Madison71

....or ditto what Larry says....

I would check the plan document and administrative procedures. I think most basic plan documents provide that once the 6 month suspension period expires, that the participants prior election will no longer apply unless otherwise provided in the administrative procedures. The procedures could be revised to permit is to automatically restart if not already provided for in the procedures. I would think this would result in the likelihood of operational failures for failure to automatically restart.

EPCRS requires a determination of actual earnings show earnings methodology and computations (if applicable). However, it also states that if the difference between actual and approximate is likely insignificant and the administrative cost of a determination of the actual earnings would significantly exceed the difference, then reasonable estimates can be used when calculating earnings. I've used both the DOL calculator and the average plan earnings in the past without issue. In this case, the plan participants made investment elections. Complexity to calculate alone is not reasonable argument if the difference between actual and approximate is significant.

I believe Colonial Surety still writes these.

It’s difficult to read on my iPhone as well

That is my understanding as the period of absence is less than 12 months

Th plan could be amended before the end of this plan year to current year testing. That wouldn’t guarantee it would pass, but would avoid this issue. I believe the plan then can not switch back to prior year for 5 years

Record-keeper provides a one-time payment to its TPA partners based on a new plan that comes over (based on asset size). For example, in 2018, one new plan is placed with the record-keeper. Based on the asset size, the one-time payment to the TPA totals $6,000. It is paid out of the general assets of the record-keeper. This amount is not paid by the plan, participants or investments held in the plan. Does this need to be reported on the Schedule C of the Form 5500 as indirect compensation to the TPA? Does this need to be reported on the 408(b)(2) disclosure? Thank you!

Thanks for the attached letter Peter. I am sure I will now here this coined term used often when distinguishing between two.

RBG - 100% agree. You make an excellent point Bill - one I have never thought of before. I've used the 7 business days in correction filings on small plans and it was never pointed out as an issue. However, that doesn't mean it is the appropriate date to use. I think pay date may be the way to go based on that reasoning.

On small plans I tend to use the 7 business day safe harbor. On large plans, I use what is their average length of deposit on "timely" contributions as long as that is on or before that 7 business days. I know the DOL does not recognize this for large plans (arguing more advanced systems should result in even quicker deposits), but it is where I start. I worked on a large plan a few years back where it legitimately took them 8 business days to deposit. Their internal payroll person left the company and for a few months they clearly had late deposits. We laid out to the DOL this convoluted internal payroll process where it did actually take 8 business days to deposit. The DOL auditor denied saying he had never approved a large plan going beyond 7 business days.

Luke - I believe your understanding to be correct. I filed under a VCP some years back on this very issue where there was a series of employee reductions over several years resulting in a partial termination. We broke out those that were employer-initiated to come up with the percentage. It was above 20%. We then fully vested only those affected participants. The IRS disagreed and said we needed to fully vest both those that were voluntarily and involuntarily terminated over this time period. I believe I even found and provided informal IRS guidance stating that we only had to vest those that were involuntarily terminated. One of their arguments was that when you have large scale reductions it’s difficult to determine those that were voluntary as they may have been taking preemptive action for what they believed to be the inevitable termination. That was my experience.

Thanks for elaborating on recalcitrant. I had to look up the definition as I forgot what it meant. I then had to listen to the pronunciation. I was pronouncing it recalc...like a calculator. This is a great question. It sounds like it was sent certified mail. Was his entire account liquidated? It was triggered due to severance and NRA and not because of an RMD, so its an eligible rollover. I’ve heard of some (above 5k) sending to an IRA provide with plan sponsor consent. This is after the attempts of the IRA provider to reach the participant before money is rolled. Of course subject to the plan document.

That is correct. The current vested balance includes outstanding loans. You should also consider highest outstanding loan balance for 12 months to ensure not exceeding maximum of $50,000. The current outstanding loan balance is subtracted from the highest outstanding loan balance to get your reduced maximum statutory limit.

I would agree that if the only participant affected by the blackout is the owner, then a blackout notice is not necessary.

Good morning - 401(k) Plan document was restated a couple of years ago when moving to a new provider. This is the only plan sponsored by the employer. Top paid group appears to have been inadvertently selected on the adoption agreement. I say that because it was not selected on any of the prior plan documents, the sponsor states that there were supposed to be no changes on the restatement other than a change to the new provider's document and it was not included on the initial draft restatement. In looking at the census data from prior years and this year, it would never have been advisable to select this option. The plan parameters set-up on the system left off top paid group, so it passed testing with flying colors the past couple of years without this selection. When going back to re-test with that option selected, it fails badly each year. The sponsor will amend the plan prior to the end of the plan year to eliminate this option. However, any thoughts on correcting this operational error without having to correct past years based on this inadvertent selection? I know VCP is an option although my understanding is the IRS will not approve if request to retroactively amend to remove top paid based on this reasoning. Thank you!

I agree with you - it’s a no from my understanding. It’s a terrible result for those tipped employees making less than minimum wage. I’ve heard of pulling amount out of wages pre-tax and any difference paid by check. Not ideal, but better than all being paid by check. I’m assuming they are only covering those FTEs they are required to cover, correct? So, they could raise wages to cover premiums, but assume that would not happen.

Do they receive a W-2? I believe they are considered a W-2 employee eligible to participate in the plan (if meet whatever age and service requirements) unless specifically excluded.

My understanding is a totally unfunded H&W plan is not required to furnish an SAR. It is a specific exemption listed in the 104 regs.

You are correct that if excess is in one plan than it must be distributed. Post 4/15 results in double taxation - reported on 1099-R as excess deferral in 2017 - code P I believe with whatever other applicable Code (Code 1, 7, etc.) and 2018 (assuming it is distributed this year) for the year of the actual corrected distribution (excess deferral plus earnings) - code 8 with whatever other applicable Code. There may be a 10% penalty depending on the age of the participant. There would not be 20% mandatory withholding because the amount is not eligible to be rolled over.

Good morning. I would change prospectively by indicating the change in Q.4 on the Form 5500 and be done with it. I would not amend past filings nor use DFVCP for this situation.

You’re welcome

To add to this, beginning in 2018 you have an extended period of time to put this amount into an IRA or another qualified plan. It used to be 60 days and has now been extended to the due date of your tax return (plus extensions)

Excellent course of action! Never thought of that. Thanks for the info.

Thank you. This is great. What a dummy I am. I remember coming across that in the past, but not locking it down in my brain. Sorry TPA Bob - listen to Kevin C.