John Feldt ERPA CPC QPA

If in doubt, perhaps put in a enough dollars to remove your doubts. Give it to non-keys only, make sure the document allows the allocation.

Yes. Under a VCP application a negotiated amount was maybe a third of the usual 1-1 contribution. Some fairly extreme circumstances applied, including the employer's financial state at the time, which had to be proven with the reviewer.

You could look through Derrin's posts on this website under the Message Board Q&A Columns under Who's the Employer? Especially, Q&A 16, 21, 40, 102, 108, 216, and 276.

A DB plan currently passes 401(a)(26) easily (they're not top-heavy). The plan just now was frozen to new entrants and will freeze accruals for HCEs only. Thus it will only continue accruals only for the NHCEs that entered before the close date. It intends to stay closed and to not allow accruals for HCEs (including stopping accruals when a NHCE becomes an HCE later on). In many years, the number of non-excludable employees will dip below the 40%/50 EE threshold under 401(a)(26). The plan is not aggregated with any other plan for any purpose. Under the current rules, is there an exception for passing 401(a)(26) if the plan only has benefit accruals for NHCEs? What about the proposed rules? 401(a)(26)(B)(ii) has this: If employees described in section 410(b)(4)(B) are covered under a plan which meets the requirements of subparagraph (A) separately with respect to such employees, such employees may be excluded from consideration in determining whether any plan of the employer meets such requirements if (I) the benefits for such employees are provided under the same plan as benefits for other employees, (II) the benefits provided to such employees are not greater than comparable benefits provided to other employees under the plan, and (III) no highly compensated employee (within the meaning of section 414(q)) is included in the group of such employees for more than 1 year. and 1.401(a)(26)-1(b) has: (1) Plans that do not benefit any highly compensated employees. A plan, other than a frozen defined benefit plan as defined in § 1.401(a)(26)-2(b), satisfies section 401(a)(26) for a plan year if the plan is not a top-heavy plan under section 416 and the plan meets the following requirements: (i) The plan benefits no highly compensated employee or highly compensated former employee of the employer; and (ii) The plan is not aggregated with any other plan of the employer to enable the other plan to satisfy section 401(a)(4) or 410(b). The plan may, however, be aggregated with the employer's other plans for purposes of the average benefit percentage test in section 410(b)(2)(A)(ii).

Agree. The 4th employee is fully vested due to having reached normal retirement age, thus your 3rd vested employee.

Correct, but there is one additional exception that might be useful here. If, in addition to the allocation of deferrals and safe harbor, there is an allocation toward an additional match - and that match is not a safe harbor match but meets the requirements to be ACP-free, then you are still exempt from top heavy. For example, an additional like this would be ACP-free: a fixed-required additional match that is uniform, its match rate does not climb as deferral rates increase, ignores deferrals over 6% of pay, and has no allocation conditions. This match can have a vesting schedule. Another example, a discretionary additional that is uniform, its match rate does not climb as deferral rates increase, ignores deferrals over 6% of pay, has no allocation conditions, and overall is not more than 4% of compensation. This match can have a vesting schedule.

See Rev. Rul. 2006-38. It looks to me that the 15% excise tax is determined by using the reasonable interest rate on the date of the failure and the reasonable interest rate in effect as of the first day of the plan year for each year thereafter, but it's base on simple interest, not the form of compound interest that the DOL calculator uses. This of course is not very practical to actually compute it this way, so I would think that probably 99.999% of all Form 5330 applications simply use the missed earnings amounts that were calculated for the actual correction, using those amounts and multiplying by the 15% excise tax rate for each year until fully corrected.

Can be allowed as early as age 59.5. Can be allowed at any age upon disability. Can also be allowed at any age for a military deemed severance distribution. These are only optional, so check your plan's document to see what it actually allows.

sorry - wrong post - removed!

Scenario 1. If the only allocations are deferrals and safe harbor, then the plan is exempt from top heavy for that plan year. If any other amount is allocated in the plan, even if from a forfeiture, you must do a top heavy test to determine if that plan year is top heavy. If it is top heavy, they need to provide any top heavy minimums and apply the top heavy vesting schedule. If no HCEs receive any nonelective allocations, such as profit sharing, then you will not need to run a 401(a)(4) test for the nonelective allocations. You don't have to test for discrimination among NHCEs, you only do that for testing discrimination in favor of HCEs. So if the owner's sibling is a NHCE, they can get a large profit sharing allocation and all of the other NHCEs can receive zero profit sharing, but just be aware that the PS amount will show up on the 5500 and the SAR. Scenario 2 Some or all HCEs can be excluded from safe harbor. Some of those HCEs might not be key employees. Regardless, if the plan only allocates deferrals and safe harbor, the plan is exempt from top heavy for that plan year.

The quote from EPCRS mentions violations under 72(p)(2)(B) and (C ). But if the loan is merely outside the plan's written loan policy, has it actually violated 72(p)(2)(B) or (C )? (B ) says the term can't exceed 5 years unless the loan is for a home. (C ) requires substantially level amortization of such loan (with payments not less frequently than quarterly) over the term of the loan. Suppose the loan gets entirely paid off now. Did the plan have an actual error? The loan is just over two weeks old.

A plan's loan policy had a limit of 5 years for participant loans. The vendor issued a loan a couple weeks ago for a 15-year primary residence loan. The plan sponsor does not want to adopt a new loan policy that allows for primary residence loans. The loan is not in default, the end of the cure period hasn't passed. One payment just occurred. Has an actual error occurred that would necessitate VCP? Could this be self-corrected by re-amortizing the loan now to not go outside 5 years or by having the participant pay off the loan now and borrow from outside the plan?

