AlbanyConsultant

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?

NFP ER has a non-ERISA 403(b) plan. For many reasons, this arrangement is no longer satisfactory and they want to 'start fresh'. They would like to freeze the current plan (I know I can't terminate it and get it all paid out within 12 months) and install a new ERISA 403(b) plan on a single vendor platform. The participants can transfer their accounts from old plan to new plan even without a distributable event, right? The catch is that we'd have to preserve distribution options from the old accounts for participants who are still employed at the time of the transfer. Am I missing anything? Thanks.

New info seems to indicate that it was rolled to an IRA in the meantime, so we're still OK on that score. She did go to HR, who kept dumping it back on the broker. Everyone was very patient up until now. Proving the fund selection is easy because she completed a rollover form that had investment elections - that and the rollover acceptance form must be submitted together. If the client does actually reimburse, then I agree that they should bring this up with the advisor and there should be a payment there, but that will not be the plan's problem. :) And, no, I don't want to set a precedent at all.

This may not specifically by a 403b question, but it is happening in an ERISA 403b, so here I am. A participant has been trying to roll her money into the plan (I believe from a former 403b) for about six months, but due to... less-than-stellar 'assistance' from the financial advisor, it still hasn't happened. She has calculated that the amount she would have earned based on her fund selection less her earnings in her old account is ~$140 (her math looks pretty spot-on), and she's wondering who owes this to her. The HR dept seems willing to pay it just to make peace. Let's ignore the idea that since she controlled the money, she could have invested it however she wanted in the interim and therefore is responsible for her own lack of investment gains over this timeframe. Of course, I can't find any legal justification for the NFP to pay this amount - there are only deferral and match in the plan, so I can't do anything creative with profit sharing (well, I guess I could since she's not an HCE, but that seems extreme for this small amount). Is there any legitimate way for the employer to make her 'whole'? And, yes, I'm already trying to straighten the broker out so this doesn't happen again. I suspect there's even less legal standing for their firm to deposit that amount. Thanks.

My staff and I are really tired of keying in all the assets held, especially since we see it is a page in the audit report. Does anyone just copy the pages from the audit report and include it that way? Does that work (i.e., not get dinged by the IRS/DOL)? Thanks.

This year, I have different auditors from the same firm reporting assets at the same RK platform product on different lines. I pointed it out, and each insisted the other is wrong. *shrug*

Hi. I'm working on two related companies (that do not rise to the controlled group or affiliated service group level) where the top guy (who is in both companies/plans) took a max $50K loan from each plan - each loan was a valid loan based on amount, etc. Now there may be a change in ownership that will put these entities into the same controlled group. There is even talk about merging the plans. His loan balance will be more than $50,000, but is that OK since the loan(s) were valid when they were taken? Thanks.

Being not-for-profits, there's no deduction for the employer contribution, so is there a maximum amount allowed? I get that most NFPs don't have tons of leftover cash to make excessive plan contributions, but let's say that this year is an anomaly. Example: NFP has $800,000 payroll. if this were a regular corp, the deduction limit (and therefore the maximum total contribution) would be 25% x $800K = $200K. Is this the same for a NFP? One of those things that I know I've seen before, but just blanking on it. Thanks.