DLavigne

If a self-employed individual exceeds the 402(g) limit, is he subject to the refund correction? He didn't get a W-2 and his tax return hasn't been filed yet so he really hasn't taken the deduction at this time. Could his accountant change the deferral on his tax return to $25,000 (2019 limit) and then we could apply the excess to another contribution type for 2019 (ie. match true-up or PS)?

This may sound stupid, but when exactly does a distribution occur? This is an ADP refund question. If the process to pay out a refund was started on 3/14/16, ie the shares were sold and converted to cash, but the trust account doesn't reflect that the money actually left until 3/16/16, is it beyond the 2 1/2 months? Our recordkeeping software will show the distribution on 3/14/16 even though the money didn't leave the trust account until 3/16/16. I know the safest answer is 3/16/16 is the distribution date but technically, did we make the 3/15/16 deadline? Thanks.

What are the consequences of depositing 2016 employee deferrals into the plan in December 2015? Tax and plan years are both calendar year. We have confirmed that the 2016 W-2 will reflect these deferrals. Thanks.

A plan was a Money Purchase plan until 2013, when it was amended and fully restated to a Profit Sharing Plan. When the plan was a MP plan, it allowed in-service distributions at age 62. The PS document changed in-service to age 40, particularly so one participant (age 41) could take a distribution. Unfortunately, the accounts were never split to separate out the MP monies from the new PS, and the EGTRRA Adoption Agreement did not mention that in-service distributions for the MP monies were only permitted at age 62. In 2013, the 41 year-old took an in-service distribution for $73,000 which was all MP monies since the 2013 PS contribution had not yet been made. This has recently been discovered and we're wondering how to correct this. The $73k was taken in cash and the participant is in no position to pay it back to the plan. We would like to file through VCP but we're unsure what to propose as a correction. Can we file a VCP submission simply begging for forgiveness? Does anyone have any experience with this who could offer us some advice? Thank you.

A plan is written so that if a participant (not a >5% owner) turns 70 1/2 but still is employed, he does not take an RMD until he actually retires. If that plan terminates in a year after the participant has turned 70 1/2, is he required to take an RMD before he rolls over his distribution to an IRA? He is still employed; it's the plan that terminated. Thanks.

We have a plan that has one participating employer. Up until June 30, 2015, they were controlled. As of July 1st, the ownership changed so that the two companies are no longer controlled. In previous plan years, we did coverage testing by aggregating the employees of both companies. I know in MEPs, they must be tested separately. How do we handle coverage testing in 2015? Thanks.

Thank you! Stupidly, it never occurred to me to look in the document. I've looked in other reference material, but not there. Yes, it does address it (this is an MEP) and it does say the MEP can terminate and distribute assets. So, thank you for pointing me in the right direction.

If a participating employer wants to terminate their portion of the plan, is the only way to do that by creating a spin-off plan and terminating it? Is it possible instead to simply terminate the participating employer's portion of the plan and allow those participants to take distributions? Terminating the participation agreement does not allow participants to take their monies from the plan and this is what they want to do. Thanks.

A plan has a plan sponsor and two participating employers (PE1 and PE2). The plan sponsor is owned by Scott (100%) and PE1 is also owned by Scott (100%). PE2 is owned by Robert (75%) and Chad (25%). Robert is Chad's father. So sponsor and PE1 are controlled but PE2 is not part of the controlled group. Cheryl, who has no direct ownership of anything is Chad's mother and Robert's ex-wife. She has no family relationship with Scott. She works for the sponsor. Is Cheryl an HCE? Does family attribution cross companies that share the same plan but are not part of a controlled group?

I appreciate the replies but I'm still a little unclear. Are you saying that we would need to run the general test on a contributions basis, and if so, wouldn't we still need to pass gateway? Or are you saying we don't need to run the general test at all, and therefore, also no gateway?

Well, in our situation, there is a lot more to the story but I thought I could ask the general question of whether the contribution has to be tested just because the document says the formula is comparability. In this case, the plan has dual eligibility (1 YOS for deferrals & SHM and 2 YOS for PS), and the plan is top heavy. So, we very often have people who either get the TH minimum in the SHM or as an additional PS contribution. Since the HCEs who benefit get 11%, in order to satisfy gateway the people getting the 3% TH minimum all in PS would have to get an extra .67% to satisfy gateway IF we have to satisfy gateway. If we can say that the contribution is really salary ratio (with the one HCE exception) then we don't need to look at gateway. At least that's what I'm hoping.

A plan uses a volume submitter document and is set up as comparability with two groups, 1) one named individual and 2) everyone else who is eligible. The employer is a partnership and the person in group 1 is one of the partners (HCE & Key). He gets a 0% PS contribution and everyone else gets 11%. Does this scenario need to be tested for gateway and the classification/average benefits tests? It's as if the formula is salary ratio with one HCE not getting a contribution, but since the document is comparability, does it need to be tested anyway? Would the answer be different if the partner was getting 11% too? Thanks.

I have a question regarding Cycle A restatements, which are due 1/31/12. We have one ESOP which needs to be filed with IRS by this deadline and it doesn't look like we're going to make it because the document is currently being reviewed by the client's attorney. We'll have the 5300 and accompanying forms done and the document is done, just not executed. Do you think we can make the submission without an executed document? The document would be included in the submission but it wouldn't be executed, we would file it as 'proposed'. Thanks.

Thank you all. The employer wants to give this employee the allocation for the Owner group for the portion of the year he was an owner and the allocation for the all others group for that portion of the year, and that's exactly what the LRM says. Thank you.

I can't find anything written that states as of what date the allocation group classifications are made. The plan document simply names the groups. If the document has two allocation groups; Owners and All Others, and a participant is an owner part of the year but isn't at the end of the year, which allocation group is he in when it's time to allocate the contribution?

