cpc0506

I have just learned that the annual Premium for the policy is $18,000 a year. Doesn't this amount become more than an incidental benefit?

I have a client who owns an insurance policy for an employee and wants the 401(k) plan to take possesion of the policy. Is this allowable (assuming the plan allows for insurance)? What would need to be done if this is even allowable? What steps must be taken to insure compliance?

Client is looking to add loans to its plan. The loan fees will be paid by the participants, i.e., set up and annual loan maintenance. Investment House is telling us that the loans cannot be made available until a new 404a5 notice is provided and this notice must be given 30 days before the change. Is this correct? Any thoughts?

What compensation would there be to prorate since the employees had no compensation beyond 6/30/12?

We have acquired a client who has split its employees into two plans in 2010 based on hire dates. Plan 001 is for all employees hired before 1/1/2007. Plan 002 is for all employees hired on or after 1/1/2007. Now Plan 002 is getting close to audit size and the client would like to amend the two plans effective 1/1/13 and change the hire dates for Plan 001 to cover employees hired before 01/01/2009 and Plan 002 for all employees hired on or after 1/1/2009. Is it legitimate to move employees around like this? Or does the client need to add a third plan that moves employees from Plan 002 to Plan 003? Does anyone have clients that have multiple plans to avoid plan audit? Has anyone moved employees between plans like this?

If you elect in the Adoption Agreement to define Eligible employees as all employees EXCEPT for part-time/seasonal employees, where part-time or seasonal employee is defined as an employee whos regularly scheduled service is less than 1000 hours of service in the relevant eligilbity computation period. Can you then go on and chose the conditions of eligiblity as 21 and 90 days of service? In order of heirarchy, does the definiton of eligible employee supercede the eligibility requirements? Thanks.

We had a client who changed eligibility from 1 year of service (1000 hours) to 90 consecutive days of service effective 12/1/2012. Entry dates stayed the same - quarterly entry dates 1/1, 4/1, 7/1 and 10/1. For all the employees who never meet the year of service but clearly have worked 90 consecutive days, do they enter 12/1/12 or have to wait until the next entry date which is 1/1/13? Can anyone provide guidance and documentation for such guidance? Thanks.

Client signs a document (on 10/26/12) effective 1/1/13. The plan is to provide a safe harbor 3% nonelective. This is a brand new plan. Client comes to us today and says that they will not be able to fund the 3% in 2013 and can they amend the plan to take the safe harbor out. Client provided the safe harbor notice to partcipants in early November, 2012. Can the plan be amended today effective 1/1/13 with no safe harbor provisions? Is the client obligated to make some contribution for 2013?

Are the HCE's getting the 3% safe harbor as well?

Right now there is no monetary penalty from the DOL or IRS. But a partcipant could sue the employer for failure to provide the notice.

Client came to us today, December 3rd and asked to be safe harbor for next year. Currently are a 401k plan with match. Client says December 1 fell on a Saturday, so we should be able to give a notice today, December 3rd and satisfy the notice requirement. Any thoughts?

Are you willing to share your 'programmed' spreadsheet?

My copy of the regs is slightly different. It says: We're planning on one disclosure each calendar year, with future disclosures provided when the 1st quarter statements go out. What date is associated with the Regs you mention?

An employee just confessed to our client that he has been using someone else’s last name and SSN. The client has contacted an attorney (not an ERISA attorney), who advised that the participant’s 401(k) account balance should be forfeited since he was employed under false means. We don’t feel that this is necessarily the correct resolution. The participant has a $26,000+ vested account balance and an outstanding loan (if that makes any difference). We’ve looked through all of the previous posts on this, most of which have to do with illegal aliens, and all of which are over 8 years old. There seems to be one camp that says the participant doesn’t get anything in the plan because of the fraudulent behavior in becoming employed. Others say that this has no real impact on the retirement plan because the individual worked for the compensation regardless of the SSN that it was under. Any new insight on this?

This same issue was discussed on our office. The regulations do state "at least once every 12 month period without regard to whether the plan operates on a calendar or fiscal year basis." So if a notice is made on August 30, 2012, the concensus was that the next notice must be provided by August 29, 2013. And the dates keep backing up. Does this really make sense?

