AlbanyConsultant

This has to be relatively common, but I can't find anything that is clear on the topic (which probably means there is no clear answer)... Calendar year plan has dual eligibility: 1. one-month eligibility for deferrals, entry on the 1st of the month coincident or next following 2. one YOS (1,000 hours) for safe harbor and profit sharing, entry on 1/1 & 7/1, and uses DOP compensation The plan switches to calendar year eligibility periods if the YOS is not satisified in the initial one. Dan was hired on 4/1/09 and left in 2011. He had never completed a YOS while employed (generally working about 100 hours per year), so never became eligible for safe harbor or profit sharing. Dan is rehired in January 22, 2013, and works more than 1,000 hours in 2013. For deferrals, he has to be eligible right away (there's no "hold out" rule in the document). For the employer contributions, is he treated as a new employee and therefore becomes eligible on 7/1/14? Or because he's already a "participant", we just look at the calendar year and since he completes a YOS in 2013, he is eligible for those sources on 1/1/14? Thanks...

I've never counted it, but this year I've got an accountant who says that it's "all the same", and I was looking for something clear to point to that explained it isn't. Thanks, PensionPro!

Can we define "participates" here? Do you mean actually making contributions, or just "has met the eligibilty and entry provisions of the plan".

Can anyone provide a link to something that makes it clear that the K-1 an S-Corp owner gets isn't considered compensation? Just not having any luck putting my finger (or mouse) on it. Thanks!

Working through a census, we found compensation for someone who was terminated two years ago. We asked the client if it was a rehire, and they said that this was a commission from a long-term job that just completed; their policy is to not pay commissions until the job is completed, including for employees who have left before it was done (presumably they pro rate it or something, I probably don't really need to know about that part). So this employee was terminated in 2011 - clearly, by any sane definition of "post-severance compensation", this is past the timing period. Following the document would exclude this compensation. Is there anything that I need to be concerned about - excessive delay of payment or anything like that that could come back to haunt me later? Thanks.

What about the case where the partners/sole prop end up with negative (therefore zero) compensation on the K-1/Schedule C? If you drop them off the test, you're going to put any other HCEs in a tough position. I know, the IRS doesn't care about the HCEs...

Plan sponsor elected to default rather than go this route.

Corporation Z is owned 50% each by two brothers, A and B. The brothers have decided to end their professional relationship; each brother will take a piece of business (and some employees), and each will have their own company (which might be a corp, or maybe a sole prop). They want to terminate the 401(k) plan, and both expect to start new 401(k) in their respective new entities. Does this run afoul of the successor employer/plan rules? It seems to be OK, but I could certainly see how this could look like a tax dodge (i.e., a way to get a distributable event). Any thoughts? Thanks.

Plan has a participant who defaulted on their loan (because the plan sponsor forgot to start the repayments, not that that particularly matters). 1099-R has been issued, and we're still accumulating income because there is no distributable event yet. Now the participant wants to take a new loan - the plan sponsor is very inclined to give one to her because they feel this whole situation was their fault. The plan's loan program only allows one outstanding loan per participant. Does this defaulted loan count as the one loan the participant can have?

I have a plan that was sponsored by Company A. Company B split off from Co. A and the plan was admended to make it a MEP so that Co. B could still be part of it (the 100% owner of Co. B is an still employee of Co. A and draws all her pay from there - she doesn't get paid by the company she owns! - so it's not a CG). The employees of Co. B also still work at Co. A, so they are still getting paid and deferring from both 'sides'. I get that, because each company is tested separately, I'll have to manually break out the deferrals by company for testing (the platform they are on doesn't seem to do sub-accounting), but I'm not sure how to treat them for top heavy. Where do Co. B's employees' balances count for top heavy determination? Should the balance they've accrued up until the division stay in the Co. A testing, and then as part of my split going forward I'll have to track their balances as two sub-accounts for testing purposes? Thanks for your help.

This pooled profit sharing plan received an executed and proper QDRO from the court for participant TW to assign $X to an account for AP (well, the estate of the AP, as AP died in September 2013). TW happens to be an owner and Trustee. I called TW to discuss timing and a possible interim valuation, and he said that he talked to the attorney for the estate, and they agreed that he can pay the $X from his personal assets and not touch his plan balance, so that's what he wants to do. Leaving aside the fact that this QDRO has been two years in the making and this probably should have been thought of before this point, does the plan have an obligation to make this distribution because a valid QDRO was received? Is there some way to modify or cancel it or otherwise 'take it back' so that it's no longer an plan issue? Thanks.

