AlbanyConsultant

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.

Not that this means it's OK, but there are several vendors selling 403(b) MEPs, so it must work... somehow.

I've got three NFPs who want to establish a common plan because they are essentially three cooperative arms of the same service - they share an Executive Director and many admin functions, and there is some board overlap. First - I know there's an 80% threshold for commonality of board members to determine if it's a controlled group or not. At what point is that looked at? Board positions begin/expire in the middle of the plan year, so do I look at BOY, EOY, or include everyone who as on the board at any point during the year? Second - Even assuming that it's all throughout the year, I don't think that I meet the 80% level. So if these entities want a single plan, it would have to be a MEP. I know that MEPs are a thorny enough issue with 401(k) plans - is there anything in the 403(b) world that would prevent one? Thanks.

I thought that I found an out with this article from Prudential, but it seems that if they are both NFPs then I don't get to use this exemption. However... I did find a paddle. Writing the previous post made me challenge the CG assumption, and it turns out they were basing it on an evaluation done over five years ago - no one had looked at it since then! It turns out that there is practically no board overlap between Z and X/Y, so I think this problem has just disappeared. X and Y have more board member overlap, but it might not reach the 80% threshold - either way, them being a CG wouldn't be a problem.

Yes, they've been a CG for years (according to them and their accountants, at least), but there was never a problem because there were no HCEs benefitting in the 401(k) plan because no one was paid that much until 2013. There really wasn't an opportunity to fix this in time. I was simplifying the facts because I was trying to solve one problem at a time. Here's the full scoop so you can see how bad this is (I posted about it before at some point): Three NFPs (call them X, Y, and Z) are in a controlled group. X (20 participants) and Y (50 participants) each sponsor their own 401(k) plan where they are the only adopting employer. X has an HCE for the first time in 2014; Y has no HCEs. Z is a 520 participant PS only plan with 1 HCE (it also has its own 403(b) plan - no, I don't know why the prior TPA was smart enough to make this one a 403(b) and not the others). 410(b) is fine on the PS side because I have 519/588 NHCEs benefitting (which is over 70% even before I get to only 1/2 HCEs benefit). Ditto for the 403(b). 401(b) on the 401(k) side is the problem. Benefitting HCEs are 1/2, and benefitting NHCEs are 69/588, which fails by a lot. I haven't actually done the average benefits test, but I suspect that it will also fail since I have 519 zeros to average in. Correcting this will be... I don't even know. "Expensive" springs to mind. And on top of that, my one benefitting HCE in X's 401(k) deferred 12% (I misspoke above because I was using an estimated comp number). The average NHCE ADP in X's plan last year was about 5%, so there's an ADP failure issue, too. I figure that's my top priority, because that has to be refunded in 15 days. So I've got a bunch of issues to deal with, and am trying to develop a strategy for it. I'm trying to figure out if I can treat each 401(k) plan separately or if I have to put them together. And I'm desperately looking for a solution to the coverage problem that doesn't involve bringing in 137 NHCEs from Z and giving them an employer contribution of half the ADP deferral rate for missed deferral opportunity. For 2015, I've terminated all these plans and have started up one new ERISA 403(b) with employer contributions for all three entities, but I've got to get past 2014 first! So I'll take any advice anyone has.

Just got the data yesterday and did a quick scan - the problem is that we took over the plan for 2013 admin in mid-2014, and we found that A had their first person cross the comp limit in 2013... but she had already deferred almost the max in 2014. So I don't know how badly we fail the ADP test yet, only that we're going to because the only HCE is deferring at something like 14%. A and B have been a controlled group for a while (i.e., since before we took it over), but since there were no HCEs in either company, it didn't impact the 2013 admin. I don't see a mechanism for deciding how much to give these new HCEs other than half of the NHCE ADP rate. Which is going to get really, really expensive if they have to give several percent to a hundred or more NHCEs from Company B (last year, the NHCE rate was almost 5%). Belgarath, I presume you're referring to EPCRS Appendix A, Section .05(2)g, which says: I'll link to it, too. http://www.irs.gov/irb/2013-04_IRB/ar06.html#d0e2716

I have a plan that is going to fail the ADP Test this year. The plan will also fail coverage on the deferrals because they are controlled group and the other company didn't adopt the plan (this other co., "B", is larger than the original company, "A", so we have a lot of people who weren't given the opportunity to defer). Which order do I have to correct things? Can I run the ADP Test just on A and process the refunds and then deal with the coverage failure separately? Or do I have to figure out how to fix coverage and then include those new "participants" in the test (which will make the ADP Test results far worse, of course)? Thanks.

Had a conference call today to clear this up. An owner of the original plan sponsor signed a resolution to adopt MCO's plan effective 1/1/15, and that's where the deferrals have been going ever since. I agreed that is a sponsor-level decision, and therefore they really did an end-around their current Trustee, who is still responsible for the "old" assets. The goal is to terminate or merge the "old" plan, but MCO wants to wait until 2014 admin is done first (which is reasonable).

I have a plan where the Plan Administrator is the Trustee - common enough. However, this person is not the plan sponsor, as he does not own the company sponsoring the plan. The plan sponsor entered into an agreement with a management company (MCO) to take over operations of the company (and eventually purchase it sometime in 2015 if all goes according to plan) back in November 2014. MCO then decided that effective 1/1/15, all plan contributions would be made into their plan (which is a MEP). The Trustee heard about it when the fund platform for the "old plan" asked why they hadn't received a payroll deposit yet in 2015. Suddenly all this was uncovered. The Trustee claims that he had no knowledge of this happening, and is demanding that the 2015 contributions go back to the "old plan" because as Trustee and Plan Administrator, he is still responsible for that money and he didn't authorize it. MCO says that they are in the right (well, of course they say that) and that it was part of the responsibilities they assumed when they took over management in 2014 - they let it continue as it was through the end of 2014 and then switched it at the beginning of the new year. My first reaction was that as long as the actual original owners of the company signed a resolution to allow the company to adopt MCO's plan effective 1/1/5, then this is OK, and it even makes for easy testing. But then what exactly is the role of the Trustee/Plan Administrator? All responsibility but no power? Thanks for your advice. Any links would be greatly appreciated (not that I don't trust your responses, but so I can provide them to the players involved).

