John Feldt ERPA CPC QPA

The proposed regulations have a section that talks about allowing a DB/DC combo plan to utilize the average NHCE match (but not over 3%) as being counted toward the minimum gateway. When can that portion of these proposed regulations be relied upon? The Proposed Applicability Date section says: Except as described below, these regulations are proposed to be applicable to plan years beginning on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. Taxpayers are permitted to apply the provisions of these proposed regulations except for those described in section III of the Explanation of Provisions portion of the preamble for plan years beginning before this proposed applicability date, but not for plan years earlier than those beginning on or after January 1, 2014. Accordingly, the ability to rely on a provision of these proposed regulations for periods prior to the proposed applicability date for these regulations applies to the disregard of certain defined benefit replacement allocations in cross-testing; the exception from the minimum aggregate allocation gateway with respect to certain closed plans; the special testing rule for benefits, rights, and features with respect to certain closed plans; and the rule applying the ratio percentage test to a rate group in the case of a benefit formula that does not apply to a reasonable business classification. Taxpayers may rely on these provisions (that is, the provisions that the proposed regulations would permit a taxpayer to apply before the proposed applicability date for these regulations) in order to satisfy the nondiscrimination requirements of section 401(a)(4) for plan years beginning on or after January 1, 2014, and until the corresponding final regulations become applicable.

To determine if employees have accrued a meaningful benefit, it is my understanding that the average benefit accrued over the participants years could be used for purposes of the calculation. Also, it is my understanding that a fresh-start calculation could be applied.

Are you suggesting that this might be a potential violation of 410(a) for the non-benefiting divisions? Requiring more than 1 YOS to get an allocation? If the plan is written to explicitly exclude all other divisions from PS eligibility, then would that solve the reasonable classification problem?

Is there another possible exception, depending on the terms of the plan, for forceouts of any size balance for terminees who are past NRA and had entered the plan more than 10 years ago? If they don't respond to make an election, I think the plan's terms could be written to require a force out.

Unlike an elective deferral under 402(g) where a partner in a partnership must make the election no later than the last day of the plan year, what is the timing requirement for an after-tax election? Can a partner, in November 2016, write a check and say that it is an after-tax contribution for 2015, assuming no written after-tax election was in place by December 31, 2015?

If the fixed match is set to about 90 cents for each dollar deferred, you'll be slightly overstating the minimum fixed match, so the discretionary would be slightly less than 4%. Before you do that, go back a few years and check the results on how that would have worked. You could also find Tom Poje's limit projection spreadsheet and see how it might look into the future. Well, at least until tax reform passes and the rules and limits all get messed up!

Also note that Derrin discusses this in questions 9:4 through 9:9 in Who's the Employer, 6th edition. You may want to look at 9:8 in particular where they tried to make a controlled group by using options but set such a high price that the government ignored the option.

He only has the option to buy once it reaches $100 per share, not before then? Does that mean he cannot exercise the right at this time? If so, I am not sure you have an attribution. I think that occurs once the option-holder has an unrestricted option to buy. Or, are you saying he currently has an unrestricted option to buy it all at $100 per share?

The 404a disclosure is required, but to technically apply 404 (c ), which is voluntary and not required, the employer has to provide a notice that it intends to comply with 404©. I believe that notice could be provided in the SPD - I do not see an annual requirement.

If the account is not vested, I think the nonvested portion of the RMD is added to the next years' RMD. I did not look this up, but that is my recollection. So if the DB plan has a 3-year cliff schedule, uses the later of age 65 or 3rd anniversary of entry for NRD, and excludes years prior to the plan establishment for vesting purposes, then any RMDs for the over age 70.5 owner which are not vested are thus not paid but they are carried forward to increase the next years' RMD. Correct me if I'm wrong, but that's my memory on this. As to the solo-k topic here. If you're a TPA that tracks time spent by client, you might be surprised by how much hand-holding these owner-only plans actually need - especially in the first several years, and very much especially if they are also doing their own investing (no advisor - they're paying the TPA, so how can they afford an advisor too, right?), and even more so when it's time to end the plan. They can really eat up a lot of your time. Remember, they usually don't have staff to help them, so once they find you are reliable and straight forward about how to handle their plan, they call and ask you for all kinds of help, such as "How should I be filling out this investment form for the plan?", "Who do I write the check to?" "How does the distribution withholding work and how do I get that paid to the IRS?". And when a contribution deadline is approaching you might have to remind and explain multiple times and in various forms why you need the data request completed and returned. Perhaps it would be better for someone else to take a crack at these plans. Maybe I am wrong about this, but I am not convinced these plans truly help the bottom line of a TPA, other than it can build relationships that turn into additional future business. IMHO, FWIW.

If you want the QNEC relief described in Revenue Procedure 2015-28, then a notice is needed. See pages 5 - 10. https://www.irs.gov/pub/irs-drop/rp-15-28.pdf

Also, how does a fiduciary satisfy the requirement that certain fees paid from plan assets must be reasonable if they don't have a sense of what folks are paying for such services? Does that imply some sort of benchmarking is needed perhaps?

