BG5150

For some reason, powers that be made this plan effective 12/1/21. What limits am I prorating when doing the profit sharing? And am I correct in remembering that self-employment income is "earned" on 12/31? So in this case, the owner will be using his full $290,000 comp? (unless the comp limit is 1/12 of course...)

Is this an actual quote from the document? or is it a paraphrase. And where did your wife the the full plan document? Did HR give it to her? usually, participants only get the SPD.

No. 5% of compensation, not deferrals. Otherwise in your example of $4,000 in deferrals, the match would only be $200 (5% of $4,000). True-ups are simple. You calculate the match under the formula on an annual basis (ie, you treat the year as one big payroll). Since the plan does not exclude pre-participation compensation, you use full year pay. Divide deferrals by comp then apply the match formula. Then look at how much match was deposited and make up the difference. I'm having trouble with the wording on the match: it matches 100% of first 4% of pay and then half of the next 2%. To me, that goes up to 6%. But it seems to be saying the deferrals are capped at 5% for match purposes. I'm guessing it is supposed to mean that the MATCH is capped at 5% of pay (4 + 1/2 + 1/2 = 5), but it says the "Elective Deferral amount does not exceed 5%..."

It is my understanding, the loan gets offset when the participant has a distributable event. Therefore, if the plan allows for distributions at age 59 1/2, and the participant is still employed. the loan will offset when the participant turns 59 1/2. But what happens if the 59 1/2 withdrawals are restricted to deferrals only and the loan was taken from deferrals and match? For example, a $10,000 loan was taken: $6,000 from deferral and $4,000 from match. $5,000 was paid back, so his loan balance is $3,000 in deferral and $2,000 match. Loan defaults, deemed distribution processed. Participant still employed, and turns 59 1/2 on May 1. Plan allows for distributions of deferrals only at age 59 1/2. So he has a distributable event (for deferrals) on May 1. Does $3,000 get offset? All $5,000? None?

Plan is effective 1/1/21, but deferrals are effective 7/1/21. per doc, match is cal'd on a plan year basis. Do we calculate the match using all the comp, or just the comp after 7/1?

DC plan.

A few years ago, sponsor amended plan to exclude by name two partners (there are several other partners in the plan). Now they want to remove that exclusion. Are there any discrimination issues given the fact that the amendment only affects HCEs? I wouldn't think so because the HCEs aren't getting special treatment per se. They've otherwise satisfied the age/service conditions. It's not like they are being let in early. I just want to make sure I'm not overlooking anything.

Plan has online enrollment, but from time to time they get hardcopy enrollment kits mailed out. The sponsor is billed $x for each hard copy. I that an acceptable expense that can be paid out of the forfeiture account?

How much did the Employer make in its bank account? Put back what was taken out, and add the earnings from the Employer's account. The ER shouldn't get a windfall for having that money when it shouldn't have.

Who issued the 1099-NEC? Ask them what it's for.

it's been a while since I've had to deal with a 1099 for a 402g failure. If done by 4/15, does the participant get 2 1099's? One with code P for the excess and one with code 8 for the earnings? Afterward, it's just one for code 8 for the earnings, right?

Was the suspense account subject to earnings, or was it a cash account?

No key EEs.

Company sponsors two plans, one for union EEs and one for non-Union EEs. Do I combine them for Top Heavy, or do them separately? Or, do I have the option to test them together or separate?

I would tell them to get a second opinion from counsel who specializes in ERISA matters. This sounds like someone taking complex patent law advice from a divorce attorney. Just because someone is an lawyer, doesn't mean they know what they are talking about in all fields of the the law. (Would you ask your gynecologist what to do about Parkinson's Disease?)

Could it be 7/19/21, 18 months after hire, or more specifically, 6 months after satisfying the eligibility requirements?

Is anyone going to put up a stink if the owners do not fund the match for themselves? Did they do the Cycle 3 restatement yet? Going forward, they can do a flexible discretionary match under which they can pick and choose who gets what match. Including not including themselves.

And I found it in the BPD. (Not sure how I missed it the first time...) (ii) shall be made, as operationally determined by the Administrator, from the Participant's Pre-Tax Elective Deferral Account or the Participant's Roth Elective Deferral Account, to the extent both Pre-Tax Elective Deferrals and Roth Elective Deferrals were made for the Plan Year;

But issuing from Roth first then leaves in place funds for which earnings will not be distributed tax free. Would you rather have a tax bill of $4,000 now and have the earnings on that $4,000 grow tax free? Of have a zero tax bill today, but have the earnings over the years be taxable later?

Plan is failing ADP test. One HCE getting a refund had both Roth and Pre-tax deferrals during the year. What is the protocol for doing the refund? From which source(s) do you start using amounts? Is it a plan document issue? Administrative procedure? Does the participant have to make the final call? (Is that even feasible if we are coming up on processing deadlines?) As usual, your thoughts are appreciated.

How could they be part of testing if they do no have any plan compensation? The remuneration they get on the 1099 is not earned income or W2 or anything that would fall under 415 or withholding wages.

What happens when the plan's method of crediting hours of service is the elapsed time method? is a Year of Service merely when someone works for 12 months straight (or credited due to spanning rules)? How does that translate to calculating Otherwise Excludable? I have a participant in q 403(b) plan who was hired 7/3/18 and worked 350, 650, 675, 720 hours in '18, '19, '20 and '21. Is the OEX rule purely 1,000 hours in a year, or can it be based on elapsed time and depends on the plan's definition? can this person be OEX or no?

I suggest following EPCRS. The excess allocation goes into a SUSPENSE account and can ONLY be used to offset Employer contributions (not including deferrals). And, that no ER contribution may be funded by the employer until the account is exhausted.

But in the original scenario here, how can that first 'plan' pass coverage? No one is benefitting. is a coverage ration of 0/0 acceptable?

How does gateway work with component plans? Do only those in the x-tested 'plan' get the GW and the contribution-basis plan can be bypassed? And remember, the x-tested component needs to pass via the ratio test, otherwise you'll have to run the ABT for everyone in all component plans together.