DMcGovern

I had a couple of clients last year that received their information. I didn't see the whole package, but I was told it was a lot of information. They do seem to market heavily to certain companies, and like you said, it appears to be from 5500 information.

The DOL letter states that a "VFCP team member can assist the applicant throughout the process to ensure that the correct documents are provided and to answer any questions that the applicant may have." I'm wondering how effective this would be if clients were to contact them and do the forms themselves. (If they were willing in order to save the expense of the TPA preparing everything.) Is there a direct phone number for this DOL service?

How do you write the documents to include or exclude the specific HCEs & NHCEs? Seems like unless you have certain groups, divisions, departments, etc. this could be problematic. Would also have to satisfy coverage each year, right?

My nose seems to agree with Tom. There's such a limited amount of time to notify participants, and allow them to make an informed decision on a change to their deferral election. Doesn't seem to follow the "reasonable" time the regs require.

IMO there is a lot of information in the full divorce decree, that while it would provide some fascinating reading, isn't my business. Don't need it to determine if the DRO qualifes. I feel the same way about death certificates. I have seen some that go into detail the manner and reason for the death - again, fascinating, but none of my business.

Were the employees (participants) told there wouldn't be deferral deductions from bonuses? If so, was it done consistently (such as at enrollment meetings)? Anyone given the opportunity to make an election on bonuses (or told they could not)?

Small 401(k) plan intended to terminate plan and merge assets into a PEO plan a couple years ago. Client never paid for final reporting (including 5500), or termination documents and did not respond to requests for information/payment. Two years later client receives a letter from the IRS requesting filing of the 5500 for that plan year. We can certainly do the final reporting and have started the process. During a review of the transactions, we discovered that one of the participants (also an owner) is missing $509 in salary deferrals for that final year. So, there are document issues to fix, along with the missing deferrals. Since all of the assets are no longer in the investment accounts for the plan, not sure how to fix this. Use a bank account in the name of the plan, then deposit the deferrals + earnings and transfer to the PEO plan? For the document, the intent was to terminate the plan in March 2015. With the deferral correction that is needed, would the termination date need to be current? Not sure how to proceed on this.

Sorry, not a response to your questions, but we see this all too often. Seven payroll deposits of contributions and loan payments late and none of the 20 people involved noticed! Everyone just assumes that payroll and deductions are handled correctly. We know what assuming does.....

Have a 401(k) profit sharing plan, with safe harbor match provisions. The plan is top heavy and the effective date of the plan termination is 7/1/17. The owners made salary deferral contributions and received the match (or will, through the termination date, as will the couple of regular employees that participate in the plan). I believe the approach to take for top heavy purposes is to consider it a short plan year of 1/1 - 7/1/17. Anyone employed as of 7/1/17 would be eligible for the top heavy contribution. The problem is, this employer has a number of seasonal employees that normally would not be employed as of 12/31, thus ineligible for the top heavy contribution. If we go with the 7/1/17 date, this will pull in quite a few employees that have never received a contribution, and the amounts will be fairly small. It doesn't seem like this would be the intent of the regulations. Thoughts are appreciated!

It seems this is a question of whether or not the house is considered the participant's principal residence. ERISA does not provide a legal definition for "principal residence". If we look at tax law, Treas Reg Sec 1.121-1 refers to the property held (as in owned and paid for) by the taxpayer. Facts and circumstances may come into consideration. Does the fiancee have any ownership in the property? Does the fiancee pay any taxes? Or, is there a rental agreement? I think there may be a difference between an eviction notice for a place you are renting, and a person living with you. Unless there is some sort of contractual agreement between the two parties, doesn't the eviction notice only apply to the person(s) named in the notice - and their legal immediate relatives (spouse, children, parents, etc.)

A few comments here bother me. "Pre-funding" deferrals is not really allowed, although I'm not aware of anything that disallows deferrals from draws. Then there are the comments that draw is not salary, earned income is. So, constructive receipt of income for a partner occurs when the Schedule C is prepared? Or is it on the last day of a calendar year? I don't recommend Partners contributing deferrals from draws. Once the Schedule C has been prepared they may have zero income.

Got it - thanks RBG!

Respectfully, I interpret this differently. It says it applies to taxable years beginning on or after the date of publication.... If the final Reg is published in 2017, wouldn't that make it effective for the 2017 taxable year?

FTW's responses to my questions regarding the effective date: 1. Is that the plan’s taxable year, or the employer’s? ANSWER: The Plan 2. For calendar taxable years, that would be 1/1/17? (So, a sponsor could use forfeitures toward the full 2017 safe harbor contributions.) ANSWER: Yes 3. What about non-calendar taxable years? ANSWER: It would be the tax year that starts in 2017. Since the proposed Regs state they are effective for taxable years on or after the date they are published, that would include 2017, right?

The proposed regs say it is effective for taxable years after the publication of the final regs. I'm guessing it is the taxable year for the plan? So for calendar year plans, 1/1/17, right? Non-calendar year plans?

