John Feldt ERPA CPC QPA

Yes, that does not violate the 415 limit. The over 50% PS allocation and nondiscrimination testing is a separate issue.

Here is SunGard's, I mean, FIS's take on this: "It is important to note that to apply these changes, plan documents will need to be amended to remove the language that restricts the use of forfeitures to fund safe harbor contributions. FIS Relius will be preparing good-faith amendments for this purpose in the near future. Since this change is discretionary, an amendment would need to be adopted by the last day of the plan year to which it applies. In addition, an earlier amendment might be needed to avoid violating the anti-cutback rules (IRC §411(d)(6)) depending on how forfeitures are handled under a plan sponsor’s current plan. For example, if the plan provides for the reallocation of forfeitures, then amending the plan to reduce contributions could violate the anti-cutback rules if participants have already satisfied the conditions for sharing in the reallocation of the forfeitures." Their full explanation: IRS Relaxes Rules on Use of Forfeitures to Fund Safe Harbor Contributions

I don't see a contribution deadline for the top-heavy minimum in the code and regulations. You might not actually need to add missed earnings. Be careful about the timing of the deduction and the treatment for 415 limits.

This would be an optional interim amendment - discretionary, not mandatory. The IRS can argue that plans could retain their existing restrictions on forfeitures if they wanted (crazy, I know). But are we suggesting that later this year an optional interim amendment can be adopted, and that amendment could have a retroactive effective date of January 1, 2016? That would allow sponsors to ignore the current written language in the document that existed in the plan as of 12/31/2016 for the 2016 plan year. Do you believe this also allows a plan sponsor to ignore the rule that requires discretionary amendments to be adopted by the last day of the plan year? Is there regulatory precedence?

Where did they say this? If a calendar year DB plan terminates July 31 and it is all paid out November 30, it can still be combination tested for nondiscrimination with the ongoing calendar year 401(k) plan? Did they cite an authority?

When did the plan first restate for PPA? Then look at your basic document. It probably says that that starting with the first plan year after the PPA restatement is first executed, that forfeitures cannot be used for allocations of QNECs, QMACs, or safe harbor. If that is in there, with no additional clause added like "unless otherwise allowable", then your plan won't let you use the proposed regulation language until you amend the document since you must follow the terms of the plan. Yes, your plan can be more restrictive than the rules would allow.

From the 2000 Annual ASPPA Conference: 22. Company A has 11 nonexcludable employees; one HCE and 10 NHCs. Four of ten NHCs leave employment during year after working more than 500 hours. Plan requires end of year employment for allocation. Coverage ratio is therefore 60%, which meets the non-discriminatory safe harbor at 1.410(b)-4(c)(2). Plan also passes the average benefits percentage test of 1.410(b)-5 (e.g. on a cross-tested basis). Plan still must cover reasonable class per 1.410(b)-4(b) to pass the average benefits test of 410(b)(2). Question: is “those employed on the last day of the plan year” a “ reasonable classification” for purposes of 1.410(b)-4(b)? IRS: Yes. From the 2001 Annual ASPPA Conference: 46. The average benefits test for coverage testing consists of the nondiscriminatory classification test and the average benefits percentage test. To satisfy one part of the nondiscriminatory classification test, it is necessary to determine if the classifications are reasonable based on objective business criteria. Do participants employed at the end of the plan year constitute a “reasonable classification” under Treasury regulation 1.410(b)-4(b)? IRS: No. Our opinion is that it is not a reasonable classification.

I agree. I would say you are also not protected against government action against you even if the client signs a "hold harmless" letter for your actions. Meaning if you knew that your actions were assisting a client commit fraud, you are now stepping into the same sinking boat that your client is in. When it sinks, the hold harmless letter won't stop you from sinking too.

Maybe I misunderstand, but isn't 415 compensation limited to reasonable compensation for services rendered to the employer? Thus making their 415 limit zero? So regardless of their W-2, if the reasonable compensation is $0, then any allocation is over the 415 limit. If that's correct, you do have issues with going over the limits.

Yes, you have to exclude the 3% SH from the portion that is imputing disparity. You could not integrate using the 3% SH even if the plan had a hard-wired integration formula, right? So you still get the same results, but still noting Mike's comments above.

From what I hear, Congress actually has bipartisan agreement to change the default from paper to electronic. But, they say, we just need to convince one lobbying organization to agree with that. So maybe in 30 years or so we'll get that to happen.

Also note, a payment under the terms of a QDRO from the plan to the alternate payee will be taxable to the alternate payee. But if there is no QDRO, and a participant payment occurs which is signed over to the alternate payee, well then the participant gets taxed on the payout, not the alternate payee.

Why does the IRS think these NHCEs benefits need to be increased? If it is to pass 401(a)(26), then prepare your calculations to show the value of the annuity payable at NRA and show that it is "meaningful". If it's because they believe the plan fails 401(a)(4), then show how 401(a)(4) passes without their requested amendment. If it's because the plan is terminating and you are trying to allocate all the excess to the owner, then good luck with that.

