AlbanyConsultant

Isn't an RMD "periodic"? It's every year. This is from IRS.gov: Or is that overruled by the specific clause in the W-4P instructions (assuming that payment of an RMD is "on demand" since it can be requested at any time during the year, and co-opting the IRA rule) {emphasis mine}:

Thanks. I don't suppose there is anything I can point to to show this guy that such a thing is kosher?

We usually get direction on a plan distribution form, but this person didn't complete that and sent a W4-P instead.

I have a client who, when requesting his RMD, sent a W-4P "so I could calculate the withholding". Huh? Usually, participants complete a distribution form that lets them indicate a percentage or amount to withhold. Is this really the way it's supposed to be done? Is there some kind of easy conversion chart from "W-4P deductions" to "percent to withhold"? Thanks.

It is a DC plan - should have included that.

I have a plan that has terminated, but the employer is still continuing. We are now working on the final administration, etc. before payouts. A participant is requesting an in-service distribution (which was allowed by the plan). Is this still a valid request after the plan termination date? Thanks.

Yes; effective for those hired going forward.

The basic plan document language is: And the adoption agreement says: And, for completeness, I got this response when I asked Datair: The second sentence there is a bummer, but it sounds like there is room to argue that point, and I think it's a point worth arguing. I intend on amending the AA effective now to say that only service with D through the date of the split is counted in D's plan, essentially changing A7c to say "D (only service prior to 1/1/98 will be counted)". I can't go back and take away service from anyone who was already credited, but at least this will stop the issue from continuing. If I apply it only going-forward, it shouldn't affect any current participants, so I think I'm in the clear on this. Thanks, and any further thoughts are always welcome.

My client is law firm "G", which was formed when G and his buddies left law firm "D" in 1997. When they started a retirement plan a couple of years later (not with us), their plan said to count service with D for all purposes (eligibilty, vesting, allocations, etc.). We took the plan over two years ago, and in the PPA restatement said the same thing. Now there is a new employee of G who was previously an employee of D. The thing is, she was hired by D in 2005 - years after the split. Is there some kind of 'reasonableness' (ha!) standard on this? Obviously, the plan sponsor doesn't think this new employee should get the benefits of working for basically a competitor. Or do we have to amend it prospectively to only count service with D through 1997 and just know that one 'got through'? Can we even write an amendment like that? If it helps, I'm using a PPA Datair volume submitter adoption agreement format document. Thanks.

They are actively searching for new employees and want to have the plan available to them. I have suggested this; if they're going to hire someone at ExecDir-level, do they really want a one-year wait for deferrals? I have resigned myself to having to answer a question from the IRS about this plan when they get the zero participant filing.

The board of a small NFP with a 401k/SHM plan terminated the contracts of the executive director and his assistant. They were the only two employees - and participants - of the plan. The board is currently looking for replacements. They were both fully vested, so I don't have an issue there. The plan allows immediate distributions, so both of the terminees are looking for their money. Once they get paid out... is this still a plan? The sponsoring entity still exists (well, it still has a board), though it would be hard to say that it is actually performing any service for anyone. The plan has a one-year eligibility; even if they hire someone now that employee won't meet eligibility until 2017, so the 2016 Form 5500 is going to show that it ends at zero participants. Is there going to be a problem with a plan that has zero participants, no money, and not marked as "final"? Thanks.

When we got our 2015 census data for Client M, they mentioned that they have leased employees that started with them in late 2014 and are still employed. It seems that they meet the requirements of 414(n) at this point so they are considered "leased employees". The plan has a six-month eligibility for 401(k). If we're supposed to count service back to the original date of hire, do we have a missed deferral opportunity? It seems like we shouldn't, since they weren't eligible as of that date. My thought is that we count them as eligible as soon as they meet the criteria to be counted as a leased employee. Thoughts? Thanks.

This is technically a hypothetical, but when it came up I didn't have an answer: We've all had the cases where the participant's beneficiary form is old and doesn't match the current legal beneficiary (cases of re-marriage being the most common). So let's say the plan beneficiary designation form has Spouse 1 as the beneficiary, but Spouse 2 is the current for-all-purposes-outside-the-plan legal beneficiary, and they are both less than 10 years younger than the participant. Whose DOB should be used for calculating the plan RMD? Just curious.