Client has come to us. The client had a SEP and then dropped the SEP and added a Profit Sharing Plan. Has not filed any Form 5500s. They did not know they had to (their words). This I can fix using DFVC Program. There are also a number of missed RMD payments. How can this be corrected without penalty to affected participant?

Here is my scenario: Company A contracts with Company B as their EGTRRA document provider. Company A provides a partially completed Adoption Agreement to Client X. Client X completes the Adoption Agreement, signs it and returns it to Company A. Company A confirms that they did receive a signed copy of the Adoption Agreement. Here is the kicker: In the instruction letter to Client X, Company A tells the client to send the signed Adoption Agreement directly to Company B who will then generate the SPD. Well, it appears that Company B never received a copy of the signed Adoption Agreement so no SPD is generated. Client has come to us for assistance. Does the client have a valid EGTRRA document or not? I am still trying to find out who Client X paid to provide the document? The client is a bit 'green' and any time I ask a question, they get very nervous..... Any suggestions? Thanks.

How do I handle lost earnings?

I have a client (takeover from another TPA) who has established two plans. One is for employees hired prior to 1/1/07 and the other for employees hired 1/1/07 or later. It appears this was done to avoid audit. I have never seen this done. Is it okay? Both plans have the same provisions, even a new comparability profit sharing contribution. What has to be tested together? Thanks for your help.

Background: Client had a SEP. Changed to a Profit Sharing Plan effective 8/1/2005. Has not filed a Form 5500 as they were not aware that they needed to do so. We have been hired to complete all the delinquent Form 5500's. Intend to go through the DFVC Program. BUT, we have discovered that for 4 of the 6 plan years that are delinquent, the profit sharing contributon was not capped for the HCE's. Client was giving 10% (in all years affected) of compensation (no limit) to all employees. FYI, the profit sharing allocation is discretionary amount - pro-rata/ Since the amount was deducted on the Corporate Tax Returns for all those years, it is my suggestion that the client determine a "new percentage of comp" for profit sharing in the years affected that would generate the same taxable amount and re-allocate the profit sharing contribution (taking money FROM the HCE's and giving TO the NHCEs). Any thoughts? Any concerns with this method of correction? Are lost earnings required as well? Thanks

If the participants are NOT paying the charges, I do not believe that they have to be listed.

Can you clarify that you are referring to the participant initiated transaction charges and not the plan level/recordkeeping charges? Both. John Hancock did not include some plan level numbers that now have to be included as well as TPA fees for participant initiated transaction charges if John Hancock is not aware of these fees.

I listened to a John Hancock webinar and they indicated that the TPA were going to have to add the specific fee information to the John Hancock template. They are providing a Block of Business Report (excel file) which now has the fee information and the TPA needs to add for this first annual notice. The subsequent notice, John Hancock will include the information. More work for us TPAs. Also, we have learned that the American Funds notice has incorrect plan related information for about 75% of our clients and the notice is not editable. We are telling our clients to include a cover letter telling the participants as much and asking them to refer to their SPD for up-to-date plan specifications.

We are giving our clients instructing on e-delivery. I do believe that the safe harbor e-delivery method is a two step process. First email informs employee that the second email containing the disclosure is coming if they do not want to receive by email, they must affirmatively request a paper copy. Or something along those lines. And yes, the date is August 30th.

Hello. It is discovered that the client did not withhold salary deferral contribuitons for vacation pay period. Auditer has indicated that the client needs to make up for the missed deferrals and missed match that would have been attributable to the deferral. We have been asked to calculate the lost earnings. The auditer states "If missed salary deferrals are related to vacation pay received during the year, someone will need to review the payroll reports to determine the date on which the vacation pay was paid. If that is too time-consuming, a safe (easy) alternative would be to calculate lost earnings on all employee deferrals from the first day of the related year". Client would like to use this 'safe harbor' date. Can I get some others feedback on this? Also, do I need to calculate lost earnings on the Employer Match. The client usually paid the match to the accounts quarterly.