AlbanyConsultant

Does this really give everyone a blanket suspension on loan repayments until July 15? I didn't read it that way, but the latest ERISApedia webinar with Derrin Watson said that's what it meant (though the loan has to be caught up by 12/31/20). So... since you don't have to be a "qualified individual" like for the coronavirus suspension, are all loan repayments for everyone suspended until then? Or just if requested? I assume this is mainly a mechanism to postpone defaults. And of course the Notice doesn't say anything about accruing interest or reamortizing... I don't see the recordkeepers just giving everyone a few months off.

Not sure what you mean, Mike... Thanks, Luke. I was beginning to suspect that this was not as easy as in the profit sharing testing...

For 401a4 testing, we can do some exciting disaggregation of the participants to get groups with the most beneficial characteristics for testing purposes. How much of that is applicable to ADP testing? There's the standard excludable employee segregation that can be done, but I don't recall if we can go any further than that. I've found some slide decks on testing from seminars I've gone to (and online) but none have mentioned it so far, which is leading me to think that it's not a thing... or do I just need to keep digging? Anyone have a direction to point me in? Thanks.

I've got a participant who is confident that they will be brought back from furlough in "three of four months" and wants to start making repayments when they come back. It sounds like they will be at reduced pay: enough to make the weekly loan repayment, but not enough to 'double up' and catch-up on the missed ones, at least not right away. Can the CARES suspension period be used for less than a year? So we'd add a few months of interest accrual and reamortize from the date he came back, but it's not the "1 year" as CARES 2202(B)(2) says. It seems reasonable...

I've got a plan that wants to be nice and add loans until 9/23/20 as part of the CARES options. Loans were never offered in the plan before. The plan sponsor would like to pass the costs of the loans on to the participants. Functionally, do we add the loan provision dated 30 days from now, giving out the notice today that starts the fee disclosure clock? That feels wrong, if not from a legal standpoint, then certainly from a "doing the right thing" standpoint (and I fully realize that sometimes the rules are written such that "doing the right thing" is not as easy as it could be).

Along the lines of the OP, I've got a plan asking me if they have to match on the paid family leave under FFCRA. It's a discretionary match made after the end of the year (that they always do), and the plan uses a W-2 definition of compensation. It sounds like the pay would be included - if I understand it correctly (and I certainly may not be), the company is paying the employee and the federal govt is reimbursing the employer. I asked if they knew if how it would be reported tax-wise and got this answer: Their goal is to not give match on this FFCRA pay, but I'm not sure that's going to be allowable. If it's "compensation", it can be deferred upon, and it gets the match (unless the plan is amended, I suppose, but no way would that pass nondiscrimination testing). Is this still the same thing - compensation is compensation? Thoughts, comments... thanks.

It seems obvious, but I presume this means that there is no 30-day period to be waived...

Makes sense to me. Thanks.

Thanks @k man. Not sure what you mean by "optional distribution"...

Section 2203 of the CARES Act seems clear to me that 401(a)(9) does not apply to RMDs paid in 2020 or for 2020 - they are "waived", which I would interpret as meaning that they are not to be taken (I'm not a lawyer, though, and I don't claim to understand Congress). But I'm seeing some recordkeepers including it in the list of optional provisions that plan sponsors can choose to elect. Are they being overgenerous, or am I mis-reading? My concern is that we've got most plans written such that terminated participants can't take partial distributions (though I suppose coronavirus-related distributions would get around that), so if there is no legitimate RMD for 2020 per regulations, then can the plan really elect to let a 2020 RMD happen? This also applies for those few plans without an in-service withdrawal provision where the 5% owners would be affected, but we can amend to fix that if we had to. Thanks, and stay safe.

Most of the NHCEs are part-time and some work in the 1,000-1,200 hour range. If 1,000 hours are needed to get the profit sharing allocation and they now fall below 1,000 hours, they may have a 410(b) issue. Yes, there's a fail-safe provision because this is the annoying cross-tested plan that still insists on having a 1,000 hour requirement written into the plan document, so it's not a real problem (at least in this plan), just something to be aware of in general. But the lower hours threshold for this year would solve that handily. Thanks to everyone for the ideas.