Agreed! I'll be very interested in FTW's communication and [likely] amendment for this. I don't always agree with the person responding to my question through customer support and have to seek out assistance elsewhere within FTW.

Thank you for your responses!

In the process of terminating a DB plan, one participant elected a split distribution - part as lump sum, and part as a rollover. The lump sum amount is great enough to require 20% withholding. Client's CPA is saying that the company is not responsible for submitting the withholding taxes, the participant is, due to the plan termination. Client has issued a check to the participant for the full lump sum amount, and instructed him to submit the W/H taxes himself. Never heard of this before. Is this something new in the tax filing world?

Wow Would definitely want to see a plan document for both plans. If there is one, it's difficult to believe they received a favorable determination letter - although it's doubtful that was ever applied for. How are they meeting the insurance limitations in the DC plan? Not In addition to producing documents, I would also be looking for/requesting copies of 5500's for past years.

Plan sponsor discovered several people that were not auto-enrolled, dating back several years on some. Plan document specifically states "Effective for Plan Years beginning after the adoption of the 2010 Cumulative List (IRS Notice 2010-90) restatement, forfeitures cannot be used as Qualified Non-Elective Contributions, Qualified Matching Contributions, Elective Deferrals, or actual deferral percentage test safe harbor contributions (Code section 401(k)(12))", so we know that the QNEC cannot be funded with forfeitures. What about the earnings adjustment on each QNEC - could they use forfeitures for this?

http://www.napa-net.org/news/technical-competence/regulatory-agencies/help-stop-a-small-plan-killing-regulation/ Good article from heavy-hitters in the ERISA world, and an opportunity to submit your thoughts on the proposed regulation

Good point, jpod. The EOB Ch. 3A, Section II, Part H states that "there are no specific statutory rules relating to allocation conditions" in a DC plan. It further states that "the DOL recognized that the absence of accrual requirements for defined contribution plans enables such a plan to prescribe reasonable allocation conditions, such as an hours requirement and/or a last day employment requirement". So, a couple questions come to mind: 1) Is the allocation condition you are proposing "reasonable"? 2) Is this an option allowed under the plan document you have? Note: I'm not sure this would qualify as a "last day" allocation condition. That is generally defined as the last day of the plan year, or a specific allocation date (such as quarterly allocation dates). But, this point may not matter here.

The event timing may be "not a definite date", but the Employer would then be able to manipulate who does or does not receive a bonus, and thus a profit sharing allocation. Similar to what BG5150 is saying.

Did find this: Revenue Procedure 2013-12 SECTION 6. CORRECTION PRINCIPLES AND RULES OF GENERAL APPLICABILITY .06 Special rules relating to Excess Amounts. (4) Correction of Overpayment (defined contribution plans and 403(b) Plans) . (a) In general. An Overpayment from a defined contribution plan or 403(b) Plan is corrected in accordance with the Return of Overpayment method set forth in this paragraph. Under this method, the employer takes reasonable steps to have the Overpayment, adjusted for Earnings at the plan’s earnings rate from the date of the distribution to the date of the repayment, returned by the participant or beneficiary to the plan. (b) Make-whole contribution. To the extent the amount of an Overpayment adjusted for Earnings at the plan’s earnings rate is not repaid to the plan, the employer or another person must contribute the difference to the plan. The preceding sentence does not apply when the failure arose solely because a payment was made from the plan to a participant or beneficiary in the absence of a distributable event (but was otherwise determined in accordance with the terms of the plan (e.g. an impermissible in-service distribution)). © Unallocated account. Except as provided in section 6.06(4)(d), a corrected Overpayment, adjusted for Earnings at the plan's earnings rate to the date of the repayment, is to be placed in an unallocated account, as described in section 6.06(2), to be used to reduce employer contributions (other than elective deferrals) in the current year and succeeding year(s) (or, if the amount would have been allocated to other eligible employees who were in the plan for the year of the failure if the failure had not occurred, then that amount is reallocated to the other eligible employees in accordance with the plan's allocation formula). (d) Repayment by the participant or beneficiary. To the extent an Overpayment was solely considered a premature distribution but was otherwise determined in accordance with the terms of the plan, any amount returned to the plan by the participant or beneficiary is to be allocated to his or her account. (e) Notification of employee. Except as provided in section 6.02(5)© with respect to the recovery of small overpayments, the employer must notify the employee that the Overpayment was not eligible for favorable tax treatment accorded to distributions from an eligible retirement plan under § 402©(8)(B) (and, specifically, was not eligible for tax-free rollover). We did the notifications to the participants. Some returned the funds. Hope this helps!

Large 401(k) plan, ADP test failed and corrective distributions made to 124 HCEs. Subsequently it was discovered that a change in compensation and deferral amounts was needed to a few participants, including 2 HCEs. Once the test was re-run, this changed the results. Two additional HCEs now need refunds (no problem here), and 123 HCEs had been distributed too much. Most of them the excess amount distributed was about $65. Does this need to be corrected?