CLE401kGuy

Does anyone know the citation for where the code indicates that RMDs must continue to a former 5% owner if he or she had to start taking RMD's at 70 1/2 but have since divested themself of ownership?

If the Plan Sponsor specifically names the TPA in their retirement plan's plan document as the Plan Administrator for purposes of signing Form 5500, can we entirely avoid having the Plan Sponsor sign the 5500 or any authorizations to file at all? My hope is 'yes' and then we can modify our 5500 process to just provide a copy of the filing with the Plan Sponsor for their records and the SAR for them to distribute to their participants. Could this signing authority also extend to the SSA filing? As it stands now, we file 'on behalf' of the Plan Sponsor who signs the 5500 and signs authorization for our firm to file. I'd like to eliminate all of this back and forth, eliminate plan sponsors' signatures being out on EFAST2 and just streamline the entire process. I'm completely comfortable with our firm signing since we very closely monitor deposits, review in detail for late deposits, review participant census ongoing and the like. Anyone's POV on this and what they do would be greatly appreciated. Thank you,

For clarification - we're passing ABT on contributions and then passing rate groups on benefits - As long as we can interchange those from test to test, we're good!

The plan satisfy Average Benefits Testing on Allocations permitting us to use the lower threshold to pass rate groups. Rate groups then pass on benefits. Is it permissible to satisfy ABT on allocation rates and then satisfy rate group testing on benefits? This is how the question should have been posed initially.

The employer sponsors 2 retirement plans - one is a regular 401k and the other is a 457 Plan for which has no 5500 filing requirement - when filing the 5558 to extend the 12/31/2018 filing due 7/31/2019, the 401k was intended to be extended but the 457's plan name and number were used by mistake - is fixing this as simple as sending correspondence to the IRS in advance of them sending any late filing notice to bring the issue to their attention? On the IRS website, it addresses getting a late filing notice and at that point realizing incorrect incorrect info was entered on the 5558 and just responding to that late notice indicating your error... I'm figuring, it's always best to get in front of the issue as soon as we know about it and not wait for a late notice from IRS... and when / if we do get a late notice, being able to point to correspondence that brings the issue to their attention... anyone's thoughts would be greatly appreciated

A sponsor adopting an open MEP decided to start its own plan. So they gave notice to the MEP and the balances for the active participants were rolled into the sponsors new plan. Balances for terminated people were left in the MEP though. Should the balances for the terminated people have moved as well? Have another recent situation when the plan sponsor was acquired by another company and the acquired sponsor is transferring into the acquiring entity's plan. Again, do the balances for participants terminated prior to the acquisition move into the acquiring entity's plan?

Client instructs participants to make elective contribution changes in their payroll system. In error, the online elective contribution change feature was activated on the record-keeper's website. Several participants made elective contribution changes on the record-keeper's website despite instruction from the plan sponsor to only make changes in the payroll system. Does the sponsor need to recognize the changes on the record-keeper's website? Thanks in advance for anyone's thoughts on this!

Perfect, thanks much Tom!

FACTS Plan is top heavy Plan entry has immediate entry for 401k, 1 yr and age 21 for profit sharing source Plan is safe harbor Any participant who entered the plan immediately for 401k but did not yet meet the eligibility requirements for profit sharing and is not terminated is subject to receiving top heavy minimum. Is the top heavy minimum given to these individuals as safe harbor or profit sharing? Thanks

Plan acquired entities with 400 new participants during the course of 2018 - all hired 2/1/18 Plan is recognizing service from date of hire for the 400 new participants In 401k testing, I am excluding all those who do not meet statutory eligibility Do I count the participants I'm recognizing past service for in the non-excludable test It seems like I would not since their hire dates with the employer do not meet statutory eligibility regardless of the past service that is being recognized Thank you

A 401k plan converted from one investment product to another product with the same recordkeeper. A couple, but not all, funds in the plan's core lineup changed and the account number changed. Discovered that the notice to the participants announcing the change was not delivered. Is the fix to forward the notice now to communicate the change? What other correction would / should be made? Thank you I googled on the topic, but did not find this situation addressed in the 401k fix-it guide and no articles or citings came up regarding the specific topic....

Safe harbor match formula is 100% on the 1st 3% and 50% on the next 2% Match is calculated on a per pay basis Participants elective withholding is 5% Total Compensation is $286000 Retirement plan software matched participant 4% of each pay based on the match formula for a total of $11440 for the year But isn't the max match permitted for this person $10800 which is 4% of $270000 Pretty sure I need to forfeit $640 of match since participant was matched on wages over $270k, but the per pay basis for allocating the match is throwing me off Any thoughts on this would be welcome... Thanks

Thanks Luke - the total error despite going back to 2014 is only $2900 in over payments (elective flow is about $500k total each year) - there are no 415(c) issues or discrimination issues with HCEs (there is only 1 HCE in the group affected and he has one of the smaller overages) there is no match so that isn't an issue and the annual profit sharing was calculated off payroll records with the correct compensation by the TPA Thanks again for you thoughts on this - yes it is a weird one!

Situation: the payroll company was calculating elective withholding including unpaid time off which in turn has caused people’s deferral rates to be off. For example, if a participant worked 32 hours for the week, and then had 8 hours of unpaid vacation. the payroll company was taking 40 hours X $10 an hour X 5% to equal $20 of withholding. However, the participant was only paid $320 and correct withholding would have been $16. $20 of $320 of comp is actually 6.25% withheld, not 5%. So the withholding election was technically not followed based on what the person was actually paid. This has been happening since 2014. Since its unpaid vacation it's not huge $ wise but what correction is to be made.