I know this is way early for this discussion, but here goes anyway... Just had a dentist call to say that he is following the ADA recommendation and basically shutting down for the next three weeks. Since his employees don't want to use their vacation days and prefer to collect unemployment, he is going to give them what they want and fire them (NY is waiving the usual one-week waiting period for unemployment benefits). He intends to rehire them all in about a month, but was concerned about what effect it might have on the plan. Obviously, they can't defer while they're not paid, and they don't have plan compensation during this period so their end-of-year safe harbor and profit sharing will end up being lower. For those normally working just over 1,000 hours per year (and if that's a requirement for a profit sharing allocation), they might fall below the threshold and it could cause a problem with 410(b) testing. And... what if he doesn't hire them all back? I know partial plan termination is partially facts & circumstances, so maybe this could be argued, but I'm thinking this might come into play if he lets go 7 and rehires 4 because business is slow to restart. According to this dentist, this is going to be a common situation for many small dental practices, so I figured I'd toss it out here so we can start discussing it.

We took over a plan and discovered that a participant died ten years ago and her balance is still in the plan. Had she still been alive, she would have hit 70.5 a few years ago. All the plan sponsor has for beneficiary information is a few names and phone numbers, and when they were called, all are no longer in service (and there was no SSN information, so any detailed search is out). The old plan document (before we restated it when we took it over) said that all benefits would have to be paid out within five years of death... and that clearly wasn't done. The prior TPA was just one person at a CPA firm who was doing bare minimum (calcs, 5500s, amendments/restatements), so it seems this never was discussed. I don't think that our usual rollover partner, Millennium Trust, takes distributions for deceased participants (at least, not knowingly). And it seems a little late to try and pay it to an estate now. Any suggestions for the best thing to do with this $1,600? Thanks.

The 403b doc was restated, and now it is being amended again. Does this new amendment need to get it's own administrative addendum to show that it's the change from the previous version? Or does it get added onto the addendum that they had from 2010 that listed all the changes for the past ~10 years? Thanks.

Spoke to another friendly CPA this morning about this and got some interesting feedback: > Other TPAs that he works with [but clearly not us] are just taking whatever is on the W-2 Box 1 and not asking any further questions. > Some CPAs don’t take the deduction for the premiums on the S Corp so then the K-1 income is higher and then they take the deduction on the personal 1040. So as we have heard, mathematically they work out on their side. The IRS has made it clear that they are supposed to put it in box 1 of the W-2, but upon audit, no action has been taken against them (this being the key for why they are not changing anything). This ruling of having to put it in the W-2 was the IRS’s way of kicking the can down the road to be a problem they would deal with later and the IRS has never gotten back to it. So the accountants and payroll companies have no incentive to change the way they are doing things because they are not being penalized for doing it the wrong way. They are leaving pension allocations on the table for their clients, but 99% of their clients don't realize that. Does using a different definition of compensation fix this? As originally noted, we use a W-2-based compensation definition. Does changing to 3401(a) or 415(c)(3) as the definition of "plan compensation" (we're using a Datair document) get around this problem (without causing a host of new ones)?

I just spoke to another client about this who uses Paychex. She said that she called in the shareholder premium information at the end of the year, and it shows up on the W-2 as a note... but it's not reflected in Box 1. If one of the largest payroll companies can't do this properly, then what hope is there? I know, the answer is to find a better payroll company, but they do payroll for thousands and thousands of S-corps; they can't be willfully getting it wrong, can they?

I agree that if the health insurance benefit for a >2% S-corp shareholder is included in W-2 Box 1, it is included in plan compensation (we use W-2 definition) and 415 comp. But I've got an accountant (several, actually) who doesn't get that information to be added in - he claims that his way, it ends up deductible to the employee, not the S-corp, so he doesn't bother adding it to the W-2. Plus, it means he doesn't have to chase it down while preparing W-2s. I'm not an accountant, so I don't know how OK that is, but what I do know is that there are some participants whose "compensation" is significantly affected by this, and are now receiving a few thousand less in profit sharing. Is there a leg for us to stand on as TPA to add that amount in, even though it's not on the W-2? Or do we just tell the plan sponsors to get more diligent CPAs? Thanks.

