Santo Gold

We TPA for a small 401k plan whose parent company is actually from the UK. The plan only covers the US employees. We had three trustees for the plan, 2 of which were not US citizens while 1 was a based in the US and was a US citizens. The US trustee left the company a few days ago. He will be removed as a plan trustee. Is there a problem if there are no US trustees for this plan? Thank you

Do employees with balances under $5,000 have to be given distribution options or can they simply be forced out? One of my plan sponsors wants to go hyper-streamlining in the distribution process and the day that an individual terminates employment, if they have under $5,000, send them a check and inform them they have 60 days to do something with it. Assuming only lump sum distributions are permitted, could they do this? Doesn't the plan sponsor at least have to give them their options and maybe a 30 day window to decide before taking the force out route? Plus, if over $1,000, the only force out option is an IRA. Thanks

I have a similar situation. Our loan policy language in the plan document does not directly state that defaulting on a loan prohibits the individual from taking a second loan. Given that, if the loan is in default (has been for several years), the currently employed participant has been 1099'd on the loan balance, is under age 59-1/2, the plan allows for more than 1 loan at a time, and a second loan would not exceed the $50,000 threshold (factoring the outstanding balance from the 1st loan), could he take a second loan? Thanks

That's an interesting thought. But he did have 100% vesting in his 401k and safe harbor and did not take those out. I've seen language as you described that seemed to apply more to the participant's entire account balance, but not to just a portion of their overall account balance.

A calendar year plan was created with a short initial plan year 7/1/15 - 12/31/15. It had a 3 year cliff vesting schedule and the plan's vesting computation period is calendar year. Service prior to the effective date of the plan (7/1/15) is counted. We have an individual who was hired 1/1/15 and has 1000 hours in 2015 and 2016. Then he terminates employment in early 2017 without 1000 hours. So, does this participant have 2 or 3 years of vesting service? It would appear to be only 2. But because of the short plan year, does the participant get credit for all of 2015 and then also for the short plan year as well, giving him 2 years of vesting service as of 12/31/15? Another question: The plan amended to a 2/20 vesting schedule as of 7/1/17. This was after the participant had terminated. If the same participant was 0% vested at termination in early 2017, would he now be 20% vested due to the new vesting schedule, even though he was not employed at the time the new vesting schedule was adopted? Thank you

Doctor who was 100% owner of his practice sells his practice to new owner (not related to the original owner), who is now the sole 100% owner. The old owner continues to work as an employee in the practice now. The 401k plan was top heavy before the sale. The sale took place in 2018 (it is now 2019). (1) since the sale, for the 2019 plan year, is the account balance of the prior owner now excluded for top heavy calculations.? If so, does that continue for.....how many years? forever? (2) the adult son of the prior owner is also a plan participant and also continues to work after the sale. He was a key by attribution before sale. Starting in 2019, is he a key employee, non-key, or excluded from the top heavy calc? Thank you.

This may be too simple, but if for 2019, an individual over age 50 contributes $6,000 to his roth IRA, can he still do $25,000 to the 401(k) plan as either a pre-tax 401(k) contribution or as a Roth elective deferral to the plan? Thank you

If an employer wants to allow for after-tax employee contributions, then those contributions are tested in the ACP test. If the plan operates as a safe harbor match, does that mean that ACP test passes the inclusive of the after-tax employee contributions? Thanks

I'm not sure if this is complicated or not, just that I have not run across this before. Individual A has a solo 401k plan for himself. No other employees of his business. Now he is going to go work for a small employer as their employee. This new employer does not have any retirement plan. Would the new company be able to "take over" as the plan sponsor of the solo 401k plan, allowing their employees to become participants as well as allowing Individual A to stay in the plan? I don't see why not, but, it just seems odd. This is not a merger situation since the company has no plan to begin with. Thanks

A small engineering firm has a 401k plan. They are showing an operating loss for the 2018 year. The plan sponsor would still like to deposit a discretionary PS contribution. The plan document is clear that is permitted. However, (details not clear on this), he has a contract with the state of New York for some/all of his business which states in part that there can be no PS if no profits. I am recommending legal counsel for this but just wondering: Does an ERISA plan document take precedent over a state contract like this? Thanks

The individual is in the medical field. He was paid by a health provider for services provided (not passive income), perhaps more than 1 (separate 1099s). They paid and reported it as paid to him, the individual. I think his personal reporting is that it is part of the S-Corp revenue. But it sounds like the 1099 should have been paid to the S-corp, not him. Would this mean that it cannot be used as a basis for pension contributions through the S-Corp? Thank you

An individual establishes an S-Corp. He is the only owner, no employees. He wants to start a 401k plan for himself. His income for 2018 consisted only of 1099-MISC income, coded as nonemployee compensation (box 7). It was paid to him and reported on the 1099-MISC but was coded using his SS#, not the S-Corp EIN. Is this income eligible to be used for 401k plan purposes? Thanks

An employer wants to terminate his 401k plan in 2019 and start a SIMPLE at the beginning of 2020. Can the employee 401k accounts be rolled immediately into the SIMPLE or is there a 2 year wait? If a 2 year wait, then if the owner and/or participants wanted to have their 401k money in the SIMPLE, they would have to park the money in an IRA, wait to years, then move it to the SIMPLE, does that sound acceptable? Thank you

Thank you for the replies. I would prefer to not use the names and will see if there is some category that we could squeeze those 3 HCEs into. If we have to name them by name as being not part of the excludable class, then that is going to show up in everyones SPD as well. Which isn't wrong but all things being equal, I would not want my name singled out in the SPD for any reason....

