AlbanyConsultant

A terminated participant has a residual balance of $5... so his RMD is less than the cost of the stamp it would take to mail the check to him. I know there's talk of not having RMDs if the AB is <$50K, but that's not here today. Any thoughts on just giving this a pass? Thanks.

FWIW, I've seen this done a bunch of times by different TPAs and never seen anyone implement a waiting period in making this change.

OK, I know I know this, but just not today. Like it says on the tin: if a rollover comes from a SIMPLE IRA to a 401(k) of the same employer, does that count as a related rollover? Thanks.

Well, at least the auditor and I were both wrong... So for a 2017 calendar year plan year for an S-corp on extension (so due 9/15... which I know is a Saturday), the allocation can be either: Made by 9/15 and deducted on the 2017 return; Made by 10/15 and deducted on the 2018 return. And that's it. Any deposit after 10/15 is not considered "for 2017" and shouldn't be allocated based on 2017 information? With the exception of things like SH and QNEC as Tom pointed out (which may be what I was thinking of in the first place). Thanks, everyone.

Currently working through an IRS audit on a calendar year plan, and the auditor mentioned that the 2017 profit sharing contribution was due next week. Casually, I said, "Sure, if they want to deduct it for 2017, otherwise they have until the end of 2018." He directed me to Publication 560, which says that the last date to make a contribution is the due date of the employer's return (including extensions) - link, see Table 1. And now I see the 401(k) Fix-It Guide supports the same timing: What? I'm looking for anything to refute this, but I'm coming up empty. Is this real life?

Waiting in my email this morning was the BPD! Perfect timing! Here is the entirety of the discussion of "ad hoc" (I have edited out language that clearly has no bearing): This sounds like just another form of option benefit payment that can be eliminated to me, but of course, that's what I want it to sound like, so maybe I'm biased...

Unless there is a compelling reason, whenever we take over a 401(k) plan we at least discuss the topic of removing installment or annuity distribution options because they are not protected benefits and I like things easy. In this latest plan document I'm taking over from, the language suggests that the "ad hoc" distributions it allows are a protected benefit. This one, I'm less sure about. First of all, I'm presuming (since I can't get a copy of the basic plan doc, only the adoption agreement) that by "ad hoc" distributions, they mean amounts allowed to be taken out by a terminated participant in any amount at any time. Any thoughts as to if this might actually be protected somehow? Thanks.

Thanks to both of you.

So, the 5% owner hits age 70.5 in January 2017, and we do his 2017 RMD in 2017. No one blinks. Now we find out that he sold his portion of the business "one second after the stroke of midnight" (who knew lawyers could be poets?) (I find it hard to believe that that's what they were doing while singing "Auld Lang Syne") into 2018 to avoid taxes in 2017, and he is arguing that he doesn't need a 2018 RMD. I explain that, at least in this instance, once he is in RMD pay status, that's where he stays. Grudgingly accepted. Here's the question - his wife turns 70.5 in 2019. Is she off the hook because the stock was sold before the calendar year in which she turns 70.5? If she is still employed in 2019, do I go to the definition of HCE, which has a lookback year and because her husband owned more than 5% of stock for a second in 2018, she has to take a 2019 RMD? Or do I go to the definition of "5% owner", which does not includes a lookback year? Personally, I'm hoping she terminates and takes her entire balance before the end of 2018! Thanks.

Sorry - by 'personal 415 limit' I meant that since the daughter's max limit is the lesser of her eligible compensation or $55K, then in this case it would be $0. Upon re-reading that, yeah, I was unclear. Nothing to do with 403(b) here. Thanks, everyone.

Complete brain freeze here... The calendar-year safe harbor plan has a 12-month elapsed time eligibility to defer, and the owners hired their daughter in August 2017... who deferred $5K in 2017 (and more in 2018 so far, of course). We got the 2017 annual data yesterday. Going "by the book", what's the right ordered solution here; what is violated "first"? My first thought is that she violated her 'personal 415 limit' and that it has to be distributed to her and is taxed in the year of distribution, but that seems way too easy. Also, I'm remembering something about double-taxation under 402(g)...? Thanks.

