Lou S.

Corbel, Relius or FIS or whatever they are called these days sent an e-mail saying they are reviewing IRS letters for accuracy and will send shortly and that document update is scheduled "summer" release.

I usually need to make a chart to make sure I've got the deferrals, catch-ups, and 415 limits in the right years. You have to make sure you are not violating 402(g) or Catch-up in any calendar year. And you have to make sure you don't violate 415 in the limitation year. It's usually pretty easy to follow when a guy puts in the max deferral per calendar year, it can get confusing when you can can't use catch-up rules when you aren't hitting the max. My understanding might be off but I don't think you can bring the prior calendar year limit into the current limitation year, but you might be using some the prior year limit in current limitation year if you exceed the catch up in the 2nd half of the prior calendar year that falls in the current plan year. The timing of the 401(k) deposits can also come into play.

In this case you will need to limit catch-up to $6,000 for the 2017 year. There is no catch-up for the 2016 year because he did not exceed any applicable limit.

Didn't he have a 2017 RMD due 4/1/18 and doesn't he still have a 2018 RMD due by 12/31/18?

Since the earnings are not leaving the plan and will be taxable when received I would not think that they would be reported on a 1099-R now. I would think that you need to move allocable earnings from the pre-tax 401(k) source to the after-tax when you do recharacterize .

How about just not allowing loans? Whether or not it is legal is a question I'm not sure about but it does seem to add a great deal of needless complexity, in my humble opinion. For NHCEs you are restricting them from making deferrals making it more difficult to pass ADP testing. For HCEs you are basically saying you can't take a loan if you want to make deferrals. You are almost effectively saying HCEs can't take loans because most of them won't want to give up the tax deferred savings. Either way it is unlikely to make the employers most valuable employees happy. If the Plan is a safe harbor 401(k), especially a safe harbor matching plan I think you have a problem with the provision as you are effectively restricting an eligible participant's ability to make deferrals and receive safe harbor match that is not an allowable exclusion. Lastly if the plan allows catch-ups anyone with a loan now has an effective deferral limit of $0.00 so if they are over age 50 even if you say they can't make regular deferrals, you have to allow them to make catch-up contributions. All and all it sounds like a bade idea to me but if you can make it work, more power to you.

^Yes. Assuming everything else works out. After making the PS contribution, $6K of his deferral would be recharacterized as catch-up to avoid a 415(c) violation. For 415 purposes he would be considered to have $2,400 deferral, $51,600 PS, $6,000 catch-up.

Since he filed for divorce I'm guess she wouldn't have given spousal consent but I don't see where spousal consent was in question in this case. As I understand it participant requested a distribution and a wire was sent on Friday, he died on Sunday, and the funds were credited to his account on Monday. The spouse was claiming she was beneficiary and entitled to the $2.7M payment but the plan argued he had no accrued benefit as of Friday when the funds left. The court sided with the Plan. Could she have Joined the Plan that a (Q)DRO was coming freezing his account from payment after he filed for divorce but before he took a distribution?

Under the terms of the plan document.

I think we had this happen about 15 years ago. Sent the 1099-Rs, filed the forms with IRS (though FIRE I believe) and the IRS send a late penalty notice to the client to pay the late filing fee.

If the Plan is top heavy and he's not a key, he'll need a top-heavy minimum but otherwise you are allowed to discriminate against HCEs all you want. So if he's in his own group allocate $0 to his group.

I'm not an employment attorney and it sounds like you may need to talk to one to get a determination. That said to me it sounds somewhat analogous to a co-employment situation where the employee in that case would be credited with the full hours worked by both employers with each employer.

It seems like they are changing from 0% to something other than 0% and can do so "weekly".

What does the Plan Document say about changing deferral elections?

I can't remember if this one gets extended if it falls on a weekend or not (I think it does but wouldn't stake my life on it) but March 15, 2018 was a Thursday so for 2017 calendar year ADP tests it is a moot point.

I think this is correct and how the IRS judges it. Though I think you could probably make an argument that is the funds were liquidated on the 15th and check issues on the 16th that the refund was made by the 15th. I don't know how an IRS auditor would rule on it. That said in this particular case the refund was late since it wasn't even initiated at the investment house until 3/16 per the OP. And it looks like the plan sponsor gets to file a 5330 and pay the 10% excise tax.

He's over 59 1/2 so wouldn't the code be "7B" And correct, only the earnings would be taxable.

I believe it is because the 402(g) refund is taxable in the year deferred and not necessarily the year received.

What does the document say? If she's not otherwise eligible for the PS contribution but the plan has fail safe gateway language you would give her the 0.11% to pass gateway. If the plan now passes all applicable non-discrimination tests I'm pretty sure you are done. If on the other hand she's eligible for the PS and in the same group that is getting 5.5% than she would get the bump to 5.5%. From the way you describe the situation is sounds like she doesn't meet the allocation conditions for PS but is getting a required TH minimum plus the additional amount required to pass gate-way under the plan. So I think she gets the 3.11% contrib and you are done if plan passes 401(a)(4) testing.

You didn't make complete corrections. It sounds like you have an ADP failure correctable under VCP.

A long time ago we had an annually valued pooled profit sharing plan that the owner wanted the condition for distribution to be only after a 2 year break in service, which was an option in the AA He was paranoid that one of his employees was going to take his profit sharing distribution and setup a business in competition with him. I think all he really accomplished was more lost participants in the days long before automatic IRA rollovers.

It was very common not to long ago. It is less common now. There is nothing illegal about it if the plan has a provision that termination distributions are not made until the anniversary of your separation from service. In fact the plan, if written as such, can restrict distributions until you reach retirement age but that's very rare in a 401(k) Plan.

If there are additional allocations for Profit Sharing beyond just deferral and allowable SH contributions, the plan is no longer deemed to the be not Top Heavy.

I would have a hard time seeing any US court rule that opening a retirement account for employee under terms of the Plan is a violation of their religious beliefs but maybe I'm crazy. What if you do exclude him or have him irrevocably opt out and the Plan fails coverage, what then?

Tell them to donate it to charity when they leave the company, after talking to their accountant of course.