Can an employer have as an excludable class of employees by specific name? For the 401k plan we are drafting, the employer wants to exclude HCEs (about 15) but not exclude 3 of them. For excludable class, could they have in their plan document something to the effect that "all HCEs are part of the excludable class, except individual A, B and C"? Any thoughts? Thanks

Can a calendar year 403(b) plan have as a condition for matching contributions that individuals must work 260 hours each quarter and be employed on the last day of each quarter? Is it acceptable to have contribution conditions established on a quarterly basis rather than an annual basis, knowing that ACP and 410(b) will be tested annually? Thank you

We are drafting a new 401k plan for 2019, non-safe harbor. 200+ expected eligible participants. Initially the plan was to be written excluding HCEs (HCEs would have their own nonqualified Deferred Comp program). The question was now asked can we let the HCEs into this plan so that they can rollover any 401(k) accounts from previous employer (presumably unrelated) 401k plans, but not have the HCEs eligible to make 401k contributions or receive any employer match (only 2 money types, other than rollover, allowed in the plan). Does this sound acceptable? This would only affect HCEs so discrimination issues would not seem to matter. Thanks for any replies.

Thank you for all replies. I do not like the design that they are considering either. But what if they kept this as a non-ERISA plan but instead of the rolling 3 year vesting and/or holding the deposits for 3 years, they just not give contributions to anyone with less than 3 years of service? Keep the plan at 100 vesting but you have to be there 3 years before receiving employer contributions. They may or may not pass 410(b) in a given year, but if not under ERISA, would it matter?

We are looking at a larger Church plan (300+ employees) that elects not to be subject to ERISA. There are several HCEs. They have followed mainly vanilla plan provisions but are looking to make some changes starting in 2019. Do these changes sound permissible? For individuals hired 1/1/19 or later, they want to have a 3 year cliff vesting schedule apply annually to that year's contribution. So that if you are eligible to receive an ER contribution for 2019 plan year and have 1 YOS in 2019, you do not vest in that contribution until 2021. If eligible for contribution in 2020, you do not vest until 2022, and so on. Since this is non-ERISA, that seems to be acceptable for this type of plan. However, because it might be messy for the recordkeeper to track money in this manner, the ER was not going to deposit the money into the plan until they actually vest in it. The ER would keep those contributions in a non-plan ER account. So, from the above example, for those affected individuals, their 2019 ER contribution would be deposited into their accounts in 2021, 2020 ER contributions deposited in 2022.... If someone from 2019 leaves in 2020, their contributions never vested so that year's $$$ can stay with the ER or go to another year's contribution. Writing the language in the plan document would be a challenge, but assuming that can be done, is this allowed? Are there any 410(b)-type tests that have to be done since there are HCEs? Its not subject to ERISA so maybe not? Any comments are really appreciates.

Are all 403(b) plans with employer contributions subject to ERISA? If so, then this would not be an acceptable vesting schedule for a 403(b) Plan, is that correct? Thank you

If I am understanding this correctly, if the business really wanted to do this, there would really NOT be any employer contribution to the plan. Individuals who wanted this "Employer" contribution deposited into the plan would have this initially paid to them and they would defer into the plan. If they did not want it in the plan, then it would simply be additional pay for them. Either way, it is not an employer contribution. With all that said, could they still do this? This is a 403(b) plan so no problem with 401k testing issues.

In a qualified plan, an employer could not say have a 3 year vesting period apply to each year's contribution, which could for example have an employer with 20 YOS but would not be vested in that year;s contribution until she had 23 YOS. But if this were a church plan or other non-qualified plan, that type of vesting is acceptable, is that correct?

403(b) Plan sponsor wants to start offering a discretionary match in 2019. The formula they are considering is dollar-for-dollar match up to $250, determined each quarter. Participant's could received a maximum match of $1,000 for the year. They want to throw in a twist: They participant's can take the match either as a contribution to the plan or have it paid to them as cash each quarter. Is that acceptable? I think we could try to do something like this if it was pertaining to a PS contribution and we have each participant as a separate rate group. But for a match, can that option be available? Thanks

Thank you for that information. Would it be possible then that, in 403(b) plans with certain contracts, the plan sponsor is not responsible for ensuring that participants take their RMD?

We are the TPA firm for an ERISA 403b that has assets with a well known recordkeeper' plan sponsor has an unbundled service agreement with the recordkeeper. We have a terminated participant who will be due an RMD by 12/31/18 and are being told that only the participant can request the RMD. Not the TPA, not the plan sponsor. But, if the RMD is missed, it is the plan sponsor who is responsible and liable for the missed RMD, correct? If the RMD is missed because the participant either intentionally or unintentionally does not request the RMD, but the plan sponsor requests I, is the plan sponsor still liable? Is the answer different because this is a 403b plan? Thanks