401king

Going back to the original question - Does anyone know of firm deadlines to notify a former employee with a balance of the right to receive their benefits under a defined contribution plan? I've always assumed it is the participant's sole responsibility to request the distribution.

It would be news to me if the administrator was required to provide notice within a specified timeframe. It seems even the IRS contradicts itself when saying that "Timing: A participant may receive information describing retirement or termination benefits at any time" in your first link. I'm interested to know how this pans out and what people consider required WRT notices to terminated employees.

The Auto-Enrollment idea is one that I'm sad I didn't think of. Another suggestion from a colleague is to setup class-based non-elective contributions. The company would simply establish their own internal policy (along the same lines of their proposed match) and we would allocate the NEC in that manner.

Plan is looking into establishing a match whereby only first year employees receive the match. On the employee's one year anniversary, they would no longer receive the proposed match. The hopes are that once they are signed up, they won't stop deferring just because the match is no longer provided. Assuming that I could write in an excluded class of, "Individuals employed for one year or more," would the plan be facing potential coverage issues? Any ideas are appreciated. Thanks!

If the formula is 50% up to 6% of deferrals, the $1,500 match is correct. $3,000 / $100,000 = 3%. 3%*50% = 1.5%. 1.5% * $100,000 = $1,500.

Anything on the safe harbor notice cannot change after it has been distributed. Basically, no 'material' amendments can be made to a safe harbor plan for a subsequent year after December 1. No, you could not exclude HCE if the notice has been distributed.

We've gone back and forth on this topic in-house and with clients. While I've read many conflicting answers, we've followed the assumption that "guaranteed payments" on a K-1 may be considered for 401k purposes, while other K-1 income is considered passive.

One of the brighter minds here will be able to elaborate, but I've always been under the impression that "once a participant, always a participant;" assuming there is no severance of employment. That, too, would be a plan-specific rule, as opposed to company.

The safe harbor profit sharing contributions will count towards the general test. Is the entire 10% already documented as being a safe harbor contribution? If so, for 2012 and beyond you may wish to reduce it to 3% and provide 7% as a discretionary, vested contribution. Both will count toward the general test in the same manner.

I just want to get others thoughts/processes on what you do when a client never submits employee census data for a plan year. Do you just send out a non-compliance letter, file the 5500 based on the information you have, and leave it at that? Do you continue to request the data until it's received (even if that is years down the road)? Do you take the drastic step of terminating the business relationship with that client to CYA?

I'm sorry, but which item are you questioning -- the "facts and circumstances" reasons, or the IRS' safe harbor reasons? FWIW - we only allow hardships based on the IRS' pre-defined reasons.

Was the recordkeeper the custodian of the assets? If not, then there should be a company that is still holding those funds -- find out where the investments were held/what account checks were issued from from the company prior to the transfer.

We used to just forfeit it, but then realized how much we were losing each year in revenue by doing so. We now process the distribution entirely as a fee.

I've been looking for the answer to this question for a long time. I think what I found is that the excess funds would need to be considered as discretionary contributions and tested, as such. Another correction option that I found that may be allowable is to calculate gains/losses and remove the total from the account as a "forfeiture" of sorts. For what it's worth, we implemented neither of these changes and took the approach of "Let's help them/hope they fix it going forward."

We are the TPA for the plan in question. I have searched for corrections to this scenario below, but my search terms are poor or this questions hasn't been posed before. The distribution occurred in the 2010 plan year and was noticed by us in 2011. The Plan Trustee authorized a direct distribution for an employee who was not eligible for In-Service Distribution (let's say, August 2010). This distribution was processed directly with the custodian and we were unaware of it. The participant terminated employment a few months after he took the distribution (termed in Nov 2010). When performing 2010 testing, we (the TPA) realized that the distribution was made prior to the distributable event and no taxes were withheld. According to the IRS correction method, the participant has to return the distribution back to the plan (even though he'd simply re-distribute the funds immediately). However, the participant is no longer with the company. Should the TPA just issue a 1099R showing a taxable distribution, or are there any penalties/excise taxes involved in this case. Would the 1099 be for the 2010 tax year even though it is issued well after the deadline? Any advice on how to correctly account for this would be appreciated. Please let me know if any additional facts would be helpful.

The answer to your questions is plan-specific and should be outlined in the provisions of the plan. You can make definition of compensation for safe harbor contribution purposes to only include compensation from the date of entry.

According to this chart: http://www.irs.gov/pub/irs-tege/rollover_chart.pdf you are allowed to roll a 401k into a SEP IRA account. Your wife can convert her 401k into a Roth and have it rolled into her Roth conversion account. Obviously, she would need to pay taxes on the converted amounts.

I'm not positive about it, but I believe that because in-service distributions are protected benefits that the ability to take an inservice distribution from a rollover also falls under the protected benefits category. This is with the additional presumption that many individuals may not have rolled in the funds if there wasn't a provision allowing them to roll-out.

I'm not sure of the deadline, but I think if it's the first RMD they have until April to take it for the prior year. Anyhow, the cost is a penalty equal to 50% of the amount of the RMD.

You're correct. We've had a similar question come up: Does vesting apply to funds, or the participant? Or, do funds contributed in 2008 vest according to the '08 schedule, then funds deposited in '10 vest according to a new schedule. The answer we found is that a participant retains their vesting schedule for the life of their participation in a plan. So if someone became eligible under an immediately 100% vesting schedule, then they will retain a 100% vested status for all past and future contributions. A new schedule will only apply to employees who became eligible for the plan after the new schedule took effect. Hopefully I'm right on this, because we spent a lot of time checking to make sure we had the right answer.

Depending on the type of account (pooled vs. individual accounts) that the trust is held in, it may be necessary to request an EIN for the trust of a retirement plan. Often times, pooled accounts have one EIN for multiple plans. Non-pooled retirement plan trusts generally have their own EIN.

This place seems to have done some extensive surveying http://www.psca.org/PUBLICATIONS/SurveysDa...77/Default.aspx

Subject to the limitations of the plan document, all employees (HCE & NHCE alike) should be able to defer 100% of their compensation related to paydates up to 12/31/2010, up to the IRS limitations. They cannot go back and defer from prior payrolls, though, because the withholding must come through payroll.

I've noticed that the deferral limits and the comp. limits always seem to be outside of the range of a full safe harbor match. For example, if you're using the basic safe harbor match, 16,500/.05 would be $330,000 comp, so anything over 16,500 could not be matched A match of 6% max out at $275,000 comp. I think that's why documents wouldn't specify either way, because the catch-up portion would never need to be matched since it would always be out of range of the maximum compensation.

Could the lost earnings be funded by forfeitures if the plan allows forfeitures to reduce all employer contributions (in addition to administrative expenses)?