Madison71

Thanks!

Hello - I'm sure this has been covered many times on the board, but I was not patient enough to do a proper search for it after 1 minute of failing to uncover anything. A quick question on loan offsets in a qualified retirement plan. I understand that typically upon a distributable event (in this case - termination of employment), an outstanding loan becomes immediately due and payable within a certain period of time (60-90 days...based on loan procedures and the promissory note). Failure to repay in full within this time period results in a loan offset with 1099-R reporting. The question is in what year is the 1099-R reported? I have seen some providers that report it upon the quarter following failure to repay in full and others that do not report it until the entire account is distributed. I understand the administrative ease of reporting it upon distribution of the entire account...and it makes sense if it is earlier than the quarter following termination, but does not make sense if the participant waits years to request a distribution of their account. I've been told it is based on whatever the loan procedures say, but waiting until whatever year the remaining monies are distributed does not make sense. Thank you!

Hello I have an operational failure whether otherwise eligible employees (all NHCEs) where included prior to meeting the plan's minimum service requirement. The money was deposited in the Plan (a 401(k) Plan on a prototype document), but sat in cash for a couple of months. It appears from the reading of EPCRS that this can be self-corrected by retroactively amending the plan to permit those employees to enter the plan. I have three questions I was hoping to get your opinion on: 1. The example correction in Rev. Proc 2016-51 provides for SCP by retroactive amendment, but also includes the submission of the amendment to the IRS for a determination letter. This would no longer be an option beginning 1/1/2017, correct? 2. Earnings would need to be applied - since these employees never directed their investments, this would be based on the default fund provided in the plan, correct? 3. What if instead the facts were an error was made where only some of the otherwise eligible employees (all NHCEs) were included prior to meeting the plan's minimum service requirement. Can this be self corrected through SCP by only including those let in early or would that require a VCP submission? Thank you for your time

It would seem the correction I outlined above would make no sense. As I understand it, if you need to correct the ADP Test and also have an error where there are participants who were not given the opportunity to participate, you first correct the ADP Test. You correct the ADP Test only using those that were given the opportunity to defer. You then correct those participants who were not given the opportunity to defer, by contributing 50% of the average deferral percentage. I'm not sure how you correct an ADP Test that fails because none of the NHCEs were given the opportunity to defer other than pulling them all in the test and providing a QNEC to all those not given the opportunity to defer to correct the failing test. This would then take care of correcting the failed ADP Test and also the missed opportunity to defer

Thank you. So, if for example, there were 2 HCEs deferring an average of 9% in the ADP Test and 5 eligible NHCEs deferring 0% (none of the NHCEs were given an opportunity to defer), that one approved correction would be to make a QNEC of 7% of compensation for each of these 5 NHCEs. Because these 5 NHCEs also were not given the opportunity to defer, then they are also given a QNEC of 50% of the missed opportunity deferral (50% of 7%) plus earnings?

Hello All - Can someone confirm if I am understanding the correction under EPCRS appropriately? Small non-safe harbor 401(k) Plan with eligibility of age 21 and 1 YOS with at least 1,000 hours worked in a plan year. For several years, the HCEs were the only ones deferring into the Plan (no match offered in the Plan). The ADP Tests run for these years were automatically passing as none of the NHCEs were eligible - not shown to work at least 1,000 hours in any Plan year. It is now discovered that the hours were calculated incorrectly for these year and several NHCEs should have been eligible. My understanding is that the ADP Test would have to be corrected first. The Sponsor is correcting by making a QNEC to each eligible NHCE. A 7% QNEC (plus earnings?) will have to be contributed to each NHCE for each Plan Year to correct the failed ADP Test. I'm having trouble reconciling this with the correction if the initial ADP Tests were passed and an NHCE employee was not given the opportunity to defer. Depending on timing, the correction would be a QNEC of either 25% (or 50%) of the missed deferral (whatever the average deferral percentage on the ADP Test) plus earnings. Am I understanding correctly that because no NHCEs were given the opportunity to defer, then an appropriate correction is a QNEC to these NHCEs to correct the failed ADP Test. There is no 25% (or 50%) QNEC of the missed deferral? Thank you

Thanks so much. What about if instead the facts were a missed matching contribution spread over a couple of years. You have to provide 100% of the matching contribution plus earnings. You treat this the same way? Subject to a vesting schedule? If it was instead a ACP correction without refunds, then that is a 100% vested QMAC?

Hello - A 401(k)/Profit Sharing Plan has made a number of profit sharing contributions over the years. Unfortunately, it was recently discovered that several eligible employees were not given a profit sharing contribution. The sponsor is now deciding between VCP vs. SCP under EPCRS based on recommendations provided. (1). What do you call these missed contributions (plus earnings) once made? Are they QNECs? (2) Are these missed contributions 100% vested once deposited into the plan? I assume so, if they are QNECs. Thank you for your time.

Thank you very much.

Hello All - I was hoping to get some insights from this group on daily benefit's reading. Specifically, I'm looking for the best sites to go to ensure I am getting the most up to date information on any benefit changes (mainly DB, DC, but also touch on health and welfare plans and exec. comp.). I then dig deeper depending on the information provided. On a daily basis, I am only reviewing the news links on this page and the IRS and DOL news pages. Are there others you could recommend...other recommended blog sites, etc.? Thank you for your time!

Thanks. I'm not sure. I'm stuck on the established as a professional services corporation. It is a drs. office with a dr. as partner and practitioner in the industry. I would think that by its very nature makes it a professional services corporation. However, it is set-up as a C-Corporation. Does that throw it out of the rules?