Thanks for the quick response - that was what i was thinking would be correct - I appreciate it!

Plan is a 'definite' 3% safe harbor annually. HCE's are excluded from receiving the safe harbor contribution. Plan is 89% top heavy Compensation is recognized from date of participation Plan is allocating 3% safe harbor to NHCE's Plan is allocating 3% profit sharing to HCE's Question: I have one 'mid-year' entrant so the safe harbor is given on participation wages. Since the plan is also allocating 3% profit sharing to the HCE's, what am I required to give the mid-entrant? A. just the 3% safe harbor on participation wages, or B. 3% safe harbor on participation wages + 3% profit sharing on wages earned before plan entry (i.e. total of 3% contribution on full years wages Thanks!

Thanks Tom, If i have this wording in my plan documents, does it change things: (e) Ordering of Tests. The determination of the amount of Excess Aggregate Contributions with respect to any Plan Year shall be made after first determining the Excess Contributions, if any, to be treated as After-Tax Voluntary Contributions due to recharacterization for the Plan Year of any other qualified cash or deferred arrangement (as defined in Code 401(k)) maintained by the Employer that ends with or within the Plan Year. Is this relative to other plans that may be maintained by the Employer or is it as it seems to read to me - do your ADP test first, make any match adjustment related to that result if there is failure and then do ACP test...

Can someone clarify when match is forfeited vs when it is refunded when completing ADP and ACP testing? Scenario - plan matches 25% up to 8%. Independently both the ADP and ACP tests fail. We've historically completed ADP and ACP tests "simultaneously" and refunded the respective elective and match to HCE's after leveling. The permitted ADP for HCE's though falls below the 8% match cap so we're wondering if some match should be forfeited prior to running ACP testing. So when exactly does match forfeiture come into play when correcting failed ADP and ACP? In reading today, I came across ASPPA material indicating that non-vested match refund should be forfeited and that after both ADP and ACP are 'corrected' if any HCE's match % is greater than that of the NHCE's that portion should be forfeited. We are a Relius office and the refunds calculated by the system supports running both tests "simultaneously" and correcting each independently as opposed to running the ADP test, getting refunds and then determining if any match should be forfeited based on those refunds. This is a citing from another benefitslink posting that seems to support how we've historically been completing these tests: Posted March 14, 2007 If you have a failed ADP test and distribute deferrals, then you might have to forfeit match because te benefits rights and features rule clearly state you can't do that. 1.401(a)(4)-4(e)(3)(iii)(G). but those same rules also state that to determine if you have a violation, that the rate of match is determined AFTER corrections made under 1.401(m)-2(b)(1)(i) [which are excess aggregate contributions] we read further that (in fact the very first sentence of 1.401(m)-2(b)(3)(v)(B) Excess aggregate contributions are NOT considered when determining rate of match an individual received. so, based on that, I am indeed one of the folks that believes you can run the ACP test, correct a failed ACP test (as well as the ADP test) and then determine if you have to forfeit match due to a bad rate of match. in fact, I'd say the regs say you have to do that way. Any additional points of view or citations would be welcomed. Thank you

Client has approx. 5000 employees. There is very high turnover within the first 90 days of employment (about 40%). The client permits date of hire enrollment so 401(k) sign up happens during completion of new hire paperwork. QUESTION: Can automatic enrollment be added to the plan that such that participants become automatically enrolled first of the month after their 90th day of employment? Therefore, anyone who's made it through the first 90 days and hasn't completed a 401(k) election would then be automatically enrolled. Thanks!

Yes, after 2 years - found my answer on IRS.gov

Quick question: Can a SIMPLE IRA balance be rolled into a 401(k) balance?

Does anyone know of a good resource that gives detailed statistical data regarding participation in 401(k) plans - perhaps participation in micro market 401k plans vs. large market plans or 401k participation by industry - i.e. x% of participants on average in manufacturing make 401k contributions while y% of participants on average in medical make 401k contributions... it seems like these statistics s/b somewhere, but i'm just not unearthing them... i've checked our Bureau of Labor Statistics, DOL, PSCA (which has some but not quite the detail i was looking for) Any suggestions would be appreciated... trying to see how participation rates in the plans our firm manages stack up again national averages - but comparable ones.... not so generic that it's not really an apples to apples comparison Thank you!

Currently is there more protection for an individual to leave his / her account balance in a 401k plan than to move it to an IRA? My thought had been that it used to be the case where leaving balance in the plan gives additional protection, but is that still the case today? Anyone's points of view would be appreciated, Thanks

Theses participants have all severed employment - that assumption is true! thanks for the feedback

Plan started early 2000's and had elective and match only... match was suspended several years after the plan's effective date. Forfeitures of match instead of being used to reduce future match were allocated across participants resulting in many balances under $10 - some even below $1. Many of these are only 20% vested. Plan only has $150k in it. Any participant with a balance under $25 will have their balance 'eaten up' by the plan admin's processing fee. The plan sponsor never requested that the provider involuntarily cash out the small balances over time so the participant count has grown to 122. Yes, 122. Should someone whose balance will be eaten up by processing fee really be considered a participant?