I don't call the IRS any more than I have to, believe me, but when there's a letter saying there there is a missed filing and threatening penalties, that leads to very nervous clients, so I have to do something. I don't agree with their logic, but doing what they told me to did resolve the issue each time, so there has to be some kind of method to the madness. Maybe I'm the guinea pig for a new pilot program?

This has happened a few times in the past couple of years, so I was wondering if anyone else had the same experience... Plan sponsors change their EINs for reasons. When we complete the 5500-SF, we note on Line 4 that in the previous year, they used to be a different name and different EIN; presumably that is there to help EBSA track the filing when the EINs don't line up. A year or so later, the plan sponsor gets a letter that a filing is missing. When we finally speak to someone, they tell us that the old EIN needs to have a final 5500-SF filed showing the participant count going down to zero and the assets transferring to the plan under the new EIN. "But it's the same plan." Doesn't matter. In their tracking, that EIN is still open and needs a filing until the participant count (and the asset values, but that's secondary, it seems) goes down to zero and a final filing is received. We have been instructed to correct this issue by actual IRS agents by sending in amended filings showing this, even after they acknowledge that we have entered the information on Line 4 of the new EIN's filing that references the old EIN. So we have started proactively filing final 5500s for plans where the EIN changes (and "first filings" under the new EINs) when we see this happening. We've gotten no correspondence back on any yet, but there are so many questions... What about timing requirements? What is an appropriate date to use as the transfer, and when does that mean the 5500 is due? Whose crazy idea is this, and are they serious? And so on. Anyone else running into this? When it happened once, I was willing to just go with what the agent told me to close the issue. But when it got to several times, and now that our filings that continue the pattern seem to be going through OK, I'm wondering if this is some new directive that I missed. Thanks.

The problem is that I restated, not amended, so there was no specific language about this particular change (meaning I didn't put any in the adopting resolution). But I went back to the doc provider (Datair), and they confirmed that their doc reads such that the employee would not be able to continue deferring after moving back to the union at a later date. Here's the kicker. I called the client to explain all this, and he listened very patiently before asking why I had gone through all this trouble: didn't he send me the amendment that changed the eligibility to exclude union employees that was effective right before they bought their first company that had union employees two years ago? Why, no, in fact, that hadn't been provided to us. Well, he's going to look for it and get it over to me now. So this is all moot for this plan. But thank you all for your insight, anyway!

When we took over this 401(k) plan, union employees were not excluded, but the plan sponsor wanted us to exclude them when we restated the plan document, so we did on a prospective basis. What happens when a union employee goes non-union, and then switches back to union status? Can he defer from that new union pay because he was grandfathered? Or because he switched to an ineligible class after the amendment date, can he not defer any longer? Thanks.

I'm hopeful for SSN, because I believe that the former rk used that as the identifier. I'm hoping at least those are real. I had mistakenly thought that I needed SSN and DOB or last known address to do a participant search, but I guess SSN is usually enough, so that should help somewhat. DOBs are trickier... there are so many places that just don't get them, it boggles my mind. CuseFan, even if I were to "run", I couldn't leave them in the lurch with just a "yeah, you're in deep trouble, best of luck, bye!" (and I'm not suggesting that you would, either). Yes, I will have to impress on them that this work will be above and beyond the expected admin costs, but it is necessary if they want their plan to be correct; I think they know they are in trouble and want to get back into safer waters... the question is how much are they willing to spend to do so. I'm thinking that, as a large plan, this is audited every year... how has this not come up before?

The discussions of us taking over this ERISA 403b plan were going well, until they mentioned that they "purge" their employee records every couple of years. They are currently with a low-cost (and low-service, but you didn't need me to say that part, did you?) recordkeeper that never questioned any lack of data or plugged data, and there was no TPA (the plan sponsor did their own employer calculation and their auditor did the 5500). After they revived me, I started ticking off all the potential problems: RMDs, no ability to deal with missing/lost participants, proper coding of 1099-Rs, etc. It's one thing if it's a smaller plan and you can get your hands around all the participants - maybe they know that there is no one who is 70 years old, and maybe they can track down all the terminated employees with balances. But it's a different story when it's maybe 100 or 125 people in this situation, and the whole HR department is new in the past 6 months. I've asked them to take a second look around for information, but let's say they really don't have dates of birth for those who separated from service more than three or four years ago. Possibly a bunch of the addresses are no longer valid and no one has followed up on them... or are "c/o the plan sponsor". On a scale of "very" to "run away". how screwed are they? There's no easy fix to this sort of stuff that I can see. Any suggestions on how to get this plan back on the straight and narrow without it costing a fortune are appreciated, thanks.