I have an ERISA 403(b) plan where the plan sponsor wants to allow hardship distributions on all money, including amounts rolled into the plan (as opposed to in-service distributions for any reason). Is there anything in particular that disallows hardships from rollovers in 403(b) plans? Thanks.

They have never filed one in the past, so I certainly didn't want to start now. I have asked the vendor to explain - no answer yet.

I'm working with a small non-ERISA 403(b) that has convinced the few participants with balances to take their distributions so the plan can be terminated. The custodial vendor sent a letter reminding the plan sponsor that the plan must file a "final 5500" for the year the payouts are made. Can anyone confirm that? I'm not seeing that rule anywhere... thanks.

This plan has insurance for three employees (1 HCE, 2 NHCEs). They are claiming that they were advised (by someone who is now conveniently deceased) that because they haven't offered this option to new employees in over a decade, it is "grandfathered" in and is not a problem. This does not smell right to me at all. There are 2 HCEs who don't have insurance and 10 NHCEs who don't; (2/12) / (1/3) < 70%. Is there any way that this can be OK? Thanks.

Working on a 401(k) profit sharing plan that has NRA of 55. 2 HCEs and 1 NHCE, all of whom are fully vested due to years of service. My first question is, as a profit sharing plan, is it necessary to comply with 1.401(a)-1(b) (as revised in 2007)? The language there is concerning "pension" plans, and I wonder if they mean that in the strictest sense or more general. If this plan does have to meet that requirement, what kind of problem do we have? None immediately, it seems, but the second that another NHCE is hired, he will not benefit under the old plan NRA definition, so won't we fail benefits/rights/features coverage testing? Finally, can I actually do this? Is there a problem with this kind of cut-back? Thanks.

Hi. The plan sponsor has both a 403(b) and a profit sharing plan. To reduce admin costs, we want to consolidate to one plan, so we are terminating the profit sharing plan and implementing an employer contribution in the 403(b) plan (it was already an ERISA plan, so no big deal). The plan sponsor is concerned that not everyone will return their distribution forms. Normally, we include a form that notes that participants who don't return their form will be sent to a rollover IRA custodian. But in this case, can we force the rollover to the new plan? Or, even better, can we bifurcate the instructions to say that if you are a terminated participant, it will go to a rollover IRA custodian and if you are an active participant it will go to the new 403(b) plan? Thanks.

I've got a plan where the match is 100% of the first 4% deferred (as a safe harbor match) + 0% on the next 4% deferred + 50% on deferrals from 8% - 15%. I know, it's weird; the plan initially had 50% on the first 15% but kept failing ADP, so someone converted it to a safe harbor, on the idea that "front-loading" the first 8% into 4% was beneficial to the NHCEs. No surprise, the additional match formula is where I'm having the problems. Not only is it failing ACP, but I wonder if I might have a b/r/f problem as well. 2/2 HCEs defer enough to get this match, but only 2/14 NHCEs do as well (we had several new NHCEs this year that really changed the demographics). Is this a problem? And, if so, how can I fix 2014 (and presumably 2015)? Some kind of QMAC to bring more of the NHCE's up to 8%+ deferred? Thanks.

That's what I thought I remembered. Thanks.

Hi. This was a paired MP/PS plan that we merged in 2010. A participant who is 53 (with 15 YOP) wants to take an in-service distribution of their money purchase money. The plan document and SPD say that for sources that are not subject to the age 59.5 restriction, isw's are available on the earlier of age 59.5 or 10 YOP. Is "no isw before NRA" something that had to be preserved from the MP plan? Thanks.

We're on Datair's documents; I don't think their prototype-style volume submitter document gives that much flexibility, but maybe we can do a snap-on amendment. We can definitely exclude them entirely, but I don't see a reduced amount as an option. I'll ask them. Thanks!

We have a client who wants to explore a SH match. Their issue is that they've got a bunch of employees who earn $300K+ who will defer the max, and they don't want to be on the hook to give each one a $10,600 match - that's just not in the budget. Obviously, we can exclude the HCEs from getting the SH contribution altogether. But is there a way to give them a discretionary match that doesn't fail coverage and/or ACP? Then they can decide to match all those HCEs at, say, 100% of 2% instead of at 100% of 4%. It seems to still preserve the safe harbor because the NHCEs will still have equal or better match rates and we're still under 4%...

That's what I've been looking into. The "main company" already has an ERISA attorney on retainer (!), so I've asked her to review the situation and that reg specifically. Thanks.