Then give the notice in order to comply with the Revenue Procedure. If they are owed no extra dollars, you have now complied the last requirement needed to qualify for the zero dollar QNEC. Assuming no match was also missed.

Yes, that is the limit for 2016 for a 457(b) plan for employee and employer contributions combined, disregarding any catch-ups.

If they are not due any contribution because the QNEC is zero and they are not owed any match for deferrals that would have occurred, then the only piece left to satisfy the requirement of the Revenue Procedure is to give the notice saying you are correcting the deferrals. Give out the notice and if they have any future compensation due that can have deferrals withheld, apply the correct deferral election. edited to remove what was an ill-conceived attempt at describing how that notice could be worded.

An investment provider received a rollover check and allocated it to the wrong plan and thus to the wrong participant. The lucky individual had no plan balance otherwise. After the rollover was allocated to their plan account, they took out a loan. Some repayments have been made on that loan. 1. The person whose money was actually rolled in to the plan needs to be made whole, probably by the investment provider? I assuming the paperwork was in order but just not properly handled on their end. 2. The person who got the funds, via the loan, needs to pay back the loaned amount to the investment provider, not to their plan account? 3. The investment provider needs to empty out the account from the wrong person so it can be used for the correct person's account? Or is this an excess loan that is taxable and still needs to be repaid - but how can it be repaid as a "loan" when there was no balance to actually loan out anyway? Other ideas?

Okay, but DOL EFAST2 Q&A31 says: "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." Doesn't this imply that both signatures are needed if the two are different?

If the Plan Administrator and the Employer are not the same, must both e-sign the Form 5500/5500-SF? What if the TPA gets their own credentials to file on their behalf with written authorization (because the employer can't find "internet" on their computer), must the pdf attached to the e-signed 5500 have both a PA and ER signature if they are different entities/people?

Well that was easy. Yes, it applies. Okay, so I should have just looked it up first. Treasury Regulation Section 1.401(a)(26)-1(b)(5)(i) General rule. - Rules similar to the rules prescribed under section 410(b)(6)(C ) apply under section 401(a)(26).

If a business transaction occurs, a transition rule under IRC 410(b)(6)© applies for coverage purposes. Does this transition period also apply regarding 401(a)(26)? For example, employer A covers 2 of 5 nonexcludable employees in their DB plan before the business transaction occurs. They buy company B's stock. Company B has 5 employees that would meet the plan's eligibility/entry. Does 401(a)(26) require an immediate change to the plan to add more participants, or is it transitioned just like coverage?

Thanks Mike, that's exactly what I learned from Larry Deutsch. It's takeovers like this that force me to question if I understood him correctly!

We recently took over the work for a controlled group of employers that have a separate 401(k) plan for each employer. Deferral and match only, no profit sharing. All the plans pass the ratio percent test for coverage except for two plans - so the average benefits percentage is applied to test these last two plans for coverage. One of these two plans is a safe harbor 401(k) plan. The employer has no other safe harbor plan, thus it cannot be permissively aggregated with any other plan for coverage testing, correct? The final plan happens to be their only 401(k) plan that uses current year testing for ADP/ACP, so I don't think it can be aggregated with the other plans either. The question is regarding the terms 'testing group' and "taken into account" from the 410(b) regulations. In 1.410(b)-5(b), the average benefit percentage for a plan is the ratio of the NHCEs actual benefit percentage in plans in the testing group over the HCEs actual benefit percentage in plans in the testing group. In 1.410(b)-5©, the actual benefit percentage is the average of the employee benefit percentages in the group with all nonexcludables of the employer taken into account, even if not benefiting under any plan taken into account. In 1.410(b)-5(d)(3), the testing group is defined in 1.410(b)-7(e)(1) which states that the testing group is the plan being tested (obviously) plus all other plans of the employer that could be permissively aggregated with the plan being tested. So, when reviewing the prior firm’s coverage testing, they ran the average benefits test for the safe harbor plan by showing zeros for all the hundreds of nonexcludables (those are the employees in the controlled group covered by other plans but not covered by the safe harbor plan), then averaging the results. The averaging takes into account all of those zeros. However, for the current year tested plan, they ran the average benefits test by including allocations for all employees in all plans, including the allocations made in the safe harbor plan, then they averaged those results. So, for the average benefits test for coverage, the "testing group" is only the plan being tested. So does that mean the average for that test include all the zeros for the nonexcludables covered by other plans because they are to be "taken into account"? Or, are all the average benefits provided under the other plans also calculated for purposes of determining the average benefits. It seems like the prior firm did this both ways. Why would the safe harbor plan and the sole current year testing plan be done differently for these tests? Man, that's a long question. Sorry about that.

If the one person is the 100% owner (including spousal attribution), then you are correct that they are not subject to ERISA and thus the 7-business day ERISA deposit timing rule does not apply. However, check the terms of the plan document to see if it states a requirement regardless. The plan still must operate according to its terms. I have seen some that have built in the 15-business days after the end of the month as a "no later than" requirement.

IRS Notice 2016-16 lists as one of the 4 prohibited mid-year changes: 2. A mid-year change to reduce the number or otherwise narrow the group of employees eligible to receive safe harbor contributions. This prohibition does not apply to an otherwise permissible change under eligibility service crediting rules or entry date rules made with respect to employees who are not already eligible (as of the date the change is either made effective or is adopted) to receive safe harbor contributions under the plan. Would an amendment to exclude HCEs mid-year run afoul of the above prohibition?

For an IDP document, no restatement is required unless the plan sponsor wants to submit the document to the IRS to obtain a determination letter - to get the IRS to review the plan, they require the prior amendments to all be restated into the document that you are submitting. If your client adopted each of their required interim amendments along the way, they do not need to restate if they are not preparing a Form 5300 application.