Stash026

On 6/9/2021 at 7:15 AM, EBECatty said:

It's a partial termination, which would vest everyone. 

Just wanted to followup on this.  It would 100% vest the people who were impacted by the partial termination.  What about those who terminated in the year prior who haven't taken a distribution?

Good morning!  I have a client that hires employees on a 3-month probationary period (though these employees are on payroll).  The current document states that an employee becomes eligible on the 1/1 or 7/1 after 1-year of service (1,000 hours).

The employer wants to have that 1 year start after the probationary period.  For example if someone was hired on 06/20, their probationary period runs from 06/20/21-09/20/21.  Can the 1-year wait then start from 09/20, meaning they don't become eligible until 01/01/23 (instead of 07/01/22 if the 1-year started from the original DOH, not the date the probationary period ends).

Is that allowed?

Thanks in advance!

On 6/29/2021 at 11:14 AM, Belgarath said:

That's a somewhat tricky question. Many in the pension community don't agree with the apparent IRS interpretation, but the IRS appears to take the approach that even though you don't take into account voluntary terminations to determine IF there has been a partial plan termination, once you have made the PPT determination, then all the participants who terminated during the applicable period are 100% vested, whether or not the termination was voluntary or involuntary. I have some old scribbled notes here referring to Revenue Ruling 2007-43. But I haven't checked to see if there is additional, possibly newer guidance.

Basically, who wants to fight the IRS over 1 employee? I'd just vest them and be done with it. (IMHO, my feeling is that their apparent stance is ridiculous, but somehow they don't seem to consult me on these things...)

What if it's someone who terminated 2 years prior to the partial termination?  Vesting would still apply to them, correct?

Also, this applied to Defined Contribution plans the same way right?

Just wanted to make sure.  Thanks!!

If someone terminated prior to the sale, would their vesting also be accelerated to 100% due to the partial termination?  Or only those who were let go due to the sale?

On 6/9/2021 at 7:15 AM, EBECatty said:

It's a partial termination, which would vest everyone. 

If she's keeping one person on payroll, would that impact the vesting?  

56 minutes ago, CuseFan said:

Definitely not #1.

#2 or #3, or combination thereof as the deduction(s) will need to be within the applicable limits for the applicable years. 

Nor am I, so I also suggest the client discusses with their accountant.

Great, thank you!!! 

I have a new client that hadn't funded a required contribution for multiple years.  They funded those contributions, with added interest, in '21.  The question is, when are these contributions deductible on their taxes (they hadn't been taking the deduction, since the contribution had never been made).

1) Is it deductible in the year it was originally due?

2) Can they take the deduction in 2020 (it was funded in early '21, before the due date of ER contributions)?

3) Is it deductible in 2021, since that's the year it was made?

I'm not an accountant, so I'm not sure.

Thanks in advance!

I have a client where the owner sold the company, with all of the employees being hired by the new company.

The Plan itself is staying open for a few years, as the owner working as a consultant for who she sold to and getting paid through the old company.

Basically, all of the employees are terminated except the owner and her son.

The question is, in this type of situation what happens to the participant's vesting?  I know on a plan termination everyone is automatically 100% vested, but this isn't a plan termination.  But in this case, does that still apply?

Thanks in advance!

On 5/21/2021 at 9:42 AM, BG5150 said:

Did you ask the document provider?

I did.  I'm waiting for a response from them still though

4 minutes ago, Belgarath said:

Pretty much the same as a 401(k). BUT, just check your document - this will tell you what options are available. Most docs would allow general testing, integrated, pro-rata, whatever - the usual suspects. If it governmental as opposed to an ERISA 403(b), the world is your oyster, subject to 415, etc., and your document restrictions.

No top heavy or ADP in a 403(b) anyway.

Thanks!  The document allows for "Equivalent Accrual Rates".  Would that basically be New Comp?

I haven't worked on a 403(b) in awhile, but my colleague is out-of-the-office and I'm getting questions from a potential client.

How can non-elective employer contributions be allocated to participants?  Can cross-testing be used, like in a standard 401(k) Plan?  What other formulas are allowed?

Thanks in advance!

I work with a MEWA and the association is questioning the 20 employee minimum for the COBRA subsidy.  Can someone point me in the direction of the reg that explains how the subsidy works with a MEWA?  If an employer that participates in the MEWA has fewer than 20 employees, do they still fall under the COBRA subsidy since they are part of the MEWA?

Thanks!

I'm taking over a Plan and working on the Cycle 3 Restatement.  What I find interesting is that there are two different sets of eligibility requirements for 401(k) contributions:

Senior Managers - 21 and 6 months of service

All Other Employees - 21 and 1 year of service

To me this seems discriminatory since it's benefitting the managers (upper level) and allowing them to participate sooner, but I wanted to see what everyone else thought.

