AlbanyConsultant

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.

I did speak to the participant's attorney to get clarification, and he said that the contract is going to be revised to non-FHA anyway, so this is a moot point. He confirmed that the participant definitely wants to use the loan proceeds as part of the purchase transaction. So, false alarm. Or, as I like to call it, "Scramble to do a bunch of hyper-specific research that will not be applicable when the facts change 24 hours later." LOL

Hi. We received a loan request where the participant is looking to extend the loan repayment period past 5 years because he is buying a primary residence. He sent us a mortgage contract to prove that this was happening. In the contract, it states that "This Agreement is contingent upon Purchaser obtaining approval of a FHA mortgage loan of $X...", where $X is the amount of the purchase less deposit plus closing costs. The amount being requested as a plan loan is more than the deposit amount. So... is the loan actually used towards the purchase of the primary residence or not? If the Purchaser must get a mortgage to cover the entire cost, then the loan is just replenishing his bank account (except maybe for the down payment amount). Or, as I suspect, this is just an example of language being stupid and inexact and we all know what the heck is supposed to be happening, so it's fine? Thanks!

I just don't see this covered in the regs (not that I expected to). The way I read it, each hardship application is a discrete event - today, at the time of this application, does the participant have a valid, substantiated reason to take a hardship and the available amount to do so? Based on this, the answer is "yes". But it just seems so wrong... what's to stop someone from pulling this scam over and over until they deplete their entire hardship basis (which is usually a good portion of their account)? Maybe the inability to defer for six months at a time might be a deterrent, but not to everyone.

I've got a participant who took a hardship distribution from the plan to pay medical expenses (using the safe harbor hardship rules). We now find out three months later that the participant used the money for other purposes... so those invoices are still unpaid. Now he is asking for a hardship using the same bills he provided before (or maybe they are updated versions, but it's the same amount for the same place). Is there any reason the Plan Administrator can deny the request under the regulations? He has enough of a basis to take the amount again. Thanks!

Is it just me, or does the second sentence of 6.06(4)(a) not seem to be complete...?

Thank you. I knew I had to be overcomplicating this...

Is it just me, or is this one heck of a labyrinth to figure this out? I've got a participant who was overpaid by about $1,000 in an individual account (i.e. on a platform) 401(k) plan (erroneous deposit combined with immediate distribution - every TPA's nightmare). I started with Appendix B, Section 2.05 "Correction of Other Overpayment Failures". That says that for a DC plan, I go to Appendix B, Section 2.04(2)(a)(iii). Flipping back a few pages, I find that section is headed "Return of Overpayment Correction Method" and is generally talking about a 415(c) refund, but it directs me to Section 6.06(3). 6.06(3) is "Correction of Overpayment (defined benefit plans)" - !?!? That's a little odd, since 6.06(4) is the same section for defined contribution & 403(b) plans. I'm sure the IRS wouldn't make a typo, though, so I'll stick with 6.06(3). This kicks me back to Appendix B, Section 2.04(1), keeping in mind that I might want to consider Section 4.05 (correction via plan amendment - no, I don't want that), and also keeping in mind that I don't violate Section 6.02 (general correction rules, like don't favor HCEs, etc.). Appendix B, Section 2.04(1) talks about "Failures Relating to a 415(b) Excess". Again, we're back to 415 violations, and the examples are all DB-esque. This is the worst "Choose Your Own Adventure" book ever. Can anyone help me make sense of this? Or point me to something that makes the steps to correct this clearer? Thanks!

The plan is unfortunately silent about this exact situation... It is very clear that if you don't already have a beneficiary, then the spouse becomes the beneficiary (first sentence in second paragraph of 3.4.1), but that's not what I have here. I went back to the doc provider, and their response was "...but it does not appear that the document specifically addresses this." Thanks again.