I am attempting to make an initial determination to ASG for a clinic where we have taken over on the TPA administration. I learned there are 10 individual Drs. practices with separate 401(k) Plans and each of the 10 individual Drs. practices also own a percentage of the clinic. The clinic has employees and also has a 401(k) Plan. Each of the 10 individual Drs. practices uses the clinic for any procedure they do and a significant amount of the revenue is paid to them from services provided to third parties in the clinic. An analysis have never been done nor been raised in the past. They are going to likely turn over to a law firm for analysis, but want an initial opinion from the TPA. It seems to me to be a pretty straight forward FSO and A-Org situation. However, in reviewing the 1983 proposed regulations and other guidance, I am reading that the FSO needs to be established as a Professional Service Corporation. I am not sure that any of the 11 are set-up as a PSC. Does this get me out of the rules if all are set-up as non-PSC corporations? If set-up as a partnership or something other than a corporation, then it does fall under the FSO rules? Thank you for your time.

Company sponsors a 401(k) Plan. Last year, two related employers began participating in this Plan with their employees contributing. The Plan document does not indicate that they are part of a controlled group of companies and does not have participating agreements or corporate resolutions signed indicating participation in this Plan. Company wants to correct and file under EPCRS to be sure it is properly corrected. A retroactive amendment to the date of participation and adding them also as members of a controlled group is going to be the recommended correction. In looking at the Forms 14568, I'm not sure what schedule they should be using. I'm thinking 14568-B, Schedule 2 - Nonamender Failures (other than those to which Schedule I applies). Also, is there a reduced fee or is it the standard fee in Rev. Proc 2013-12? Thank you very much for your time.

Thank you!!

I am working with a small (under 50 FTEs) with company that sponsors a fully insured group medical plan. I was reviewing the insurance booklet and was told that is the summary plan description, but it does not contain much of what I believe would normally go into an SPD. Is a fully insured group health plan (no matter the size) required to have a plan document and/or SPD? I say no matter the size as I understand the value of a wrap plan document with 100 plus participants. If so, what is required to be contained in this plan? Thank you.

Thanks again and another great point. .

...Thanks Belgarath! Quick response on #2 - the MP plan is currently audited because in excess of 120 participants solely because there are a large number of former employees with account balances. My thinking is by terminating the Plan and establishing a new one would eliminate the cost for audits on the new plan because under 120.

A couple questions to Belgarath on his comment above (and others please feel free to comment as well). 1. Can you terminate a 403(b) Plan and distribute assets out of the plan to participants and immediately establish a 401(k) Plan without violating any rules? 2. Can you terminate both the 403(b) plan and money purchase plan and distribute the assets out of the plan and THEN immediately establishing a new 401(a) plan allowing for 401(k) deferrals and discretionary employer contributions without violating any rules (thinking of successor plan rules in this instance...which I don't think is this case). Thanks in advance!

Thank you to all. I did say multiple times "do you mean terminate the plan" or merge the plan?" I was told repeatedly merge the plans. Consultant definitely understood the difference. I even asked do you mean one provider contract and two plans or actually merging the plans?

Thank you! Thank you! That is what I responded with on the conference call last week, but they were so convincing that I need to check with the experts. If anyone reads this and thinks otherwise on a 403(b)/401(a) merger, please let respond.

Good morning. I work with a plan sponsor whose consultant has recommended merging a 403(b) Plan into a money purchase plan to save money on having two plans and also on audit costs. At first blush, I thought a 403(b) Plan could not be merged into a money purchase plan because it is a 401(a) Plan. In addition, I believe the 403(b) Plan is operating as non-ERISA plan not subject to audit or filing requirements, so I am not sure there is money to be saved on audit costs. The consultant said they have merged many 403(b) Plans into 401(a) Plans. Any thoughts would be greatly appreciated.

I know this has been discussed in many forums but I am still confused. If the plan provides for immediate eligibility for elective deferrals and the 3% safe harbor nonelective contribution, is the minimum gateway required if the eligibility for the profit sharing contribution is age 21 and 1 year of service? I do know that if the participant has met the eligibility for the profit sharing (21 and 1 year of service) and terminates before the end of the year, that this participant is still owed gateway even if there is a last day employment requirement or 1,000 hour rule. The other issue is what plan compensation do I use to determine employer contributions? The plan provides that compensation is excluded for nonelective contributions for compensation prior to entry into the plan. Lets say a terminated employee was eligible for the profit sharing contribution on 7/1 and terminated 10/1 of the same year. Is compensation based on the 3 month period or the entire plan year for safe harbor nonelective and profit sharing purposes? Thank you!

Thank you both very much. I guess I am having a difficult time wrapping my mind around this and probably did a poor job of asking my question upon seeing the responses. Sorry. Employer agrees to pay 100% of the premiums if employee elects to be covered under the health plan. Employer would rather not pay for employees health insurance so it offers to pay the employee a little less than the cost of the premiums if it were not on the health plan and are calling it a cash in lieu of the benefit (health benefit). So, employee opts out of the health plan and receives cash from the employer. Is this permissible?

Thank you, but not sure I follow. Company is using a check the box 125 document from Ft. William and it is checked "yes" that the employer will contribute to the plan and "yes" that the employee can select cash in lieu of the benefit. It does not state the amount of the contribution in the document. If the employer would pay $1,000 in premiums if employee elected health coverage and pay employee $800 in cash if opt for cash is this permissible?

Company wants to start a plan where the employee could elect to either have the premium paid by the employer or the employee could receive an amount of money in cash that was slightly less than the premium payment. Is this permissible under a Section 125 Plan? I am looking at a cash in lieu option in the 125 Plan checklist, but am not sure if this is permissible. Thank you