I have a ten- or twelve-company controlled group where at least the main company (and maybe others - I'm still gathering information) has become an ESOP. I know someone has to look out for the combined employer contribution limits (there is no PS, and the match is about 2%, so that shouldn't be so bad). And I suppose that I'll have to be more vigilent about ownership percentages... But is there anything else that I need to be looking out for or advising my client on? Thanks.

Update: the plan sponsor made some determinations (with some suggestions hinted at by the DOL agent) as to what is "reasonable" and has agreed to pay us to do do the work. No abandoned plan here, nope. Nothing to see here.

This plan sponsor went out of business almost a decade ago, but the plan seems to have never been terminated. Now the DOL is trying to get it paid out after several participant calls. Of course,the DOL recommends that the plan be brought into full compliance and then paid out, and the plan sponsor has approached me to help with this. But we're talking a decade here - the DOL seems willing to waive the annual reporting, but then we've got amendments, VCP issues for late restatements/amendments, possible SSA and SAR issues with the IRS, etc. That's when I realized that just abandoning the plan would be much easier (and faster). The DOL has confirmed that all deposits have been made, and they just want it done. The money is at a product platform, and I believe they can be a QTA (whether they want to be might be another question). The DOL admitted that the plan sponsor could do that... but then the sponsor asked what were the consequences to him. I can't find anything on this, and the DOL agent is also similarly stumped. Anyone have any ideas? I'm thinking that if all the money is in the plan, there wouldn't be any consequences, but I obviously don't want to say that and then see him hit with a massive penalty from out of the blue. Thanks.

A client where the corporation was named for the two partners changed its name last week because one of the partners retired earlier this year. I have a copy of the amendment to the Certificate of Incorporation, and it is still the same entity (same EIN), just a new name effective sometime mid-December. Of course, they told me after the fact. Now they want to change the plan name, too. Since it is an official amendment to the corporate charter, I don't think I have a problem that the plan is now not sponsored by the same entity that is on all the paperwork and forms (especially since it is the same EIN). And it's a safe harbor plan as well, with all the extra complications that may or may not entail. My initial reaction is to change the name of the plan and sponsor as of 1/1/15, which seems reasonable. But then I started thinking about what if this had happened in April? Would you really wait nine months to make this fix in that case?

You can't actually defer 100% of compensation; you'll always lose the 7.65% off the top. As Lou S. said above, it is funtionally 100% of what is left. So that would leave more than enough for a safe harbor allocation.

Apologies for resurrecting this thread, but I found out why the participant wasn't returning her forms: she and her husband are splitting up, and he is refusing to sign the spousal consent. I know we've got to tread carefully around this kind of situation and have called in an ERISA attorney, but the plan is terminated and the business has closed up - the money has to go out somehow, doesn't it? In the meantime, if anyone is willing to provide contact information for annuity companies that have taken on things like this in the past, I will optimisitcally try to get that process started. Thanks.

This is a plan for a plan sponsor who has union employees, but they are an excluded class. There are several employees who were participants while they were non-union and now have moved to be in the union. I'm fine with the plan not having to give them a top heavy minimum allocation now that they are not in an eligible class (and 416(i)(4) supports this - assuming that retirement benefits were collectively bargained). But are their balances included in the TH determination? They are still active employees, so I'm leaning towards "yes". Thanks.

We took over the plans of a non-profit controlled group - three distinct entities, each with their own plan. Their approximate 2013 demographics are: Corp - 519 NHCEs, 1 HCE, profit sharing only plan (they also have a non-ERISA 403(b) plan for this group) CA - 20 NHCE, 0 HCE, 401(k) plan with match HA - 50 NHCE, 0 HCE, 401(k) plan with match The CA and HA plans are identical I believe coverage is OK for 2013 as the only benefitting HCE is in the profit sharing, and that test is (1/1) / (519/589) > 70%. However, one employee of CA had comp > $115K in 2013, so she will be an HCE for 2014. I think that will blow this arrangement up, as the deferral and match tests for 2014 will be (1/2) / (69/588) = 23.5%. Obviously, this would be Bad News. So... 1. Please tell me that my math and/or logic is completely off and everything works out fine. 2. Can I use a QSLOB election to group CA & HA and get around this? 3. If not, is there another way to pass coverage? I haven't looked at average benefits, but I suspect that having 500+ participants getting no benefit will sink that test, too. 4. I'm going to assume that the plan sponsor would like to avoid bringing in 206 - 69 = 137 employees of the Corp into one of the 401(k) plans and giving them QNEC/QMAC allocations to pass coverage. Is there another option? Thanks.

What options, if any, are there for a terminated defined benefit plan where I've got one participant left and she is not returning her distribution forms? On the DC side, we're forcing her to an automatic rollover account (pursuant to a bunch of notices), but I don't think that's an option on the DB side, is it? Her lump sum benefit is $6,000 (of course it is). Thanks.

masteff, I love your conclusion... but I'm not seeing how you get to it from the underlined sentence. It's the parenthetical part that is throwing me, I think.