John Feldt ERPA CPC QPA

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.

No, the accountant must have some other agenda, or mistakenly thinks the rate of return on the 401(k) accounts has some impact on the DB plan.

SIMPLE plans have an "exclusive plan" requirement. As I understand it, you can only have one SIMPLE and all members of the controlled group must be covered by that one plan.

Will the new plan be applying any of the prior service for purposes of benefits? If so, then perhaps you have a violation of Treasury Regulation 1.401(a)(4)-5.

If it was truly a certain only option, no life, is the calculation of such option subject to 417(e)?

After-tax contributions are not deferrals, so I believe their existence eliminates the top-heavy exemption.

Top heavy minimums. If it's a DB/DC combo with the TH minimum handled in the DC plan, then 5% of full plan year compensation is what you'll need to check for those non-key EEs participating in both plans.

And it must be the exclusive plan for the group

Sometimes you just get lucky like that!

Based on the requirements under IRC 416(g)(4)(H), I would conclude that the prevailing wage contributions would cause the plan to lose any top-heavy exemption it would otherwise normally have as a safe harbor plan. However, suppose the plan is safe harbor using the 3% nonelective, and it provides that the prevailing wage contributions are contributed as QNECs that offset the safe harbor. And further assume that no one receives any prevailing wage contribution exceeding 3% of compensation. -- I have not looked into this, but perhaps there you could try to argue that you end up with a plan that consists solely of deferrals and safe harbor -- I am not sure about this argument however.

Internal Revenue Code Section 416(g)(4)(H): (H) Cash or deferred arrangements using alternative methods of meeting nondiscrimination requirements The term “top-heavy plan” shall not include a plan which consists solely of— (i) a cash or deferred arrangement which meets the requirements of section 401(k)(12) or 401(k)(13), and (ii) matching contributions with respect to which the requirements of section 401(m)(11) or 401(m)(12) are met. Employee after-tax contributions do not meet any of sections 401(k)(12), 401(k)(13), 401(m)(11), or 401(m)(12). Therefore, if employee after-tax contributions have been made for the plan year, then the requirement to consist "solely of" contributions that meet these sections, as noted in the Code, has not been met and the plan is not exempt from top-heavy. Meaning, an after-tax employee contribution appears to "kick them out of top heavy minimum exempt status". See also Revenue Ruling 2004-13, although it has no after-tax examples. https://www.irs.gov/irb/2004-07_IRB/ar11.html

auto enroll starts at 6% and IRS response was "Probably not, as not all NHCE might be able to participate at that rate" Really? Are you kidding me?

You can run an ACP test using all the match combined with the after-tax, or, you can ACP test just the matching that exceeds 4% of pay with all of the after-tax.