BG5150

Here is a basic SHM spreadsheet I came with a while ago. Feel free to use it. No warranties or guarantees of any kind implied or given. Though, if you look at the examples in there, the calculations fur under 3%, between 3-5% and over 5% come out correct. Safe Harbor Match Calc.xlsx

When someone is missing in a plan term and the money is auto-rolled to an IRA, where do you send the 1099-R?

Participant requested a distribution from a terminated plan. She actually came in and picked up the check. Withholding was properly taken and submitted. Her check was never cashed. And she cannot be located. (and the Trustee took it upon herself to stop the check) What to do now? Can they open up an IRA with after-tax basis with these funds?

§ 2520.104b-3 ...the plan administrator shall furnish this summary, written in a manner calculated to be understood by the average plan participant, not later than 210 days after the close of the plan year in which the modification or change was adopted.

Side note: they would have to file a Form 5500 instead of a 5500-SF

Isn't it usually the IRS first into the fray when it comes to 5500's?

This one always gets me. The deadline to furnish the SMM is 210 days after the plan year in which the amendment is adopted. So, if a plan amends to allow in-service withdrawals effective Feb 1, 2021, they don't have to tell the participants about it until August 2022? 19 months after the effective date of the amendment? Doesn't seem right.

I still think the investment houses would do a better job. Again, I think it's an important issue, but I don't think it needs to be in the SPD. Do you put investment diversification info in the SPD?

This stuff would/should be provided when the account is opened in their name or when they create the account themselves. My thought is if someone is perusing the SPD to that granularity in order to see the cybersecurity warning/disclaimer, they will be similarly scrutinizing the account setup.

Can you re-run the test and see if the difference is material?

In my world, the SPD is created by the document software. I guess we could add to it, but then I'd have to hire an attorney to give me that language. Plus, there are many investment arrangements different plans can be a part of. Some are merely accounts at a big provider (think John Hancock or Voya). Some are in individual brokerage accounts (like Merrill Lynch or LPL). Some are a combination. Some plans are in a pooled account where the participants don't have access to their "accounts." I have some plans that have Profit Sharing in a pooled arrangement, but the 401(k) is employee directed. So I would have to come up with several blurbs and appropriately add them to the SPDs. Them if the funding arrangement changes, remember to change the SPD. Too many moving parts, I think. Cybersecurity is an important topic that might best be served by a joint effort between the custodian and plan administrator.

If you know how much the deferrals were, why were you using the figures from the investment house? Or are you concerned that these misplaced earnings affected the earnings calc on the refunds?

The match is NOT a QNEC. It stays on a vesting schedule (if there is one). The correction for deferrals is a QNEC b/c deferrals are 100% vested automatically (like the QNEC). The ER is not punished my having the match correction 100% vested, too.

Oh, shoot. I didn't realize I was responding to an 11-yr old post...my apologies...

The 1099 won't be "proof" Code G implies a direct rollover. There wasn't one. I don't this guy is a 'crook.' Looks like he changed his mind and is trying to do the right thing an claim the income. The only think he "gets away with" is the 20% withholding. But he's just gonna have to make up for that and pay the tax. Crummy situation, and I would just send a revised 1099-R, code 1 or 7, no withholding. IRS comes knocking, what you you (the plan administrator say)? Guy said he was going to rollover the money, we put code G. Then he told us, and we saw, this did not happen. So we corrected the form to show what actually happened.

Thanks, Lou!

Participant is allowed to defer more than the 10% limit that the plan allows. Not catchup eligible. Per EPCRS, and Excess Allocation arising from a deferral must be distributed to the participant. What 1099R code is used on that distribution?

So is the ER monitoring during the year who will be an HCE on January 1 and stop their deferrals right then? Otherwise, they might be deferring and they will become retroactively (so to speak) ineligible for deferrals on 1/1 and will have to have those deferrals (plus earnings) refunded to them. (Via EPCRS SCP)

Accrued benefit means benefice the participant has earned. Not if there is an accrual due but not deposited yet.

Here an old BL thread ont he subject:

Employer missed the SH match for several employees in 2020. Most of the other employees were ok. It is a payroll-based SH Match, and therefore, the contribution must be made no later than the end of the quarter following the quarter in which the deferrals were taken. Did they just blow the SH protection for both ADP/ACP tests and Top Heavy?

So what happens to the J&S attached to the balances? Does the PBGC enforce it when they eventually pay out the benefit?

Money Purchase Plan terminated 3 years ago. Only accounts left are for lost participants and each has over $5,000. Record keeper will not cash the accounts out and move to an IRA because of the spousal consent issue. What can the sponsor do to get this plan closed up?

The above is from Sec 416. (the bold items are my emphasis and commentary) Basically is says that if Safe Harbor is the SOLE funding method (other than deferrals), then the plan is NOT TOP HEAVY. If the plan is not Top Heavy, then, of course, no minimum is required. So, in your case, if the SHM is the ONLY employer money (or, more specifically, the SHM and a discretionary match that together satisfy ACP Safe Harbor), then your plan is NOT TOP HEAVY, regardless of the key assets held. Picky point: Safe Harbor doesn't satisfy TH minimums (if the SH is the only ER contrib); the plan is simply not TH in that case.

Being picky here: If the SH Match is the ONLY employer contribution in 2021, then the plan is not considered top heavy for 2021 regardless of the balances of key employees.