John Feldt ERPA CPC QPA

and only if the plan allows hardship distributions for the hardship of a participant's primary beneficiary

Does the partial plan termination rule for qualified plans, which requires 100% vesting, apply to a 403(b) plan when it is frozen?

I think you still need to be careful of IRC 410(a). For example, I don't think you can single out all employees with less than 6 years and give all of them $0.00 with everyone else getting some allocations. It's not a nondiscrimination issue, it's that you would look like your excluding employees longer than the maximum period of service allowed under 410(a)

Check with your document provider. But if you mark that only the ADP test safe harbor is satisfied, then it's certainly possible the document could require the ACP test for the match. For example, you can provide a ADP safe harbor with a safe harbor match formula of 100% of the first 3% of pay deferred plus 50% of the next 5% of pay deferred. That satisfies the ADP safe harbor. It does not, however, satisfy the ACP safe harbor so you would not mark the document that it satisfies both.

It's a Vol sub, which has IRS approval, so I guess you are covered. you must follow the plan's terms. I find it very curious that this surprise, which occurs after year-end (to find that comp discriminates), has no correction required, under the written terms of the plan, for any NHCEs deferring right at the limit of the full safe harbor match rate (based on discriminatory compensation), thus leaving their original allocations as "perfect" even after the 414(s) test fails and the plan's automatic compensation fix language gets applied. I would assume your document's 414(s) "automatic fix" language applies this automatic new definition of compensation only to the NHCEs? This could be awesome as a plan design for getting extra to mostly just the HCEs. Go ahead and write up wage exclusions that affect NHCEs the most, fail 414(s), which already allowed the HCEs to get higher safe harbor matches anyway, and then just apply an automatic "bait and switch provision" in the document's compensation definition for the NHCEs after it's too late to defer, affecting very few NHCE's SH match, if any! This is especially nice if the IRS has truly bought into this. Am I being serious, or am I just kidding around here, I'm not even sure yet.

If the plan was SH match, such as 100% of 4% of pay, any NHCEs deferring 4% of base pay would have no additional match if an amendment is done retro to now include bonuses just for purposes of match calculation. Even with the HCEs, any that deferred 4% of base pay would still have the higher matches. I don't see how the -11g amendment to simply include bonuses for the match calculation gets us to "Yeah, we're good, that'll do it." Depending on the facts and circumstances, I would want more assurance than that.

Yes. From the responses above, perhaps the industry standard is to file and their perception of the industry standard is askew.

You have to follow the terms of the plan. If the plan spells out what compensation must be used for determining the safe harbor allocation and that definition includes a specific modification to be done if 414(s) fails, then you have your answer. Otherwise, a retroactive amendment will be needed, but... Can someone help with my understanding of how 1.401(a)(4)-11(g) can apply here and how such an amendment to affect safe harbor allocations for the prior plan year actually complies with the safe harbor regulations? Do the safe harbor rules require there to be a minimum number of months remaining in the plan year when such an amendment is done that increases benefits? Is there an explicit exception for -11(g)? 1.401(a)(4)-11(g)(2) spells out the scope of this type of amendment, stating a corrective amendment may retroactively benefits for coverage (410(b)), nondiscrimination (1.401(a)(4)-1(b)(2)), or a discriminatory timing of amendments. Under a safe harbor plan, the safe harbor allocation amounts are not subject discrimination testing by the very definition of being safe harbor, so how does -11(g) apply? Certainly a VCP could be done. Has the IRS indicated that such a correction, with a retroactive amendment as described in the posts above, can be done without VCP?

Thanks Carol. 1969 ruling! So they can have a government 457(b) plan covering everyone (or anyone) and a non-ERISA 403(b) plan with employer contributions.

Okay, even though their "status", for purposes of maintaining the 403(b) plan only, is a that of a 501(c)(3) entity.

Yes, it is a common myth that CB plan sponsors must have some guaranteed income available for the plan for a period of several years.

Okay, thanks. It is a county hospital.