Thanks, everyone. I know this was an exercise in stupidity - I feel your pain, MoJo! - but I'm dealing with a client who takes everything literally confronted with a situation that is being twisted by the mother. I was looking for a clear "spouse is always the beneficiary, and this supersedes any previous" to make it perfectly clear. I guess I just need to raise my billable rate for these kinds of questions. :o)

I have run into a situation where the employee became a participant while unmarried, and selected his mother as his beneficiary (awww, how nice). He has recently married. We all know that this means that his spouse is now his primary beneficiary... but where is that stated in the law? The mother is reluctant to no longer be the beneficiary, and the participant, who could choose to solve this by just completing a new form listing his wife, is not doing so. This is a 403(b) plan - I don't think that matters, except that the document language isn't pre-approved and therefore maybe isn't as 'tight' as I'd like it to be. It says that if there is no designation in effect, the spouse is the default beneficiary unless he/she waives that right. But it doesn't specifically say that becoming the spouse supersedes other beneficiary forms in effect. And it's not subject to QJ&SA for anything (which I think rules out IRC 411 and 417). So where in the Thanks.

I'm working on a PYE 9/30/16 401(k) plan where the employer is just not giving us what we need to complete the ADP Test. I know it's going to fail, but I can't even get in the ballpark of completing the test. Since we're past 2.5 months after the end of the plan year, the 10% penalty will apply. Now that the next plan year end is looming, I'm trying to scare the employer into getting us the data or else. If we cross 9/30/17, then the correction is an EPCRS issue and the plan sponsor has to deposit a QNEC equal to the amount refunded. But what about the 10% penalty - is that still applicable? Or does that go away somehow? Thanks.

Just thought of something: the plan uses the "expected to work less than 20 hours per week" exclusion for their employer contribution ONLY. Does auto-enrollment mean you are auto-enrolled for all sources?

I have only a couple 401(k) plans with auto-enrollment, so now that a 150-life NFP with an ERISA 403(b) asked me to add auto-enrollment to their plan, I figured I should ask around to see if there is anything that I specifically need to be careful of implementing this in a 403b. I figure they will go the EACA route because they are not going to want to do the required QACA contribution, and they sound like they want the ability to let the participants do the 90-day withdrawal. Following the Relius chart I'm linking below, there doesn't seem to be anything else that would pose an issue in this situation. Any tips or advice would be appreciated, thanks. http://www.relius.net/news/pdf/Form376ACAcomparchart.pdf

Sounds reasonable - I was going right past the 'segregated' issue. Thanks!

I have a client who made their final deposit for 2016 (payroll date 12/30/16) and first deposit for 2017 (payroll date 1/13/17) were not processed by the recordkeeper for several weeks; it wasn't discovered for another month or two. To make good, the recordkeeper reversed the initial transactions and re-processed them as of the date they should have been done, using that dates' share prices (I wonder if the relative share prices made it come up a net positive or negative for the rk?). So... I presume that this gets us out of having to calculate any lost earnings (presuming that the rk also made sure to correctly credit any dividends or capital gains)? And how in the world do I begin looking at a 5330? Any suggestions?

I've got a plan with a non-safe harbor discretionary match that is calculated per payroll with no true-up. Halfway through the year, the plan sponsor now wants to cut the rate of the match in half. Is there anything that would prevent this? I don't see anything in the plan document that discussed this specifically. I know they'd still have to pass the ACP test, so if this is a ploy to lower the match after the HCEs have maxed their deferrals, they'll just fail that anyway. Is there anything else that could come into play? Thanks.

Just saw the new article that ASPPA now wants us to Save our Savings: https://www.saveoursavings.org/ I thought we were still saving our 401k and protecting our piggy. I can't save everything - I'm not Melissa McCarthy. :)

I've got a typical ASG - 2 lawyers O and P who each have their own sole-prop practice, and they have a partnership where their receptionist and other staff are paid from (and they receive small K-1s from it). O owns 1/3 and P owns 2/3 of the partnership. When I split the pension cost for the staff, does that also affect the Schedule C income because this is treated as one employer (i.e., add the Schedules C and K-1 together and then subtract the portion of staff contribution)? Or do I reduce only the K-1 compensation and then add the Schedule C compensation? Or is it the same thing and I'm just overthinking this? Thanks.