John Feldt ERPA CPC QPA

Regardless of the 5500 handling, the actuary needs the fair market value. Especially if the sponsor wants to contribute the absolute maximum, as undervaluing this asset could set the maximum above the true 404 maximum allowed. Or, if the sponsor wants to contribute the bare minimum, overvaluing this asset could show a minimum that is not truly sufficient to cover the true minimum.

Under 1.401(a)(4)-3(e), the compensation to use for nondiscrimination testing is average compensation, but there is an exception to allow you to use annual compensation under 1.401(a)(4)-3(e)(2)(ii)(A). Most plans use annual compensation (easier). The determination of the minimum gateway requirement (finding the highest HCE allocation) is not based on average compensation, but is based on annual compensation. Thus, with lower compensation for the plan year, the minimum combined plan gateway will likely be the maximum 7.5% of compensation to be provided to the benefiting NHCEs. Also, you are correct that the minimum gateway is allocated using annual compensation for the testing year, not allocated using average compensation. Thus, using average compensation instead of a currently very low compensation will help the nondiscrimination test - the ebars for the test will have the highest x years of average compensation over the last y years. X must be at least 3 years. Review 1.401(a)(4)-3(e)(2) overall. With the average compensation in the denominator for each ebar, instead of the current very low compensation for the HCE, the HCEs ebar is kept as low as possible. Of course, you must have enough compensation history for all employees since this method has to be consistent with all employees in the test. You can't use annual for some and average compensation for others. edit:typo

My understanding is that under a MEP, each unrelated employer tests coverage, nondiscrimination, and top-heavy separately from the other employers in the overall plan. If the amount stayed with a prior unrelated employer within the plan, or was "moved" to be listed with the new employer, it is still an unrelated amount for the new employer. 1.416-1, T-32

Approvals were recently received for two that were submitted in August and September, one was nonamender, the other was a 'regular' submission (nonamender plus other issues). No questions asked! Seemed faster than usual for a reply, but we'll accept.

Starting in 2018, the tax reform (if it passes) doubles the $3,000 limit per year to $6,000 per year for a plan to benefit certain volunteers (e.g. volunteer firefighters, fire prevention, EMS, ambulance). I am looking for anyone who has written plan documents for a length of service award plan. Also, looking for anyone interested in writing an article for publication regarding this topic.

Two calendar year plans with unrelated employers, Company A and Company B with corresponding 401(k) plans, Plan A and Plan B. Plan A will be top-heavy for 2018. Plan B will not be top-heavy in 2018. Suppose Company A sells its stock to Company B on January 1, 2018. All participants in Plan A are merged into Plan B on January 1, 2018. Thus, Plan A no longer exists on its after January 1, 2018. Will Plan B have to re-determine its TH status for 2018 by including the 12/31/2017 data from Plan A? Do the Plan A participants get any top-heavy minimums for 2018? Or how is this handled?

Due to attribution (under age 21), he should be able to join a parent's business 401(k) plan as a participating employer. And, no, what is prudent for use of this person's earnings was not questioned ... Anyway, I also am not finding an age minimum.

A 15-year old has a specific fishing license in Alaska that allows him to make earned income from fishing. They receive a Form 1099 as a sole proprietor. CPA confirmed they are not an employee. Can a 15-year old obtain a business EIN and then set up a 401(k) plan based on their net earned income, or is there some minimum age needed to be able to do this?

Okay, so nothing to clarify then. np.

CuseFan?

Be sure that all eligible employees get the notice, even those with no balance.

Did the 403(b) plan adopt all "interim" amendments that the law required after executing its 2009 document (it does have a 2009 document, right)? Some providers did not offer such "interim" amendments, since there technically was no remedial amendment period yet, thus no "interim" period for 403(b) plans. If that was the approach, then you either restate before termination or adopt such language prior to termination. If the plan is up-to-date with all language requirements, then they are in good faith compliance and would not need to restate. But good faith compliance is not the same as having IRS written approval. Doing a restatement now would stop the IRS from scrutinizing the written plan document later - if the plan gets an IRS audit later, show them your IRS letter to prevent such scrutiny. Without a restatement, they could hunt the document for any language they don't like and argue that the plan was not in compliance.