A county government has dual status. Their "403(b)" was in place prior to ERISA. They provide matching contributions, but claim the 403(b) plan is a non-ERISA plan. Is there a grandfather rule that would allow a 403(b) to be non-ERISA even if employer contributions occur? Would it have to be established before ERISA was enacted?

Which is why the OPs question is a good one. Many laws and regulations have a lot of exceptions and exceptions to the exceptions. If the intent of the "universal availability" rule was to exempt the plan from ADP tests, then if such plan has no HCEs, why would the law still require the universal availability requirement to apply? Well of course, as stated above, the answer is because there are no exceptions this time, maybe a 401(k) plan will suit the company better!

CuseFan, can you clarify please? I understand that 1.401(a)(4)-9(c)(4) does not allow a "component" plan to avoid the minimum gateway, as it states the plan is "restructured" - it is not "permissively disaggregated" - so we agree there. Suppose we have a cross-tested 401(k) profit sharing plan with entry after 3 months of service. The OEE rule of 1.410(b)-6(b)(3) allows the employer to "permissively disaggregate" those under 21/1 into a separate plan. Are you saying that the minimum gateway must be provided to all NHCEs in both the over 21/1 "plan" and the under 21/1 "plan" as well?

Thus, no ADP test. If you follow the language in the document for a plan that is written as safe harbor, you essentially only find that the ADP test applies if the plan specifically follows the rules for exiting safe harbor.

I don't recall seeing official guidance on this. 20% seems okay, but 100% would certainly alleviate any concern.

Anyone suggesting that the plan year end, in the document, be changed to "the last day in February", thus the first day of the plan year is always March 1?

Yes, unless they can be excluded under the OEE rule because they are under 21/1. This also assumes this combo is tested on a benefits basis, and none of the gateway exceptions apply: 1) the DB/DC combination being primarily DB in nature under 1.401(a)(4)-9(b)(2)(v)(B), or 2) the DB/DC combo consists of broadly available separate plans under 1.401(a)(4)-9(b)(2)(v)(C) -- neither are very common to see, although the "primarily DB in nature" exception has been useful for me a few times. Also, just a note that if you are using the option to offset the DC minimum required to satisfy the gateway by the value of the accruals in the DB plan - which is available in general on a person-by-person basis, or as an average under 1.401(a)(4)-9(b)(2)(v)(D)(3) - you can't offset the DC minimum for those that are not receiving any accrual in the DB plan, so they get the full gateway in just the DC plan. It states "a plan is permitted to treat each NHCE who benefits under the defined benefit plan as having an equivalent normal allocation rate equal to the average..."

The 457(b) limit is a separate individual limit. All your 457(b) amounts (vested ER and EE contributions, or "annual deferrals") when combined together from all 457(b) plans you participate in are subjected to the individual limit under 457. There is no offset for any 403(b) or 401(k) deferrals anymore. Your 403(b) and 401(k) elective deferrals are subject to the individual 402(g) limit (SIMPLE deferrals go under this too). It is one overall limit for the individual for all such 403(b), 401(k) and SIMPLEs that they participate in for the year. Of course any SIMPLE portion itself also has its own lower limit. I don't remember where SAR-SEP deferrals fall without looking that up, but there's not many of those around anymore. Non-governmental 457(b) plans don't have age 50 catchups, but they can have the special last 3 years catchup to make up for underutilized prior limits when they were in the plan. Again, no offset with 403(g) deferrals or their catch-ups. An age 50 governmental employee can put $24,000 in the 457(b) and another $24,000 in a 401(k) or 403(b), if they are eligible for such plans. Two age 50 catch-ups is correct, yes.

If the 457(b) plan is sponsored by a governmental employer and both the 403(b) and 457(b) plan documents allow for catch-up deferrals, then yes, assuming these are deferrals from compensation that has not yet been received by the employee and that they are not making any other deferrals with any other 403(b), 401(k), or 457(b) plans. The old rules that offset 457 from the 401(k) and 403(b) were for pre-2002 years, if I recall correctly.