Thank you. In A-6©, it says that if the benefit was paid out of the plan to the alternate payee (which was the case) the amount distributed "will be aggregated with any amount distributed to the employee and will be treated as having been distributed to the employee for purposes of determining whether section 401(a)(9) has been satisfied with respect to that employee." That seems to say that if the distribution to the alternate payee was more than enough to cover the RMD requirement, then no additional RMD needs to be made. Is that how you read that? If that's true, then how is the distribution reported? Does a 1099-R need to be issued to the employee for the RMD amount even though the alternate payee got the distribution? Or is there just the 1099-R to the alternate payee and the fact that a distribution occurred from the employee's account enough to satisfy the RMD requirement (no reporting required to the employee)? Thanks.

An owner, who has been receiving RMDs, had a QDRO distribution made from his account on 1/3/11. The paperwork to get the QDRO distributed had been submitted to the investment company before 12/31/10. We calculated his 2011 RMD on his balance as of 12/31/10, however 3 days later his balance dropped by half and now his RMD amount is a significant portion of his entire balance. Is there any exception, in this case, to using the 12/31/10 balance to calculate the 2011 RMD? Could we subtract the QDRO distribution since the process had started before year end? Thanks.

A plan we administer for a governmental entity has a definition of compensation that is W-2 wages, including deferrals and "excluding reimbursements or other expense allowances, fringe benefits (cash or non cash), moving expenses, deferred compensation and welfare benefits". They allow their employees to opt out of the health insurance they offer if the employee is already covered by a spouse's insurance and instead receive $5,000 in lieu of the medical coverage. They run the $5,000 through payroll and it is taxed. They do not want to include it as compensation for the 401(k) plan. According to their definition of plan compensation, can it be excluded? Does it make any difference that it's a governmental entity? Thanks.

Hi Kevin, Thanks for your response. I read that section and found it somewhat confusing but maybe that's just me. I also had read a Technical Update from Relius yesterday that had a Q&A about the process for nonamenders, which provided a link to an article on irs.gov. I found that to be confusing too because it was really only referring to IDPs. I've probably just been doing too many restatements! I am glad to know that our original determination that we only need to file with VCP seems to be correct.

We have several plans that are missing interim amendments since the GUST restatement and we're having them signed now and filing with VCP. All our documents are Corbel's prototype or VS docs. Do we need to also apply for a determination letter? I'm confused by what I read in EPCRS. It seems like it only addresses that issue for IDPs. I'm hoping that because these docs already have an opinion or advisory letter, we only need to do VCP. Thanks.

We have a client who makes a SH 3% nonelective contribution after the end of the plan year and currently owes their contribution for 2008 (they filed for an extension). This employer may either dissolve or declare bankruptcy in 2009 and they've asked if such an event would exempt them from the obligation they have to fund the 2008 SH contribution. They did not terminate the plan in 2008. My feeling is that they are still obligated to make the 2008 contribution even in their dire situation, but wondered if someone else has a different answer to that. Thanks.

Thanks masteff, you understand my question perfectly. My concern is that on July 1st, when somebody enters the plan, that on that day he/she has earned the right to receive a contribution based on full-year compensation. But it sounds like you're thinking that if the amendment is executed prior to July 1st, then the change has been made before that person accrued the right to receive contribution on full-year comp. I like that response - I'm going with it. Thanks for your help!

My original thinking was that an employee earns the right to receive his contribution on his full year compensation on the first day of the plan year even though he doesn't enter the plan until later in the year and so the amendment would need to be done before the first day of the plan year. But I see your point that he hasn't earned any rights until he actually becomes a participant, so if the amendment is done before he becomes a participant, it might be okay. I'm hoping that either your point is correct or the fact that this plan has a last day requirement will be our saving grace.

We have a 401(k) plan that currently has allocation conditions on the PS contribution of 1000 hours and also has a last day requirement. They currently use full year compensation to determine the allocation for first-year participants and they have semi-annual entry dates. They want to retroactively amend the plan back to the first day of the current plan year (January 1, 2008) to remove the 1000 hour and last day requirement, and also change first-year compensation to be from date of entry instead of full year. I know amending out the 1000 hours and last day requirement is no problem, but is it okay to change the first-year compensation to date of entry or is that a violation of the protected benefit rules? You cannot change an allocation formula if a participant has already earned the right to receive it and I know that by having a last day requirement, nobody earns the right to receive the contribution until the last day of the plan year, so in this case, if the answer to my first question is yes (definition of compensation is a type of protected benefit) then is amending the compensation definition okay because the plan has that last day requirement? What about the fact that we're amending the last day requirement out in the same amendment? Is that okay too? In general, is the definition of compensation even part of the 'right to receive the allocation formula' rule? (For example, in a plan that doesn't have a last day requirement.) Hopefully, I've made that clear.

My understanding was that the statements needed to show funds and didn't need to show sources, but after reading the Relius Technical Update we received yesterday, which gives several different situations and examples of what would be included on the statements, it would appear that if you cannot provide the vested balances within the 45 day period at the end of the plan year, then you should provide it on each quarterly statement. Or at least the vesting percentage for each source and then source balances so the participant can figure out his/her vested balance. The example they gave says you need to provide the latest information so on the first quarter's statement and possibly the second, you would show 2005 vesting percentages and source balances and then once you've updated for 2006, change it on the next quarterly statement. So really, the only reason you would need to include sources on the quarterly statements is so participants can figure their vested balances if they don't get that information timely at the end of the year. Did you also know that "quarterly" means calendar-year quarter, so if you have a fiscal year plan, you still have to provide statements on the calendar-year quarters? I can't understand how any TPA firm can comply with all these changes without doubling its staff! Do any of you feel the same way?