I had a nice, relatively easy plan on a mutual fund product. But then the financial advisor had... certain employees (which is its own issue, of course, but not the problem I'm dealing with today) transfer chunks of their profit sharing balances into individual annuities in the name of the plan so they are still plan assets. These annuities are providing quarterly statements to the participants that are in them, just like the mutual fund platform was. My question is: do I need to provide some kind of "total statement" for them on a quarterly (I don't think so) or annual (maybe) basis? All the participants who made the switch so far are fully vested by virtue of their Years of Service; I think I would be more inclined to give a combined statement if someone wasn't fully vested. Thanks...

Somewhat related: I have a plan with two entities - a c-corp, and a second one that changed to a partnership eff. 1/1/12 (unbeknownst to me). Suddenly, when I factor in K-1s, owners/partners (they're the same people in both entities) have net comp <$0. And of course they deferred and made SHM deposits during the year. Obviously, the SHM gets forfeited, used to fund future deposits, yada yada yada. And the deferrals get refunded. Both with earnings. What I'm not so sure of is: (a) is there any penalty on the deferral refunds, since it's now 8+ months after the end of the plan year? (b) does this fit onto a 5330 somewhere? I don't see where it would, but I want to be positive. Thanks.

Disclaimer: I'm a pension administrator at a pension consulting firm, and I'm being asked to join the Dark Side of employee health benefits. So I may not be getting all the terms or concepts right; please feel free to correct me. I got a call from an insurance broker who tried to explain to me that private health insurance exchanges are being set up that will allow the participants to pay for part of their insurance on a "defined contribution" basis. I was his first thought when he saw those words, which is nice, and he wanted to know if we were going to jump into this arena. Presumably, there will be documents to write at the front end, and most likely some kind of annual reporting each year. I have a feeling this is not "defined contribution" the way I know it - 401(k), profit sharing, etc. And I don't see how the two are related except that they share terminology (which the IRS does all the time). Can anyone point me to someplace I can get more information on this, or just explain to me that I'm meddling in affairs that may be beyond my bailiwick (which I'm not against expanding)? Thanks.

The instructions for the 8955-SSA say: How can I tell if a gov't plan is subject to ERISA 203? I'd assumed that every plan was until I read this. The section itself doesn't describe who is or isn't subject to it.

I've found several threads here that are close to what I'm trying to figure out, but maybe I'm just not able to translate them to my situation... Non-5% owner participant in a calendar-year plan will attain age 70.5 in August 2013. The participant terminated in March 2013, and is requesting a full rollover distribution (immediate distributions are allowed by the plan) to an IRA. Taking a conservative approach, I reasoned that the termination made 2013 the first distribution calendar year, with a RBD of 4/1/14 but payable anytime in 2013 based on the 12/31/12 account balance, so the plan should pay the 2013 RMD in cash and roll the remainder to the IRA. The recordkeeping platform rejected this, claiming that the RMD can't be paid until the participant actually attains age 70.5. They further claimed that the participant should take their 12/31/12 statement to the rollover institution and make them pay out the 2013 RMD. Am I being too conservative here? I'm not getting any clarity from Reg 1.401(a)(9)-7 or 1.402©-2, either... Thanks.

This plan has monthly entry after satisfying one Year of Service and uses DOP comp. We've always just asked for compensation from the entry date and not asked for detail on it. This year, their new bookkeeper is questioning what compensation is correct. They have two payroll cycles: weekly and monthly. She believes that DOP comp should be counted based on the check date (i.e., when it would otherwise be available to the participant)... which would make the March monthly payroll, where the check will be dated 4/2, eligible for someone whose entry date is 4/1. But that means that there is one month of eligible compensation on which the new participant didn't get to defer. That doesn't seem like something the IRS would approve of. It's less of a big deal on the weekly payroll because it's s shorter timeframe, but the issue is still there. I asked her that if she thinks you have to go back and include the prior month, should she allow deferrals on that (in this case, March) pay... and if so, what if the employee terminates on 3/28 (before they are technically eligible)? Mind... blown. Is there a bright-line rule on this? EOB was uncharacteristically unhelpful. Thanks.