The concern is that an audit could come in and notice that there are several hundred employees for whom no completed deferral forms exist in the company records. Therefore, how does she prove that she offered the plan to all the participants if they don't return the forms? Of course it's not required to get one back, but we've all had pesky auditors who make life difficult when they don't see a complete set.

After years of being a client and after being told about the dangers of this situation several times, the HR manager of a plan with ~500 employees with decent turnover and short eligibility (they need it to stay competitive) admitted that she has a hard time getting back the deferral election forms from people who choose not to defer (the only other contribution is a non-SH match) and is asking how to best protect herself. While I love the simplicity of it, I presume holding back paychecks until the form is returned is out of the question ("But I can't pay you until I know what you want deferred!"). I'm thinking that having the employee sign something when given the deferral election form could help show an auditor that even if the forms weren't returned, that the participants were at least notified and given the opportunity. Any other ideas? Let's assume that automatic enrollment is not an option for them. Thanks.

Can you point me to the section of the 5500-SF instructions you're referring to? I think that's just a one-person plan rule (I suppose if you are used to filing one-person plans on 5500-SFs you could say that you don't file 5500-SFs for one-person plans with assets <$250K...).

This is what I was leaning towards. Thanks, all!

Participant requests a lump sum cash distribution payable to herself. It gets overnighted to her and received, but she dies before depositing it or cashing it or whatever transaction she was going to do. The participant's son wants to deposit it into the participant's checking account to make it part of the estate. The plan beneficiary (who is the late participant's mother) wants to have the whole transaction stopped and re-processed, arguing that since the check wasn't cashed yet, those are still plan assets and therefore the payment should now go to her as beneficiary. So I guess this really comes down to when are the assets considered paid out from the plan - when the check is cut from the recordkeeper (which is what it shows when you log into the RK's website), or when the check is cashed? Any guidance (other than "tell them all to hire a boatload of attorneys" - which is where this might end up, anyway) is appreciated...

A client just shared that the management letter from their audit "strongly suggested" that the plan sponsor (!) contact participants who were still invested in the Target Date 2010 and 2015 funds to remind them that they were in funds whose dates had passed. Am I crazy, or is this wrong on so many levels? I realize that you might not know me well enough to realize this isn't actually an "or" question... LOL

In a controlled group where they handle payroll internally, an HCE under age 50 was allowed to defer from multiple companies and ended up with $29K deferred for 2018. This plan also happens to fail the ADP test (partially because I had to include all those deferrals), and he will need to get an ADP Test refund that exceeds the amount of the 402g violation (yes, I'm only getting the information to do this today)... until I apply the earnings allocation, which is actually a loss for 2018, which brings it back to less than the 402g excess. So what comes first here? If I apply the net $10,000 ADP refund, then there's still a $500 402g issue. What about taxation - 402g violations not corrected by 4/15/19 are double-taxed, so running them through as an ADP correction seems as if it would not make that clear. Thanks for the last-minute advice...

I've got a small pooled PS only plan. Participant R, who is a 10% owner, has about 80% of the money in the plan. She has had a medical setback and requested an in-service withdrawal to be paid as soon as possible; she completed the proper form and submitted it. I advised that the Plan Administrator should consider running an interim valuation, given that the assets are up ~20% year-to-date, and that's when I found out that there is currently a changeover in ownership and management and everything. So it's been almost two weeks as the other/remaining/new top people argue amongst themselves who will be the Plan Administrator and who will be Trustee and who will get to make this decision, and R has been waiting patiently. R called to ask where her money is, and noted that she might be separating from service soon. That triggered an alarm, because terminated participants are eligible to receive a distribution only after the end of the year of termination (to allow for the allocation of gains/losses during the year). So... if she does terminate while these people are still dithering about who should authorize what, or even if they get their acts together and authorize the interim valuation and she terminates while we're in the process of doing the interim valuation, would you think that invalidates her in-service request? I don't think so, since she made the request in good faith while she was an active participant, and it was only due to the... well, call it what you will of the people around her that caused it to not get paid timely.