The new Rev Proc (2016-51) is technically not in effect until 1-1-2017. Section 16 EFFECTIVE DATE states "This revenue procedure is effective January 1, 2017." The old Rev Proc was 2013-12 plus 2015-27 plus 2015-28. The annual safe harbor notice deadline is found in Treasury Regulation 1.401(k)-3(d)(3)(i) The timing requirement of this paragraph (d)(3) is satisfied if the notice is provided within a reasonable period before the beginning of the plan year (or, in the year an employee becomes eligible, within a reasonable period before the employee becomes eligible). The determination of whether a notice satisfies the timing requirement of this paragraph (d)(3) is based on all of the relevant facts and circumstances. That's the rule. If you want certainty regarding the term "reasonable", the IRS states they won't question your timing at all if you meet the timing described in Treasury Regulation 1.401(k)-3(d)(3)(ii), which states The timing requirement of this paragraph (d)(3) is deemed to be satisfied if at least 30 days (and no more than 90 days) before the beginning of each plan year, the notice is given to each eligible employee for the plan year.

And just to be clear, the loan repayments continue to the plan, they don't make repayments to the IRA.

Yes. If you have a governmental 457(b), there is an exception for police/fire, 1.457-4©(3)(v)(B)

Suppose the first paychecks in 2017 are to be paid on January 15, 2017. Will the IRS say that employer, by giving the safe harbor notice today, violated the "reasonable period" requirement for providing the notice? Did the participants not have enough time to make an informed salary deferral election for that January 15, 2017 paycheck? Those would be at least a couple of questions that the employer should be willing to consider.

If it is a DB plan, to satisfy the RMD, the annuity payment must start. That's why the actuary said life annuity x 12. But, if the plan allows a lump distribution and the full lump sum will be paid, you can use the account balance method that you normally only see with DC plans.

How about the B-Org rules then?

Your assumption and conclusions seem okay, unless there are other facts and circumstances that would change things.

Yes, as long as you don't violate the predecessor plan requirements. Sometimes you won't know that you violated this rule until one of the plan terminates, so there are some provider prefer not to set up the plans this way.

Yes, it has been done. They used to be submitted together, but that was a mess for the IRS to handle. I think they are submitted separately now. Section 10.05 of EPCRS: The IRS may process a determination letter application, including 5310, while separately processing a VCP submission. The D letter will essentially be held until the VCP submission is closed. You have to make sure you communicate clearly to the IRS in D letter application that the plan is also submitted under VCP, and also mention in the VCP application that the plan submitted a Form 5310 application.

How close were they to 0.50%? I've seen a couple of cases where the IRS did not pursue benefits at 0.45% or so.

The EOB has this: Suppose an eligible employee later becomes ineligible due to a job classification? Where the plan excludes employees in a specified job classification it is possible for an employee to become eligible for the plan, and thus eligible for top heavy minimums, but later become ineligible due to the job classification (e.g., a salaried employee later becomes an hourly-paid employee under a plan that excludes hourly-paid employees). Should the plan continue to provide this employee the top heavy minimum, assuming he/she is a non-key employee, even though he/she is no longer eligible to participate in the plan? As noted in 3. above, Treas. Reg. §1.416-1, M-10, states that only non-key employees who are participants and who are employed at the end of the year accrue the top heavy minimum in a defined contribution plan. That Q&A goes on to say: ”A non-key employee may not fail to receive a defined contribution minimum because either (1) the employee is excluded from participation (or accrues no benefit) merely because the employee's compensation is less than a stated amount, or (2) the employee is excluded from participation (or accrues no benefit) merely because of a failure to make mandatory employee contributions or, in the case of a cash or deferred arrangement, elective contributions.” It comes down to how you define a participant once the person has qualified for the plan. It is clear that if you have always been in an excluded classification, then you are not entitled to participate (assuming of course the plan is able to pass coverage without covering such employees). Our interpretation is that, if an employee later becomes part of an ineligible classification (other than the two circumstances in the quoted part of the regulation above) he/she is not entitled to the top heavy minimum for the plan year, so long as he/she is excluded from the plan for the entire plan year. See also Rev. Rul. 96-48, Holding (Issue 2). Note that if, in the plan year that the employee becomes part of the ineligible class, the employee is eligible for at least a part of that plan year, the top heavy minimum will apply to such employee based on his/her compensation for the entire plan year. At the IRS Q&A Session at the 2014 ASPPA Annual Conference held in National Harbor, MD, the IRS agreed with this interpretation.

I also think Announcement 95-33 might help, but it is pre-EGTRRA, the IRS said “Remember that a plan may compute the minimum benefit based on a non-key employee’s years of participation in the plan, rather than years of service with the employer”.