RPP2001

Thank you all. This is helpful, glad to see I didn't miss guidance on this, although, it would have been nice to have it. We'll proceed with a blend of the wordings you have suggested.

For plans that are MEPs because the employers are related in a way but do not fit together as an affiliated service group or controlled group, what wording should be used for the blank on the new MEP Schedule in Part I1(d)? Derrin Watson has described these employers as "kissing cousins" and of course, we wouldn't use that unofficial terminology, but, we want to make sure to use appropriate wording. What is everyone else using? I do believe it at least needs to mention "defined contribution plan". Thank you.

Thanks for the feedback.

A company has remote employees in a state where that state has a state mandated retirement plan but the employer itself is domiciled in a state that does not have a state mandated retirement plan requirement. If the employer does not provide a retirement plan of its own in the private marketplace and if it does not want to start one, does that mean the employer has to work with the state plan for those applicable remote employees?

Thanks all, we figured the only solution was indeed starting a new plan and doing the merger and handling the reporting/filings for both plans. I still don't understand why the SECURE Act wouldn't permit just retroactively amending the existing plan to add the feature. We end in the same place, except the client wouldn't have all these filing and reporting requirements and steps (and, not to mention our associated fees) for now two plans between the two years. We come across quite a few plans, unfortunately, that we takeover to handle the work for the prior year that do not have a profit sharing feature that would otherwise benefit the client.

I have a client that would like to make a profit sharing contribution by her 2021 extended tax filing deadline of 9/15/22 for the 2021 plan year. We can get the calculation done, but, the existing 401(k) plan does not currently offer profit sharing. Is it permitted under the SECURE Act to retroactively add a profit sharing feature to an existing 401(k) plan for a prior year? This is not starting a brand new qualified plan (such as profit sharing or cash balance) retroactively (which is pretty clear in the SECURE Act as acceptable) but instead adding the profit sharing feature to an existing 401(k) plan. As a side note, if it matters for context, this is a solo plan (husband and wife). Thank you.

Wild question. Does anyone have a sample spreadsheet that would calculate the actual earnings (based on plugged data such as plan earnings rates for the different periods, late contribution amounts, etc.) that they could share? Or, how are most people who are using the self correction method, but, not the DOL calculator handling the actual earnings calculations?

If an employer begins to pay the related 403(b) fees, does that employer involvement cause the plan to fall under ERISA status to shift the plan from non-ERSIA 403(b) to ERISA 403(b)?

Thank you John. Also, I assume having after-tax contributions deposited in a safe harbor plan does not kick them out of top heavy minimum exempt status, correct?

Correct, they are the traditional employee after-tax contributions, not Roth 401(k) deferrals.

A safe harbor plan wants to allow for employee after-tax contributions. The ADP safe harbor match is enhanced at 100% up to 6%. Also, the plan is top heavy. Two questions: 1. The plan must perform the ACP test with respect to the employee after-tax contributions only? Or, can you include the ADP safe harbor 100% up to 6% match in the ACP test along with the employee after-tax contributions? 2. Is the plan deemed top heavy exempt since the only employer contribution is the safe harbor match of 100% up to 6% or does the existence of employee after-tax contributions trigger the minimum top heavy allocation requirements? The concern is that the only individuals expected to contribute the employee after-tax contributions are the key/HCEs. Thank you.

A plan allows only 1 loan outstanding at a time per participant and the minimum loan amount is $1,000. The plan allows refinances. A participant has $400 outstanding on their loan. If the participant wants to refinance their loan, but, the additional proceeds available due to their small account balance is only $700. Is this refinance permissible? I am not sure whether the 1,000 minimum amount should appy to only the additional proceeds amount ($700) or if it applies to what would be the new outstanding amount ($1,100 which is $400 + $700). Any help would be appreciated. Thank you.

Thank you very much. The ERISA Outline Book in Chapter 2, section VI, Part E in its Example of a 401(k) feature seemed to imply that anyone employee in this situation that does not have an account balance would not be considered a participant for Form 5500 purposes. But, I took a look at an FT William document and it appears that these employees would still be "in" as you say Tom - not only to be included in the participant count but even that they would be able to continue 401k contributions after the amendment.

A 2014 calendar year plan is amended to begin excluding a class of employees as of 7/1/14. If this occurs and there are employees that had previously met the plan's eligibility and entry requirements and were previously considered "participants" in the plan even though they do not have account balances, are they considered participants in the plan effective 7/1/14 due to the amendment? This plan requires an audit for 2014, but, depending on this answer, it may drop below 100 participants as of 1/1/15 which would allow the plan to not have an audit requirement for 2015. So, the question is definitely with regards to how a participant is defined for Form 5500 purposes.

