end of year, then he would have a legitimate grievance in that he would have not contributed as much and the free money QNEC should stay in the account. I don't know how else to frame it.

Payroll company missed first 3 months of deferral deductions which equals $3,000. The participant received a 25% QNEC ( $750 EE) for the failed opportunity on the deferral + full match and gains for that period. Participant continues on their own to contribute the full $18,000 pre-tax for the year plus the safe harbor match. Did the participant exceed the 402g limit by contributing $18,000 + receiving a 25% QNEC on those missed deferrals? If so, how should this be remedied? Thanks for your guidance on this matter.

Thank you Tom. I have searched on this thread on BL and found there are a lot of qualified people who post about this topic and they use the word "MUST" when stating that the ATM forfeiture occurs before ACP. I have also seen ADP/ACP tests from large 401k outfits that use that same methodology. Granted I may not have read those plan provisions that outline the testing order, but my bet is that its not explicitly stated, or if it, then the document drafter is further removed from the administration of those provisions. I wish the guidelines would be less interpretive on this point. There is a material difference between forfeiting ATM and possibly receiving a refund of the match. (vested portion)..

Why is it discriminatory to test ADP, make corrections, AND then test ACP, make corrections, AND then determine whether you have a related match/forfeiture issue? If the HCE gets match money in cash for failing ACP versus money forfeited, then that is a better outcome for all, and a less stressful conversation to have than to run the ADP test and then forfeit the related match before running the ACP test with the match sans $ forfeit. I've seen spouses of owners take 10k pay and contribute 8k and they skew the ADP/ACP rate and that in itself can create a related match forfeiture if you forfeit related match pre-ACP testing. Where is the justice in that? Employers establish a match formula and want to retain top talent and they create a vesting schedule to satisfy the years of service in order to retain the talent. The match contribution is deemed to be a part of their benefit package. You forfeit the match so now the employer has to give a bonus to the employee on the W2 in order to rectify the forfeiture. I can't imagine a business owner reading the fine print on this, and i bet, if given the option to select the order, then they would consider the scenario of ACP test corrections prior to related match forfeiture. Even Sal's ERISA Outline provides 2 approaches amongst the TPA community, but one approach is less evil than the other. There, I had to get this off my chest.