That is correct, each day of the plan year. 1.414(r)-4(b) "A separate line of business satisfies the 50-employee requirement of § 1.414(r)-1(b)(2)(iv)(B) for a testing year only if on each day of the testing year there are at least 50 employees who provide services to the separate line of business for the testing year and do not provide services to any other separate line of business of the employer for the testing year within the meaning of § 1.414(r)-3(c)(5)."

Well, give it a shot and file under DFVC, then report back here to let us know what happened. My experience is that a form already filed can be filed again only as an amended return, not as a late filed return under DFVC. That was several years back, so perhaps it can be done nowadays. Or perhaps there are additional steps available to get you there that I am not aware of?

An employer accidently paid a former employee a paycheck when no wages were due and deferrals were also withheld from the paycheck and deposited into the plan. The can get the net paycheck back and they are able to offset the taxes withheld with their next tax filings, but they are not sure what to do about the "deferrals". Technically the real paycheck is zero and thus no deferrals should be possible. Can the plan distribute these "deferrals" back to the employer without triggering and excise tax? Or, should the amounts be held in the plan under a suspense account until the next contribution to the plan is made, and offset that contribution by the suspense account? Any other ideas for handling this?

If your wages are subject to FICA, then your deferral into the 457(b) plan should also be subject to FICA, thus not reducing your compensation for the 35-year average compensation used for determining your social security benefits.

Based on some comments I heard (quite some time ago) from some folks at SunGard (now FIS), the IRS had some court cases where Davis Bacon was offsetting the match. If I recall correctly, they said the prevailing wage contract officials were okay with that offset, but the IRS felt the anti-conditioning rule, IRC 401(k)(4), was being violated somehow. I think that was SunGard's explanation (best I remember) as to why their document did not allow the prevailing wage amounts to be used to offset the match.

So Mike, you're saying the plan can apply the 6-year vesting schedule to some of the employees when the amendment is adopted. However, anyone already held out too long (e.g. past a 1 year period of service with semi-annual entry dates), those employees have to be 100% vested when the plan is amended.

A profit sharing plan currently requires 2 years of service for eligibility for an employee to become a participant. Thus, the plan has 100% immediate vesting. The plan only covers non-highly compensated employees. The plan sponsor wants to lower the eligibility to 1 year of service and introduce a 6-year graded vesting schedule. All existing Participants will remain 100% vested. How will this be handled for existing employees? Some employees have been held out already over 1 year (some almost 2 years). However, they have not yet entered the plan and thus have no rights as a participant. Must they be 100% vested when the plan is amended to lower the eligibility, or can they be placed onto the 6-year schedule? How about those with under a year, would they be treated any differently?

Good question. Maybe Carol Calhoun will comment here on this. Without researching this, perhaps following the same procedure that applies to a qualified plan would satisfy the IRS/DOL.

Agree. Please note that the "otherwise deductible" is without regard to the 10% limitation.

That's what I thought at first and I am still inclined to agree, but when I took a close look at 2550.407d-5, the definition of the term “qualifying employer security” says: (a) In general. For purposes of this section and section 407(d)(5) of the Employee Retirement Income Security Act of 1974 (the Act), the term “qualifying employer security” means an employer security which is: (1) Stock; or (2) A marketable obligation, ... The rest of the section talks about the requirements for item (2), not for item (1).

To avoid the independent qualified public auditor opinion requirement for the Form 5500, does the fidelity bond need to cover 100% of an employer's non-publicly traded stock held within the plan, or can such stock be considered as a qualifying plan asset?

I assume you want to avoid both the ADP and ACP testing. To avoid ACP, you can match deferrals that do not exceed 6% of pay. For example, you can match 200% of deferrals, ignoring any deferrals that exceed 6% of pay. If you also provide a discretionary match, that match is limited to 4% of pay as a match and if other requirements are met, that match does not require ACP testing. If you aren't worried about ACP and you only need to pass ADP, your safe harbor formula could be something like 100% of deferrals up to 8% of pay. You avoid ADP, but you have to run ACP testing.

I think there may actually now be a case where the IRS did apply the rule. I think Derrin Watson may have mentioned something about this a few months ago?