We have a 401k plan participant that only has a life insurance policy as his plan asset and he is a 75 year old terminated employee. Is there an RMD requirement for this participant, and if so, how is it calculated, “distributed,” and taxed? Thank you in advance for any advice.

What exactly do you mean about "maybe no distribution of all the balance other than the loan?" So, is this sort of a grey area? Does the participant have any recourse if they were never made aware of this "practice" via the SPD or any other employee communication? What do you suppose the purpose is for the Loan Policy quote above? Further, the participant is not being permitted to choose which mutual fund investments are sold to satisfy the partial withdrawal request. The recordkeeper has the system programmed to only process as prorata across all of the mutual fund investments, which is not what the participant wants. Since this is a participant-directed plan, is the recordkeeper over stepping? Thank you.

A participant has terminated employment in August 2013, however, is still receiving severance pay through the end of 2013. The participant has an outstanding loan and loan repayments are being deducted from the severance pay. Plan allows for partial withdrawals and wants to just take a portion of their account as a cash withdrawal (not rollover), but, does not want loan to be offset and taxed at the time the partial withdrawal is taken. Loan is in good standing. Loan policy states the following: "An outstanding loan balance must be fully and immediately repaid upon death or termination of employment. However, if a Participant continues to receive severance pay from which loan repayments are made as payroll withholding, then solely for puposes of this Section (...which is the loan section...), a Participant will not be deemed to have a termination of employment until the first day after his last payment of such severance pay." As a note, the plan specifies that if the loan is not repaid by the end of the quarter following the quarter in which the participant terminates, the outstanding balance will be treated as a taxable distribution fromt eh plan. Can the participant take this partial withdrawal without having the loan offset and taxed at the same time? The participant wants the loan to be taxed in 2014 after the severance pay stops and the payroll deduction of the loan repayments also stops. Can the participant "choose" which investments they want to take in the partial distribution (i.e. leave the loan asset and withdraw only from the mutual fund investments)? Thank you for any input you may have.

We are counting 2 months of compensation because the PEO plan excludes compensation earned prior to plan entry. All employees entered on 11/1/12 when the Adoption Agreement become effective.

In a PEO multiple employer plan, we have an Adopter that started participation effective 11/1/12. They would like to make a profit sharing contribution for 2012. So, everyone's date of participation is 11/1/12. How is the 25% deduction limit applied? I know it will apply only the Adopter (not unrelated employers), however, do you count compensation earned prior to 11/1/12? If it matters, this Adopter has had its payroll done by the PEO throughout all of 2012. Thank you for any feedback!

A plan uses the basic safe harbor match formula calculated on a per pay period basis per the plan document. A participant’s annual compensation exceeds the $245,000 annual compensation limit (it is actually $901,000). The participant’s deferral percentage each pay period is less than 3% of his pay period compensation, therefore, he received a 100% match of his deferrals each pay period (he deferred $16,500 and received a match of $16,500). This results in a 6.73% match when divided by the $245,000 compensation limit. Is this calculation correct? It does not seem to be, but we haven’t been able to find anything that specifically states how to handle the $245,000 compensation limit with a per pay period match calculation.

I agree, applying these rules to the many possible scenarios sometimes creates non-logical results. It seems to me that your rehired employee in the MPP and subsequent 401(k)/PSP scenario would not have their service disregarded since the rule of parity woud not apply (because the employee was not previously a "participant" in the 401(k)/PSP). I still, though, am not saying that this makes sense logically!

In the IRS' answer that was posted, there is a reference of "vested amount" ("If there is a vested amount, prior service cannot be disregarded......"). What if the individual took a distribution of this vested amount after they terminated? Are we looking at the vested amount as of the day they terminated or the day they were rehired in order to determine if the rule of parity applies?

Great! This is what I found in EPCRS too, but, it was in the section for 415 corrections so I kept questioning myself. Anyways, my question is then, how do you calculate interest/earnings to tell the person to return the money? Thank you!

How much is the overpayment? I believe there is a section in Rev Proc 2008-50 (update to EPCRS) that says you do not have to correct if the total overpayment is $100 or less. (see Section 6.02(5)©). You do have to notify the participant that the amount is not eligible for a favorable tax treatment. The overpayment is $373. Also, since this was previously a distribution due to an ACP failure, it wasn't eligible for rollover anyways.

Plan has per payroll period matches for plan year 1/1/09 - 12/31/09. We ran the ACP test for this client and determined that an HCE needed a refund. The ACP refund was processed timely before 3/15/10. Later, client determines that they did not calculate the 2009 matches correctly and therefore corrects this by depositing the additional matches to the plan. Now, we are re-running the ACP test and we find that the HCE who previously received the refund now should have had a lower refund processed. What is the correction for this excess distribution?