AlbanyConsultant

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.

An ERISA 403b plan where we merrily have been excluding a few participants from the 5500 count for the past few years because they terminated in 2004 and 2005 and had their balances only in old annuity contracts is looking to terminate. All of the other participants with balances are active on the mutual fund platform so we were all excited to have an easy plan termination... and then someone remembered these stragglers. Is there any way to consider these few people already in possession of their accounts so that the plan can be terminated and paid out? Maybe with a notice to them to give them a heads-up that the plan is officially terminated?

Drat. Thank you, but drat. So if the ER still wants to start at a new platform, I could write a new document and have assets going forward for all participants at the new RK and the old accounts at TIAA, but I'd have to convince TIAA that their document no longer governs those accounts? Or, at least, is subject to any conditions in the new document (which, ha ha). Because with a few dozen participants, some terminated for 10+ years, there's no way that they will all agree to move to the new RK voluntarily.

A financial advisor has reached out to me about a 403b plan at TIAA. The plan has an employer contribution, and TIAA acknowledges that it is an ERISA plan... but they then say that because all the investments are in annuities that the plan sponsor does not control the investments, so the plan sponsor can't decide to move the plan in one fell swoop to another platform - it would have to be up to each participant because they control their own accounts. Is this just TIAA being TIAA, or do they have a leg to stand on here? Thanks.

In a plan where everyone is in self-directed brokerage accounts, two of the doctors (of course) have stumbled onto a non-publicly-traded stock that they want to buy. The financial advisor can't get them access to it through his platform, and the doctors aren't old enough for in-service distributions of any sizable amounts, so they are looking to change brokers to get access to this asset in the plan. The asset itself has a minimum - I've heard varying accounts of either $25K or $10K to buy in. Is that in and of itself discriminatory? If it's $25K, then no one else besides the doctors have that much in their accounts (at least as of 12/31/18). But what if it's $10K - pretty much everyone has that much.

I agree, but this is not the kind of client who is going to be on top of things enough to tell us when someone terminates or to initiate the forceout themselves. So I'm trying to save them from themselves by making the document reflect what will actually happen (i.e., we will swoop in after the end of the year, figure out what needs to happen, and do it then).

I'm taking over a plan that has immediate force-outs in the document for VAB <$5,000. I suspect that provision was not followed by the prior TPA, and based on how the assets are set up (individual brokerage accounts) and the fact that we won't be monitoring the plan on a daily basis, it doesn't seem like the right fit for this plan. Is it a cutback to change this to happening after the end of the year of termination in the document? Thanks.

Thank you!!

SIMPLE IRA.

Let me start by saying that I don't work on SIMPLEs - this was a call I took from a desperate advisor, and while I told the advisor that I don't know the answer (and he is now going to check with the company's accountant), now I am genuinely curious... A small business has a SIMPLE, and all participants have signed on to have their SIMPLE accounts through one financial firm (let's say Merrill Lynch). Now one participant brings in paperwork that says he wants to open his SIMPLE account somewhere else instead. Does the plan sponsor have the authority to limit where the accounts are? From what I can see, I don't think so, unless maybe the SIMPLE document is specifically a SIMPLE document from ML that specifies that all accounts will be held there... and even then, I'm not sure that would hold up. Am I even in the right ballpark?

I'm talking to a plan I'm looking to take over, and they are getting close to the audit threshold. Luckily, they have two separate businesses in their controlled group, so I'm thinking about splitting the plan into two identical plans to avoid the audit (yes, we'll charge them a little more, but nothing near what the audit costs). The assets are on a product platform. One of the issues of the plan is that very few of the participants have balances, so I can deal with manually separating the download, but is there a problem with all the participants staying in the same 'contract'? Is this a master trust? Thanks.

Seems like every few years, there's a thread about whether a plan sponsor can enforce the loan policy to have loan repayments only be deducted from payroll. Here's one good one from about two years ago: https://benefitslink.com/boards/index.php?/topic/61537-stopping-loan-payments-while-still-employed/ Let's go with the premise that if someone wants to cease their loan deductions while still employed, you cannot stop them. If the loan policy says that loan repayments are through payroll deductions only, do you then have to allow the participant to repay the loan through some other method? Or are they voluntarily dooming themselves to default? Thanks.

A client called because they were pressured by their platform to approve a distribution and agreed to it. Unfortunately, their document is written so that there is a one-year wait on distributions (because there are usually errors in deposits that we have to reconcile after the end of the plan year). But let's say that we are confident that this particular person has no deposit errors, so the distribution was 'correct' in the amount (vested amount, deposits, etc.), just about ten months too early. I know that they have violated the terms of their document. But what is the downside/correction? It's not really an "overpayment", is it? I'm not seeing anything remotely applicable in EPCRS 2018-52. Thanks.

Short version: we took over a pooled profit sharing plan a few years back... all pooled except for a few participants with life insurance. No one new has purchased policies (we've made the plan sponsor give each participant a form to sign off saying that they don't want to purchase a policy), and all those with policies have terminated and gotten paid out except the owner, so his is the only policy left. Can the plan be amended to no longer allow life insurance going forward without causing a nondiscrimination issue? Or are they doomed to be stuck in CYA-mode until the owner gives up his policy? Thanks.