Thanks!

52 minutes ago, C. B. Zeller said:

IRC 404(a)(6)

 

Thanks!  The concern was that they had filed their tax return prior to making the contribution.  That clearly isn't an issue, so thanks!

Does anyone know where in the regs (or if it does) state that contributions need to be funded prior to the filing of the tax return?

(i.e. this year someone filed their tax return in April, but didn't pay their employer contribution until early May since the filing deadline was extended to 5/17).  The accountant is asking me if this scenario is acceptable.

I'm pretty sure I'm right on this, but someone was arguing with me so I wanted to confirm:

Plan amended eligibility to be 21 & 1 with Quarterly Entry Dates as of 01/01/21

Who does that impact?  If someone was hired in 2020, but had not yet gained eligibility, is their eligibility decided by the old rule (21 & 1 with Immediate Entry) or the new rule (where they'd have to wait to the start of the quarter)?

Thanks!

5 minutes ago, RatherBeGolfing said:

I think it should be pointed out that it is a little more involved than just filling out the form.  You need to put procedures in place to prevent it from happening again. 

It is entirely voluntary to correct using VFCP.  Just be aware that they will probably start an investigation if you do not.  When an earlier round of these letters came out 4-5 years ago (maybe more), ASPPA GAC protested the threatening tone of this "invitation to voluntarily participate".  I believe the DOLs answer was that it would change some of the wording, but the message was that they were aware of a possible PT and an investigation may follow.  

@Stash026 would you be comfortable sharing some more detail?  Like date of the letter and what regional office it came from? 

It was the NY regional office that sent the letter.  I believe it was dated early April, but the scan my client sent cut it off.

The plan obviously isn't to ignore the letter, just wanted to get a feel for what's involved in the response.

3 minutes ago, C. B. Zeller said:

Did they report  late contributions on the 5500? These letters are usually sent in response to that.

It's just the DOL saying, "Hey, we noticed you had some late contributions, you might want to correct the fiduciary failure under VFCP." You don't have to - the "V" stands for "voluntary," after all - but if the client wants to dot every i and cross every t they could.

The fix under VFCP is basically to make up the lost earnings and pay the excise tax under IRC 4975. Hopefully the plan sponsor already did that. Then they would just need to file the VFCP form.

Got it, so it's not mandatory but will we keep getting letters until we respond?  Also, does the fact that this is a multi-employer, collectively bargained plan?  We would obviously have to bill the contributing employer for the interest on the deferrals/loan repayments (that's what was deemed "late" by the accountant)

I have a client that got a notice from the DOL regarding potential prohibitive transactions due to there being delinquent contributions during the Plan Year.  I haven't experienced this before, so can someone tell me what the fix/response is and what is involved?

Thanks in advance, I really appreciate it!

13 minutes ago, C. B. Zeller said:

Rev Proc 2019-19 Appendix B section 3 offers some simplified methods of calculating earnings.

Thanks!  I was thinking of just using the VFCP Calculator at:

https://www.askebsa.dol.gov/VFCPCalculator/WebCalculator.aspx?_ga=2.83674198.1102150085.1618583545-685162085.1585297162

Would that be acceptable?

What interest rate would everyone recommend using? I don't have all of the earnings for prior years, since we just took over the client.

Thanks!

On 3/22/2021 at 2:16 PM, C. B. Zeller said:

Rev Proc 2019-19 6.02(4)(a) (emphasis added)

 

So if someone is not maxing out their Cash Balance, can the Profit Sharing be greater than 6%?  What is the calculation to do greater than the 6%?

Also, is a SEP also limited to the 6% or is that separate all together?

Can someone please point me to the regulation that limits to the 6% deductibility on the Cash Balance?

Thanks!  I just have someone questioning me, so I wanted to show them the actual regulation

Good morning!  I have a new client that is currently maxing out a SEP, but also has the opportunity to start a Profit Sharing or Cash Balance Plan.  I don't believe the SEP has any bearing on the maximum contribution into the other plans, as the companies are unrelated, but I wanted to make sure someone could max out both a SEP and a Profit Sharing (or receive a contribution in a Cash Balance).

Thanks in advance!

3 hours ago, C. B. Zeller said:

Sound to me like they have either a significant operational failure which is uncorrected for more than 2 years, or a demographic failure; either way, the correction is VCP. Earnings should be calculated at the plan's actual rate of return.

The client had someone else tell them that since these are Profit Sharing contributions, and not 401(k), that allocating lost interest is not necessary.  Is there anything I can cite to back up to them that it's required?