AlbanyConsultant

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...?

Thank you so much, Peter. This is definitely landing firmly in "contact your attorney" territory.

Thanks, everyone! Today's follow-up from the Plan Administrator... if the widower can be "made to see reason and go along with his wife's wishes", is there a way for him to sign a spousal consent waiver now? I suppose that if everyone agrees, then who's going to fight it? But I don't know if that's legally allowed. I'm going to tell him that he has to ask an attorney.

Here's a sad tale for today... A participant died last week, and the plan administrator called to review her beneficiary form with me - it lists her two sons as the co-beneficiaries. "Oh," he said, "was her husband supposed to sign off on this somewhere?" Uh-oh. I explained how, without that signature (notarized), her balance goes to her husband (who is husband #2, not the father of the children - not clear if he was married to her when she was hired or not, or when we suggested they update the beneficiaries with each restatement... not that that matters at this point). Now there are quite a few unhappy people. I've got basic plan document language that explains how a beneficiary is determined, of course, but one of the lawyers wants proof "under law", whatever that means. I thought that this would be defined in ERISA somewhere, but I don't see it. The best I can find is 29 USC S.1002 (8) in "Definitions": But that's not very helpful. Any suggestions? I don't want to rack up [too much] more billable time to my client because of a bunch of pushy lawyers... Thanks.

I am perfectly OK with this being SEP (Somebody Else's Problem). And, to Mike's point above, the language does seem to support that the RMD does not need to be paid out because she is not retiring. I emailed a question to the doc provider this morning, but haven't heard back yet (it's Datair's new pre-approved 403(b) plan doc).

We put language in our distribution forms specifically in plan termination situations that if you don't respond in X days your balance will be rolled to an IRA (and provide the rollover IRA institution's contact info) and note that this is an exception to the general $5,000 cashout limit due to the plan termination. This way, the participant has been notified in writing at least X days in advance (and we have sometimes suggested that it be sent a second time via certified mail if we know it's a sticky situation and there's not a time rush).

I can't believe I've never seen this before, but... I've got a 71+ year old non-owner participant not taking RMDs because she is still employed. The plan is terminating in 2018 , but not due to the business closing, so the employee is still going to be employed. Does she have to take a 2018 RMD before she can roll over the remainder of her distribution? Thanks.

Probably the one idea we hadn't considered was carrying it as a receivable through 2017. Interesting...

I've got a small plan (<10 participants in self-directed brokerage accounts) that was paid out in 2016, and we filed a final 5500 for it in 2016. Just got a statement for January 2018 that there was a fee refund of $2K to the doctor (and him only), so the account was reopened by the brokerage firm and then immediately paid out to him with withholding. Great! Brokerage firm also remitted withholding and will prepare the 1099-R. Our initial thought is that since it was a plan account, it still is a plan account and therefore this transaction is a transaction in the plan. So it needs to be reported on a 5500... probably an EZ, since there's only one participant in the plan for 2018. But then we just skip 2017 altogether? Any thoughts or ideas are appreciated, thanks.

A NFP ["BCO"] created a Type 2 supporting organization* ["BCU"] for itself last year. According to the accountant, BCU files it's own taxes with it's own EIN and there is a "majority overlap" of the boards, so she is telling us that this should be treated as a controlled group of non-profit organizations. * "A what?" Right. The CPA gave me this link: https://www.irs.gov/charities-non-profits/charitable-organizations/supporting-organizations-requirements-and-types There are 4 members of BCU's board... two of whom also sit on BCO's board. BCO is responsible for appointing and removing BCU's board members. No one told us about this until last week, so even though BCU was established almost a year ago, BCU hasn't adopted BCO's 403(b) plan. Which is fine, actually - no one from BCU was allowed to defer, and there are no HCEs in BCO, so there is no nondiscrimination issue to worry about. Does anyone have any experience with these "Type 2 supporting organizations" they'd like to share? It certainly sounds like a controlled group, but I figured it couldn't hurt to be sure... thanks.

