AlbanyConsultant

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.

Hi. I have a participant who terminated in 2013 and received an immediate distribution. Which is great... except that the plan says that the distribution determination date is the end of the plan year, paid as soon as administratively feasible after that. It looks like EPCRS says that the correction method (presuming the participant won't return the money) is that the employer has to make a deposit for the distributed amount to make the plan whole (which is a whole 'nother topic, since this is a participant-directed account plan and it didn't affect anyone else in the plan) and then use it for their next employer contribution. But this is a deferral-only 401(k) plan - there are no active employer contribution sources. So my questions are: (1) Is there some kind of reasonable way around this? The participant was paid out exactly what she was due. (2) If the sponsor has to deposit $2K to make up for the early payment that they authorized, can they use that to fund deferral deposits? Thanks.

It wouldn't under the IRS safe harbor definition*... unless it's a casualty loss. * I should have mentioned that the plan uses this

A participant is trying to get a hardship because (he claims) ever since Hurricane Irene three years ago, his basement floods when it rains heavily, and he finally wants to get it fixed. 1. Is there some kind of statute on how long you can make a claim on a casualty event? Hurricane Irene was in 2011. 2. Presuming that #1 is not an issue, is the plan sponsor OK with accepting the participant's claim that it was caused by Hurricane Irene? I'm not saying that they should have to hire some kind of foundation inspection, but... Thanks.

Thanks - that's a great start.

A client asked me if I could help them write an RFP so they can select a new financial advisor. Has anyone seen anything like this before? We tend to work with smaller plans, so we don't go through that process. Thanks.

Got this question today: The plan excludes non-resident aliens... but that's not what she is. So it looks like she is an eligible employee, comes into the plan based on the plan's eligibility requirements, etc. Is there anything I'm overlooking? Thanks.

Just took over a plan where the definition of compensation is W-2 without adding back salary deferrals. So for the regular employees, that's easy enough - just use Box 1 from the W-2. The partners, though...the basic plan document says that it is their Earned Income, which is defined as I'm not sure if this really gives me the authority to subtract the partner's deferrals from what the K-1 calculation yields. Of course I want to, because that makes sense, but is that how this reads? And no, the K-1 amounts aren't over $255K. Thanks for your input...

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.