Bruddah Kimo

The plan did not file as a small plan in 2014, but filed a Sched H as a large plan. So it sounds like I must file as a large plan in 2015 as well - not good. This is a plan I inherited from someone who told the sponsor they would not require an audit for 2015.

I have a calendar year 401k plan that filed Sched H in 2014 with 98 participants at EOY. On January 1, 2015 five more employees became eligible to participate. Do I need to file a Sched H for 2015 since my BOY participants is now 103, or are my BOY participants considered to be 98 allowing me to file as a Small Plan for 2015? I've researched but haven't been able to find a definitive answer on my BOY participant count. Thank you!

Even though the payments to employees are made 100% by the employer, not though a plan the employer is making contributions to? Would you then be considering it a 'welfare benefit' (even though there is no plan the payments are based on) ? How would it differ from a 'sick pay' or 'vacation pay' payment to the employee?

Having an argument with a plan sponsor over the definition of compensation under their plan. Compensation is defined as Code 3401 comp including deferrals but excluding 1) comp prior to participation; 2) while an ineligible employee; and 3) amounts in Regulation §1.414(s)-1©(3) (i.e., reimbursements or other expense allowances, including fringe benefits (cash and non-cash), moving expenses, deferred compensation and welfare benefits, even if includible in gross income). Here is the issue - throughout the year they may pay 'temporary disability payments' to employees that is 100% paid by the employer and included a taxable income on their W-2. Client claims this amount is to be excluded from plan compensation and that only payment for actual work performed should be included. I argue that since payments are made by employer and includible in W-2 taxable income it is treated no different than sick pay and is included in plan compensation. Can these 'disability payments' be construed to be a payment under §1.414(s)-1©(3) and therefore excludable from plan compensation as the client insists?

Thank you Kevin - I should have mentioned that this is a DC plan. No further contributions are to be made for 2011, they only make EE Deferrals & ER Match. You're right about the loan option, I was trying to get creative and overlooked the fact the participant had already taken out available loans.

I have a calendar year Plan that processed a hardship distribution for a participant in 2011. While undergoing an audit for 2011 it was found it did not qualify. The plan uses safe harbor hardship definitions, one of which is 'payment of tuition, related educational fees, and room and board expenses, for up to the next 12 months of post-secondary education for the Participant, and the Participant's spouse, children, or dependents (as defined in Code §152, and without regard to Code §152(b)(1), (b)(2) and (d)(1)(B));'. While Sponsor approved the hardship request to be processed the auditor found that the hardship was used to payoff outstanding school loans. He is asking what corrective steps need to be taken. Has anyone had experience with a similar occurence? The IRS Fix-It Guide states that 'have participant return hardship distribution amount plus earnings' but this leaves unanswered questions: 1) How to detemine the 'earnings' 2) How to handle tax reporting for 2011 distribution. Amend 1099-R(?) 3) Can it be self-corrected in another manner (reclassifiy as a loan possibly?) Any comments or insights on handling this situation would be appreciated! Thank you!

That's what I was afraid of - it is all Safe Harbor Match or nothing then for this Plan. Thank you!

In realize I'll need to run a ACP test (see reference in my post 'I understand the match formula will not provide a pass for ACP testing') - but the big question is can I have a Safe Harbor Match of 100% on the first 4% deferred and a discretionary Employer Match of 100% of the NEXT 5% deferred?

Here's the situation: I have a new client which currently offers a 401k Plan with an Employer Match equal to 100% of the first 9% deferred. The match is immediately 100% vested. I am wondering if I should make this a Safe Harbor plan to give me an automatic pass on the ADP test. I understand the match formula will not provide a pass for ACP testing. I have a couple of questions: Is it OK to offer Safe Harbor Match of 100% on the first 4% of deferrals made and regular Employer Match of 100% on the next 5% deferred? I have not been able to find an example of this type of formula in the various examples cited in IRS examples and trade articles. Why not offer a Safe Harbor Match of 100% of the first 9% deferred? That would be easy, but right now the employer monies are available for hardship withdrawals. Making all 9% match ineligible for hardship withdrawals might make the decision to go Safe Harbor more difficult for the sponsor. I thought if only 4% were made Safe Harbor they may be more apt to adopt the Safe Harbor provisions. Has anyone seen this type of formula used in a Plan?

Thanks GMK - since the accrued benefit is not in pay status it doesn't look like the state can require the sponsor to issue a distribution to the requesting agency. I will advise the client -

The custodian of the assets of a 401k Plan recently received a letter from a State agency directing the Custodian to pay child/spousal support from the account of a terminated participant. The Custodian sent a letter back to the State agency (and copied the Plan Sponsor) saying they are not able to make a distribution of assets without the direction of the Plan Sponsor. The Plan Sponsor has asked what should be their response to their anticipated receipt of a letter from the State agency. A couple of questions: 1) Does the state agency have the right to demand payment from a participant account which has not been distributed? 2) Does the request need to follow the rules of a DRO have the SSN, address of the participant, name of the Plan, signed by a Judge, etc. to be a valid order? This is the first one of these I have seen and would greatly appreciate any advice which you could provide for how the client should respond. Thank you!

A 401k PS Plan will be terminating effective 12/31/2010. A Notice of Plan Termination was distributed to participants with distribution election forms & tax notices November 30, 2010. The Plan has the following sources of monies: Elective Deferrals Safe Harbor Non-Elective Employer Match The Plan is undergoing an IRS audit (and that's why it is being terminated by the Plan Sponsor). When informed of the Plan Termination Notice gonig out on 11/30, the auditor stated that the Ntoice must be given out 60 days in advance of the Plan Termination. ????????? Am I missing something here? Why would the Plan need a 60 day notice for a DC plan with these sources of monies?

Hi - I'm somewhat new to the 403b world and had some questions put to me by a broker. I'm not sure how to respond. A local municipality is looking to start up a retirement plan - they currently have a SIMPLE. It will cover school EE's and other municipal EE's. They want to make a 3-5% contribution to the employee's. Some questions: 1) can they offer a 401k or are they limited to a 403b? 2) Since it is a government agency must the 403b be a non-ERISA plan or can it be an ERISA 403b? 3) If they can offer both 401k or 403b, what would be the advantage of either? Thank you for any insights you can provide!

BG5150 - It's for a new plan we took on mid-2009. We have them setup for Safe Harbor in 2010. Thanks for your help!

The NHCE ADP is 0.0% which means the max rate for HCE's would be 0.0%, therefore the $5500 deferral made would be characterized as a CUC.