No, the 3% safe harbor nonelective is not treated like a QNEC when it comes to satisfying 401a4, thus, the 3% safe harbor can be counted toward satisfying all or a portion of the gateway. If you impute disparity, however, you cannot impute with any of the 3% safe harbor (so it that sense it does get treated like a QNEC).

https://www.irs.gov/retirement-plans/simple-ira-plan-fix-it-guide-your-business-sponsors-another-qualified-plan

From that standpoint, certainly. I assume they are paying for services - how can they just pay for a liability shelter?

Of course they are not completely absolving the sponsor of all responsibility, and I imagine their service engagements spell out the items where they take on fiduciary liability. One example, a periodic analysis of payroll seems prudent, keeping tabs on every payroll would certainly be better, if that's affordable - and if you build a good system to check every payroll, maybe it can be affordable. Will there still be errors, yes, but they will be monitored and hopefully addressed more quickly and procedures addressed and changed for the better. 3(16) may also be for the type of prospect that says "what, you mean that e-mail from the investment provider about some 404 notice thing? - Yeah, we've never done anything with that and we don't have time for it - even if you send it to me we're not mailing that out." - These are the folks that need some help. Then to say that you are willing to act as a fiduciary on certain aspects of the plan, well that does have some legitimate appeal for the right plan sponsors.

Of course, there are some (uhhh umm), reputable 3(16) providers that actually handle and/or monitor much of what you list plus a lot more. Monitoring cannot necessarily prevent certain issues - that still takes a conversation with the employer/payroll regarding practices, procedures and handling internal controls.

I agree on the 8955-SSA - two signatures if ER<>PA. If you look through DOL EFAST questions 30-33 I think these perhaps imply both signatures may be needed?TAG believes both must sign. EOB, in Chapter 13A, Section III, Part B, 1.d.2)a) "Plan administrator different from plan sponsor. If the plan administrator is not the plan sponsor, then both the plan administrator and the plan sponsor will have to obtain separate signing credentials." Also implying both sign? DOL website on EFAST2, Q31: Do you need a separate registration for the "Employer/Plan Sponsor" and for the "Plan Administrator" (two separate signature lines) if the employer/plan sponsor and the plan administrator are the same person? No, you only need to register one time for both purposes. The credentials that you get can be used for multiple years and on multiple filings. If the same person serves as both the plan sponsor and plan administrator, that person only needs to sign as the plan administrator on the "Plan Administrator" line. Does it directly say both sign if they are different? Not exactly. It's unsaid. So you decide - you don't need both signatures? Or is it just understood to mean both must sign. I am curious to hear what others think.

Thanks Carol. Yes, if your governmental employer 457(b) plan allows rollovers, those rollover accounts are still subject to the same 10% early penalty tax rules if they are later withdrawn as taxable. If you work for a non-profit corporation, the 457(b) plan can't have rollovers anyway, the accounts are paid as W-2 wages, and still not subject to the 10% early withdrawal penalty tax.

When going with either: "we've always done it that way" or "everybody else does it that way" - just keep in mind the possible fallout if you actually file it when it is not complete and then discovered later by the DOL. That small DFVC filing fee can be attractive as an option, but it's only an option if you have not already filed.

Also, there is no 10% penalty tax for payment before 59.5 under a 457(b) plan. So if you do terminate employment and withdraw the funds taxable before age 59.5 (or 55), you won't be hit with a 10% penalty tax.

Have you received a letter from the DOL asking about the missing auditor's report? If you have, it generally has about 30 days or so to respond with the auditor's report. If you can't meet that deadline, good luck reversing any DOL penalties. They don't work the same way the IRS does in that regard. In some cases in might be better to not file at all and go under the inexpensive DFVC program. IF the IRS contacts you before that time, you can provide reasonable cause and still use DFVC. If you already filed without the audit report, you cannot use DFVC.

My understanding is that the signature is only needed for the Plan Administrator to file the Form 5500 according a short reading through ERISA and the regulations. But, the 5500 and EFAST instructions (DOL has authority here) seem to state or at least imply that they want both signatures if the Employer and the Plan Administrator are different. My recommendation is to have both sign when the PA and ER are not the same entity, but I am interested in hearing anyone else's conclusions on this.

https://www.irs.gov/retirement-plans/simple-ira-plan-fix-it-guide-your-business-sponsors-another-qualified-plan

Is this what you're looking for (below), or are you looking for the definition of "employer" that includes all of the members of the controlled group/affiliated service group of employers? Treasury Regulation Section 1.401(k)-4 SIMPLE 401(k) plan requirements. (a) General rule. A cash or deferred arrangement satisfies the SIMPLE 401(k) plan provision of section 401(k)(11) for a plan year if the arrangement satisfies the requirements of paragraphs (b) through (i) of this section for that year. © Exclusive plan - (1) General rule. The SIMPLE 401(k) plan must be the exclusive plan for each SIMPLE 401(k) plan participant for the plan year. This requirement is satisfied if there are no contributions made, or benefits accrued, for services during the plan year on behalf of any SIMPLE 401(k) plan participant under any other qualified plan maintained by the employer. Other qualified plan for purposes of this section means any plan, contract, pension, or trust described in section 219(g)(5)(A) or (B). (2) Special rule. A SIMPLE 401(k) plan will not be treated as failing the requirements of this paragraph © merely because any SIMPLE 401(k) plan participant receives an allocation of forfeitures under another plan of the employer.