The Fix-it Guide is what confused me! LOL I started with Mistake #3 (not the Culture Club song, for any other fans of 80's music): 3) You didn't use the plan definition of compensation correctly for all deferrals and allocations. Under this section is the expected 50% QNEC, and then it says to see Mistake #6 for ways to reduce that to 25%. That sounds like something my client would be interested in, so I head over there... 6) Eligible employees weren't given the opportunity to make an elective deferral election (exclusion of eligible employees). This actually doesn't meet the criteria for reducing to 25% because the period of failure does not exceed three months. Fine. But then it goes on to say... If the period of failure is less than three months, no corrective QNEC for the missed deferral opportunity is required. Is this solely for an exclusion of eligible employee problem problem, or can this sentence be applied to my situation? I don't think it can, honestly, as it seems too good to be true, but I figured I'd get some confirmation beyond a 'gut feeling'.

Sorry to zombify this thread, but I've got a similar situation, except the participant died in December 2017, at age 70 years, 2 months. Her beneficiary (non-spouse) requested a distribution in January 2018 and the investment product asked about a 2018 RMD because their records show that she would reach age 70.5 in April 2018. I initially was going to say that death gets her and/or the beneficiary out of the RMD since she never truly reaches her RBD, but that doesn't seem to be the case. Taxes > Death.

I've got a client who paid out their first bonus in a long time... and totally forgot that bonuses are subject to the same deferral election as 'regular' compensation, so he didn't do any withholding. So the employees have compensation paid in 2017 (reported on the 2017 W-2) that didn't have deferrals taken from it where there was a valid deferral election in place. What's the best fix? If this was in the same plan/tax year, I'd consider letting him 'make it up' on the next payroll, but I'm concerned that going over the year will be a problem. I was reading this nice article, and I was thinking that the option on the 3rd page of the chart applies, but no penalty other than earnings seems like a pretty light way to get out of this... Thanks.

I don't have exact data on the partners of A, but I've been told that there are 5 and they line up with 5 of the partners in N who own 90%, so that's what I'm basing my statement on. If it's not a controlled group, that would be even better, of course! Luke, I agree that this meets the "spirit" of the rules, if not the letter of them. They are going about this wrong to dot all the i's and cross all the t's, but what they are doing is substantially the same, and I think I could argue that to an auditor. Thanks!

The partners of Partnership A have created a new Partnership N - with 90%+ the same partners - to buy a business via asset sale. Partnership A already has a plan for its business. The purchased company had a plan, and in an effort to make the changeover as seamless as possible to the employees, the partners of Partnership N want to install an exact copy of that company's plan ASAP while they figure out how to proceed in the future now that they have doubled in size. Does this meet the transition relief standards? The plan for Partnership A isn't being amended, so if you look at it from there, it might... oh, and of course, this was all first mentioned to me a couple of days ago and is happening 1/1/18. :) Thanks, and happy holidays!

Thanks, Mike. What do you feel is the appropriate way to judge that in this case? a) All current participants maintain the right to take installments, and future participants do not. b) All current balances keep the right to be distributed in installments, and all future contributions do not. c) Leave the owner "grandfathered" and no one can take one in the future. Thanks!

Taking over a plan that I see offers installment payments. In an effort to simplify, I recommend that they remove that option... and then find that one of the owners started taking an installment series in 2017. So... does that mean I can't actually remove the provision from the plan?

I was explaining the restatement process to a plan sponsor with an ERISA 403b plan, and the director said that he intends to terminate the plan at the end of 2017 anyway (there are only 5 participants, all employed, so assume payouts won't be a problem), so he won't need to restate onto the pre-approved document. In 401k-land, plan documents have to be up-to-date as of the date of the plan termination. How would that translate here? Any thoughts? Thanks.

A ERISA plan that we don't maintain the document for is transitioning from one platform/recordkeeper to another. When it was set up with the recordkeeper that they are leaving (~10 years ago), spousal consent was necessary for distributions and loans. In 2015, the plan was amended to remove the QJ&SA rules, but it doesn't seem that the recordkeeper was notified - or if they were, they never updated their records. Now the new recordkeeper is asking who they should follow - the plan doc or the old contract. My instinct says "plan doc" since it is an ERISA plan and the plan sponsor has the authority to make those changes to the plan. Any reason that wouldn't be OK?