PensionPro

How about amending the 1099-R to show that a portion of the distribution was ineligible to be rolled over?

As per ASPPA letter sent to IRS in June 2012 amending a SH plan's allocation formula for non elective contributions is questionable and risky with respect to the plan's safe harbor status. From page 2: "When asked at various forums over the last few years about the ability to make mid-year changes other than those listed in Announcement 2007-59, the IRS has responded by referring to Announcement 2007-59 and the specific amendments allowed as the only changes that can be made to a safe harbor 401(k) plan mid-year." From page 3: "Plan modifications that should be permitted to be made mid-year because they will not affect a plan's safe harbour include ... (3) altering the allocation method for nonelective contributions other than the safe harbour contributions (while protecting benefits already accrued) ..." Theory aside, until IRS issues specific guidance are we not stuck with the risk of IRS enforcement based on its interpretation? As far as OP's question it would be okay to amend the plan's allocation formula AFTER giving a supplemental notice stating the plan is not safe harbor IMO. ASPPA.pdf

I would go with the software and not treat them as active employees in 2012 because they could not have deferred or received a PS.

Did you include them on the 2012 ADP test?

Under California Civil Code Section 1798.85-1798.89 companies may not publicly display or post SSNs or mail anything to customers containing SSNs. Here is the state statute that permits use of the last four digits in certain instances: "Unless otherwise required to do so by state or federal law, no person, entity, or governmental agency shall present for recording or filing with a county recorder a document that is required by any provision of law to be open to the public if that record displays more than the last four digits of a social security number. Unless otherwise authorized by state or federal law, a document containing more than the last four digits of a social security number is not entitled for recording."

For current employees writing a letter may not be sufficient.

Employee was improperly excluded in 2013 but to calculate missed deferral opportunity, 2013 ADP results are not available. Does employer have to wait till after 2013 to determine the ADP and then correct? Thanks. PS: they do not qualify for the special rule for brief exclusion.

Are the plan assets being reported on an accrual or cash basis?

If you have employees excluded from the 403(b) who are not eligible to defer under another plan, yes you have found a problem. The regs say you can exclude employees who are eligible to make a cash or deferred election (as defined at §1.401(k)-1(a)(3)) under a section 401(k) plan of the employer.

Only eligible rollover distributions can be transferred between a 403(b) plan and a qualified plan.

Was that in the context of key employee officer definition or management functions?

EOB states: The law does not provide a definition of management functions. The term should be interpreted under common business practices. Activities that involve daily business operations, hiring or firing personnel, business planning, setting employee compensation, and supervisory roles would be examples of management functions. However, see attached, starting with the last section of page 1 ... Mgt Functions.pdf

You may want to check if there is a PTCE, perhaps PTE 77-3 or 79-13 ...

Yes I agree that ERISA 403(b) plans are not subject to 4975. In the last step the plan has the option to file under VFCP as you noted.

ERISA 502(i) provides for the imposition of a civil penalty. It is not a mandatory excise tax.

A 5330 (or the information that would be on the 5330) is only required to be submitted to DOL if you are seeking exemption from providing the Notice to Interested Parties where excise tax is less than $100. Otherwise it is not required.

I don't see the point of sending a 5330 showing an excise tax due and no check attached.

Depends on state law.

My recollection is the answer is No unless it is a dual-qualified plan.

A rural cooperative's 401(k) plan MUST be a DC pension plan per IRC 401(k)(7) such as a MPPP and I don't believe the plan can be amended to a non-pension plan.

Yes, rural cooperatives may sponsor a 401(k) plan per IRC 401(k)(7). Also see 401(k)(4)(B)(ii). Not sure on your second question. A 401(k) plan sponsored by a rural cooperative does not seem to meet the definition of governmental plan under 414(d).

A deemed CODA is an arrangement “that directly or indirectly permits individual partners to vary the amount of contributions made on their behalf." If the IRS can make an argument during audit that the individual partners are exercising discretion over their employer contribution then they can call the arrangement into question. Employer can strengthen its argument if it has a DL for an allocation rate by individual. Also having resolutions/minutes from the partnership regarding contributions/allocations can help. From EOB: In Q&A-4 of the Q&A session [ at the 2011 annual ASPPA Conference], the IRS said that, particularly in a corporate context,merely because each shareholder represents a separate allocation group does not result in a deemed CODA designation, and that the IRS routinely approves plans designed this way without raising a deemed CODA issue. What the IRS is more focused on at the determination letter level is whether there is under the terms of the plan the ability of a participant, on an individual basis, to affect the amount of bonus declared for the participant’s benefit by agreeing to a certain contribution level to the plan with respect to such a bonus. However, the IRS still might examine the operation of the plan as part of an audit.

Thank you for the helpful responses!

We are looking at a cash balance proposal by a firm that involves 401(h) accounts and insurance within the plan. I have researched the issues a little but looking for someone to shed additional light. The proposal is for a law firm with five partners and about 45 common law employees. The law firm already sponsors a 401(k) plan with 3% safe harbor nonelective. Q1. None of the partners are hitting their 415 limit. In which case what is the benefit of the 401(h) account -- is it simply that those contributions are made on a deductible basis by the employer and are not taxable to the participant when distributed to pay retiree medical benefits? Q2. Under what circumstances is it appropriate to provide life insurance policy within a DB plan and to what extent? What are the pitfalls to avoid -- such as springing cash value, etc.? We are a little nervous because part of the proposal involves product sales and not merely administration services. I am sure if done right all these pieces work, but I am trying to understand the nuts and bolts to determine if it is in fact appropriate for this client's situation or if the desire to sell product overshadows the needs of the client. Thank you for the help!!

Per my calculations, 1,237.50 from A and 2,062.50 from B for a total of 3,300 after pro-rata adjustment.