AlbanyConsultant

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...?

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!