I was not aware of that exception. Thanks, AKconsult!

I had forgotten about this post! Flyboyjohn, none of those conditions apply (that I'm aware of), so I'm not trying to get around anything like that. As to why not a 401(k), they don't intend to go safe harbor, and I, um I mean 'they' :) don't want to deal with nondiscrimination testing. And I agree that the FA should leave plan design to the TPAs, but I'm willing to listen to new ideas; I'm still a novice in the 403b world, so it's possible that he had a good idea I hadn't encountered yet. Patricia, the plan sponsor can terminate the current 403b because it's an ERISA plan, so the plan sponsor has authority over the accounts - it just doesn't want to exercise it currently due to the CDSC. So the idea would be to let them sit there and dwindle until those fees are small enough to be bearable and then terminate - if participants need to be forced out at that time, so be it. So it sounds like the FA's idea would work, but I just don't see any practical benefit to it - it might save the plan sponsor a little in our reconciling fees for collecting the data on those accounts. What about preserving distribution options? It seems like I wouldn't have to do that on a plan-to-plan transfer, which might be a benefit for me administering the 2nd plan...?

I've got a participant in a plan with deferrals, safe harbor, profit sharing, and merged old money purchase money. The participant is an owner and needs an RMD this year. Can he opt to have his RMD come from his profit sharing 'portion' and therefore avoid the QJ&S hassle? If he can do that and then move to deferrals and safe harbor, that should buy about two or three years, and I'm hoping he retires by then and takes it all (yes, I know he'll have to do the QJ&SA mambo at at that point, but at least it's only once). Thanks.

A financial advisor asked for help where an ERISA 403b plan is with one of the less-than-friendly 403b providers, and the plan sponsor is fed up with them. However, the plan sponsor learned that most participants will get hit with a large back-end fee if they move their money at this point. I suggested that we create a second set of accounts at a more friendly recordkeeper and call it all one plan under a new document (which I've done with plans on this provider before), but the financial advisor said that he has had better luck freezing the accounts where they are and creating a new 403b plan that allows transfers into it from the old plan (but not back the other way!). All new contributions will only go to the new accounts, and the FA can monitor when the sales charges have dwindled down to zero or some other acceptable number and advise each participant individually as to when to move to the new accounts. Eventually, when everyone moves over, they can terminate that plan. I have to say, the idea of not having to fight with Ye Olde Unfriendly Recordkeeper for information is appealing, but this seems like it's too good to be true. So we'd be leaving them with two plan documents (presumably that rk is going to help with the restatement of their plan, but I don't know that for sure), two 5500s, and each person getting two statements, and of course 2x the risk for an audit. The current accounts do allow loans, which might make things a little harder. What other pitfalls could there be in this arrangement?

Thanks, everyone, for the responses. I also prefer to not have the exclusion in - it is so easy for it to go wrong. This plan happens to already be a large plan, and part of the issue was with our per head charges; the plan sponsor was trying to limit our fees (of course).

Hi. So this 403(b) plan as been around for decades, and is now starting to grow rapidly, taking on a lot of 10- and 15-hour per week employees. The plan currently has the "20 hr/wk" exclusion for the employer contribution, but not for the deferrals. Is there any reason why they couldn't add it for the deferrals going forward? I can't think of any off the top of my head. Thanks.

Reading is fundamental! Thanks, NJ Mike!

In a sane world, I would never ask this question, but.. This plan has been filing 5500-EZs for years. This year, our firm has elected to change to filing the one-person version of the 5500-SF for better tracking, and I'm wondering if we should be checking the "first return/report" box on Line B because this is the first filing with EFAST as opposed to filing with the IRS all the previous years. Any thoughts, experiences, anecdotes...?