K2retire

Thank you!

We are the TPA on a 401(k) plan at Mass Mutual. In 2012 a participant who is still employed by the plan sponsor received a "termination" distribution due to erroneous information provided to Mass Mutual. The employee has repaid the distribution in 2013. Mass Mutual is saying that the employer must make up the difference between the amount the participant repaid (exactly what she received) and the current value of the shares that were sold to make the distribution originally. They also plan to issue an amended 2012 1099-R to make it appear that the distribution never happened. Any suggestions how to persuade Mass Mutual that their approach is wrong?

Because the question came from the investment advisory division of the company, rather than the retirement plan division, I am unlikely to get more information.

The statutory excludable employees are based on the maximum possible eligibility -- no the plan's eligibility. So that group includes anyone who has not met age 21, 1 Year of Service with semi-annual entry dates.

Thanks for all of the responses. Although it disagrees with most of the information here, my boss tells me that this is known as a "full flex" account and is both very common and totally permissible.

S Corp dividends are NOT self employment income for plan purposes. His profit sharing contribution will be limited to 25% of his W-2 wages.

A_Dude is correct.

There was a case a few years ago where a number of participants were getting divorces in order to obtain QDROs then getting remarried. The court ruled that whether or not the divorce was a sham was not the plan's concern. I would imagine this would be treated the same.

What does the definition of eligible employee say?

It's my understanding that the required 20% is the minimum and you can always request more. Given that most participants (particularly those under age 59 1/2) will owe more than 20%, it seems perfectly reasonable.

We have a 403b client who tells us that they provide a fixed dollar benefit to each employee with the stipulation that the employee can either use the funds to pay their company sponsored health insurance premiums, or have them deposited to the 403b plan. If they choose not to do either of those two things, they do not receive the benefit. Is that allowed? What would such an arrangement be called?

Although I've found W-2s to be more reliable than most clients...

The document allows the employer to elect the match period. Match is actually deposited each pay period, but they are doing a true-up because several of the executives miss out on match without it.

It must be getting too close to 9/15 -- my brain is on overload. In a plan with immediate eligibility for deferrals, but 1 Year of Service for SH match, I'm questioning how the match is calculated. The document calls for compensation while a participant for the match calculation. We have a participant who deferred less than 1% of full year compensation and became eligible for match on December 1. Using the basic safe harbor match formula, my first thought was that she should receive a match for exactly the amount of her December deferrals. ($15 in this case.) Datair came up with a higher number than that, so I started trying to figure out how it was calculating it. Apparently Datair is comparing the total deferrals for the year to the match eligible compensation and using that percentage to figure the match. ($125.72 in this case.) That seems to defeat the purpose of having delayed match eligibility and using compensation while a participant. Is that correct?

Thanks!

We have started hearing about these as well.

We're preparing a VCP filing for a client who has been calculating their Integrated profit sharing contribution wrong for a number of years. In trying to figure out how far back the error goes I'm seeing a document dated 1995 that shows the fixed contribution rate as 8.5% of compensation up to 80% of the taxable wage base plus 13.9% of compensation over 80% of the taxable wage base. During my years in the industry the rule has always been that you had to use MORE THAN 80% of the taxable wage base to be allowed to use an additional 5.4%. Would using EXACTLY 80% with an additional 5.4% have been permitted in 1995? When did that change?

Not without creating an enormous liability for additional PS for the remaining employees.

The excess is match. But it is a compensation error. The plan excludes bonuses and catch up from match and the person making the deposits included both.

Ours is actually more complex than the OP described. We have various adopting employers who give differing rates of match, but all require a minimum deferral to receive anything. BRF works because we have enough HCEs in every level of match. ACP is always the bigger issue for us.

We have an audit level plan that incorrectly calculated the match and deposited more than their formula for some participants. The plan's auditor is saying that this is an excess contribution requiring the payment of an excise tax on Schedule H of Form 5330. Since this had nothing to do with a failed ADP or ACP test, I don't believe that is correct. Where can I find something to show the auditor that defines the term "excess contribution"?

We have a company that does that. So far they have still passed the ACP test, so it has worked fine.

ING should be able to write the check to the "Estate of...". Whether Mom will be able to cash it without actually getting appointed by a court is another question.

That was where I was getting hung up on this also! I wondered if the trust is receiving K-1 income and pass that through to the grantor.

Does this fall into the category that once I plan sponsor realizes they are not getting adequate disclosures from a provider they must terminate the relationship?