What "service" do you benchmark? One where the $700 includes the TPA providing direct written correspondence to the participant, the alternate payee, and each of their attorneys regarding the status of the review, including an option for all of those parties to access the TPA for their questions (instead of bothering the Plan Administrator)? Okay, the fee discussed might still be high even with all of that. But being the direct contact option for calls and emails and other correspondence will add time, not an insignificant amount I am sure, on average (it only takes one messy issue to drive up the average time). Perhaps the PA prefers that service, especially if it frees up their time and also if the fees get charged to the participant account anyway.

Revenue Procedure 2016-51, Appendix A, Section .05(5). It says first to make sure that any "missed deferral" plus all the actual deferrals made for the year, when combined, are not exceeding 402(g) limit, would not cause a violation of the 415 limit, and does not go over any other plan limit. You can't calculate the missed match on amounts that could never have been deferred in the first place. Next look at .05(5)(d). Here it says how to handle ADP/ACP testing. If the plan also failed the ACP test, the correction above can't be used until after the ACP test is corrected. It then states the plan may rely on an ACP test done with respect to the employees that were not impacted by the failure to implement the deferrals properly, and may disregard employees whose elections were not properly implemented. Take a look at it and see what you think.

Mike is right, the terminated with 500 hours rule cannot be applied to someone who is benefiting, it also can't be applied to someone if the plan has no allocation conditions. The one and only way to leave out someone who terminates with under 500 hours is if they received no benefit for the plan year and it was solely because they failed to meet the plan's allocation conditions. Treasury Regulation 1.410(b)-6(f): (f)Certain terminating employees - (1)In general. An employee may be treated as an excludable employee for a plan year with respect to a particular plan if - (i) The employee does not benefit under the plan for the plan year, (ii) The employee is eligible to participate in the plan, (iii) The plan has a minimum period of service requirement or a requirement that an employee be employed on the last day of the plan year (last-day requirement) in order for an employee to accrue a benefit or receive an allocation for the plan year, (iv) The employee fails to accrue a benefit or receive an allocation under the plan solely because of the failure to satisfy the minimum period of service or last-day requirement, (v) The employee terminates employment during the plan year with no more than 500 hours of service, and the employee is not an employee as of the last day of the plan year (for purposes of this paragraph (f)(1)(v), a plan that uses the elapsed time method of determining years of service may use either 91 consecutive calendar days or 3 consecutive calendar months instead of 500 hours of service, provided it uses the same convention for all employees during a plan year), and (vi) If this paragraph (f) is applied with respect to any employee with respect to a plan for a plan year, it is applied with respect to all employees with respect to the plan for the plan year.

The catch-up limit for 2017 is still $6,000, but the 415 limit is now at $54,000. Thus a total of $60,000 is possible in 2017. A catch-up deferral can go above the 415 limit. Note that the owner's wages could be as low as $54,000 and still allow a total of $60,000 if at least $6,000 is done as an elective deferral, but that’s another side topic. So, where is the basis in the law? Let’s look at the law, as passed by Congress, Internal Revenue Code Section 401(m)(1), which states: In general. A defined contribution plan shall be treated as meeting the requirements of subsection (a)(4) with respect to the amount of any matching contribution or employee contribution for any plan year only if the contribution percentage requirement of paragraph (2) of this subsection is met for such plan year. Be sure to look at the term employee contribution – this is a voluntary after-tax contribution. This is not the same as a salary deferral election which is defined as an elective deferral. Thus, employee contributions (same thing as voluntary after-tax contributions) are lumped into the same nondiscrimination bucket as matching contributions. Seems clear. The rest of that section of the law goes on to explain a little about ACP testing with the limitations and it provides for the Treasury Secretary to write regulations (yes, the regulations apply too). So that is the basis under the law. As to all the details, I personally find the regulations to be clear about including after-tax contributions in this test, no ambiguity about that question. Look at Treasury Regulation 1.401(m)-2. Please note that the law has a clause to allow the regulation to interpret the law, and unless the regulation contradicts the law, the regulations are generally treated as having the weight of the law. After-tax contributions have been around for decades, so I have not heard that there was any confusion about this. Who, or where is this confusion stemming from?