I have a client who wants to terminate their 401(k) and start a SIMPLE 401(k). There have been no employee deferrals to the 401(k) plan this year, but the two outstanding loans have continued to be repaid. Does that violate the rule about not "benefitting" under another plan this year? Thanks.

I should be getting H's info any day, but I'm led to believe that their deferrals are pitiful; I'm concerned that it could weigh down the NHCE ADP of G, so I'd prefer to test separately. G is likely going to fail on it's own, true, but it will be worse with ~20 more NHCES (from H) who don't defer. Not to be dense, but the way this works is how? Because there are two plans with equivalend BRF, I can disaggregate them for coverage testing, and therefore can disaggregate them for ADP testing? Whereas if I aggregated them for coverage, I'd have to aggregate them for ADP?

It's the second plan that is messing with my head... I think the 36% is what I get when I do the combined test without the union for G's plan: NHCE (excluding union) 19 G NHCEs in total 3 G NHCEs that don't benefit (per plan exclusion, the "per diem" ee's), included in the 19 25 H NHCEs (none of whom benefit under G's plan) So that's 16/44 = 36% for the NHCEs, compared to 3/3 = 100% for the HCEs, if I'm testing from G's point of view. Or can I disaggregate* somehow? Because G would pass on it's own ([16/19] / [3/3] = 84%) and H passes on it's own (no HCEs). There is no profit sharing (or reallocation of forfeitures), and the plans have identical entry (or so I'm told... I'm still getting data from H because we don't do that plan). The only difference is that H has a match, which I think is OK for testing purposes. * for both coverage and ADP Mike Preston, you said that you don't see there being an issue on the deferral side... is that because they both are getting a deferral opportunity?

Took over a plan this year, and I'm drawing a blank on where the problem is... or is there one? G and H are a controlled group, and each has their own 401(k) plan. G: 118 participants that can't be segregated via statutory exclusion, of which 96 are union (included in the plan), has 3 HCEs (all non-union), and also an exclusion for "per diem" employees (14 of which are union (included in the 96), and 3 are non-union) H: 25 participants, no union, no HCEs, also has a match provision Clearly, there's no issue with the coverage for the match. For the deferrals, after pulling out the union employees in G's plan I'm coming up with benefitting 16 NHCEs (118 total - 96 union - 3 HCE - 3 "per diem") out of 44 NHCEs (the 16 benefitting + 25 from H + 3 "per diem") = 36%. And of course all three HCEs benefit. From here, I'm not sure what to do next. It seems I've found things that point in several different directions, so I'm just spinning my wheels. Any thoughts? Thanks.

Just to follow-up... This sounded so strange that I eventually got a manager at said brokerage firm. He said that the person who told me that had no idea what he was talking about, usually makes things up instead of finding out the right answers, and shouldn't be trusted. They handle all tax reporting (in a manner much more reasonable than I was originally told). Sounds like a valued employee, right?

I took over a plan last summer with assets in self-directed brokerage accounts. This week, the broker confirmed that his firm does the 1099-R... and they also did the tax withholding. I expected that meant they did it like a mutual fund product and used their own TIN, but no, they deposited it (presmably electronically) by using the participant's SSN. So that already sounds... odd. I asked them to confirm, and they admitted that the 1099-R they will prepare will have the SSN as both the payer and the payee. They are saying that they do it that way for a bunch of plans and think it's OK so they insist on not issuing it, even over my objections. I pushed further and asked him to confirm that they are doing the 945. "Nope." So besides the dropped ball problem, does this mean that someone (read: me) has to prepare a 945 for the employee? Doesn't that seem strange? Has anyone else seen this kind of thing?

I would love for the RE to be sold, but the PT rules get in the way of that unless he sells it to a third-party (which he clearly doesn't want to do).

I've got a one-person plan that holds real estate (and has for a while - let's assume that it got into the plan OK). The owner/participant needs to take an RMD, and his attorney wants to know if he can take a portion of the ownership as the RMD. I'd still issue a 1099-R, but there would be no cash moved (so the owner would have to come up with the taxes from his own pocket). On the face of it, I said "PT". But then I thought it further out - what if the plan terminated? Would the entire distribution be a PT? If not, then there must be some kind of mechanism to get this out of the plan. Is this actually permissible? If not, what recourse does this sponsor have? Thanks.