CLE401kGuy

Update on this topic.... The client has agreed to pay out the participant, the participant is someone the employer remembers - we all agree that the dollars were returned to the employer as part of the termination process as directed by the IRS... The previous answer regarding opening an account in the name of the plan sheds some light on the direction we most likely should take next.... What should be the name on the account that payment is made to the participant - open an account in the name of the plan officially, provide distribution election forms (including options to take lump sum, rollover) and then payout the individual and 1099 him in January? is there specific direction in the code that outlines process... since the IRS gave direction on what to do - it appears that the code itself may not give me the exact answer, but perhaps there is other language out there that I can apply to this situation - again, any thoughts are welcome....

Participant terminates but had a series of in-service distributions during the course of his / her participation in the plan - so when he or she becomes a prior year terminee and no longer has his / her balance included in the test - are the in-service distributions that happened within the past 5 years also disregarded - logic would say yes... is that true? Thanks

Profit Sharing plan terminated in the 80's - Form SSA filed at the time indicated a benefit for a participant who went missing - the plan later terminated.... during the course of the termination IRS permitted the balance to revert to the employer (or so it is believed) - Now because of SSA sending the participant of notice of a possible benefit, the participant is making his claim for the benefit - can someone point me in the direction of the rules to go about paying this participant - I've tried searching in the ERISA Outline Book, but am only coming up with info on what do when someone goes missing as opposed to restoring their benefit - is interest applied to the benefit in the case of a terminated plan or are there outlined steps of how to proceed... just not able to put my fingers on it - any help would be appreciated, thanks

i agree with that... the boss though wants to say "We give you your document services free!" - That's slightly exagerrated but along the lines of the goal - i suggested adding the plan doc language to a fee that remains which I think better 'solves' what we need to do according to the regs... and thanks for the quick response

Currently the TPA's plan document legal fees are being paid separately by plan sponsors - with some of these legal fees being paid by the plan (non-elective plan doc work) - so they are disclosed on 408b2, 404a5 disclosures... If a TPA is looking to provide this service for "free" - how is that handled for 408b2, 404a5 disclosures? My understanding is that firms cannot 'give away' services - but if there is no fee, how would that be communicated - are others putting "zero" fees into disclosures or would the TPA need to list under services for plan administration (which will maintain a base + per participant charge) the plan document services rolling up there... No free lunch!

The client adds in plan roth convesions... then a participant who is 100% vested in all sources elects to convert her entire account balance under the roth conversion rules... if the TPA is doing the recordkeeping in-house - what sources should be set up? - Should each established pre-tax source then have a corresponding Roth conversion source? - i.e.: Pre Tax Elective ---> Roth Conversion Elective Pre Tax Employer PS ----> Roth Conversion PS Pre Tax Match ----> Roth Conversion Match or can all sources move into 1 Roth rollover source - I'd think no since you wouldn't want to mix any elective with any employer source regardless of whether it is pre-tax or Roth Conversion...

Client has opted for Safe Harbor match in his plan... client also prefers that match be calculated on a per pay basis - each pay date a self contained calculation period... Is this possible?

Loans from the 401k plan must be permitted on a reasonably equivalent basis... can the loan provision be temporarily relaxed for perhaps a period of 30 days and then "changed back" here's the story: Valued NHCE needs to get a loan to make a car purchase Plan only permits hardship loans Sponsor wants to give the car loan to just this one NHCE Based on reasonably equivalent rules - the plan could / would be amended to temporarily allow the loan for anyone who needs a 'car loan' for the 30 day period - then amended back to require hardship Does that seem kosher? (not what I'd recommend but is it ok within the framework of the rules)

Agree with GMK - these changes are not snap decisions - I'm actually somewhat shocked by Peter's response - a fund needs to be changed when it needs to be changed - an array of circumstances can lead to a fund change - style drift, manager change, less expensive share class, performance issues - I imagine, like our firm, most firms rely on some kind of watch & alert system that triggers when a fund should be changed - changes occur when they need to occur -when I see a plan that has had no fund changes for many years, I'd wonder if anyone was even keeping an eye on the investment menu at all... As for these disclosures, my point is the cost and the audience - these disclosures and notices get sent to all eligible so hundreds or sometimes thousands receive a communication about which they themselves have no vested interest and they ignore it... Also, bear in mind, the plan sponsor is permitted to pay the cost of making the disclosure from the plan - so when a plan's fund needs to be changed, the benefit for changing could end up being nullified by the cost to the plan.. just saying from my own personal 404a5 experience, these rules need some tweaking from what they are today...

Now that we're somewhat down the road in 404a5 fee disclosure requirements is anyone aware of any push from ASPPA or any other organization to question or otherwise confront the requirements of this rule? It's becoming a bear to live with especially as an investment provider that is seeking to maintain a strong core menu for the 401k plans it manages. Anytime there's a change to the menu, there are 30 day notices to provide and 404a5 disclosures to update going to an audience that is just not reading or understanding the material. I'm all for full disclosure to participants but the time and cost here don't seem to equal up to the benefit of making these disclosures. Any comments or chiming in appreciated!

Quick post to see if people agree with my viewpoint here: 1) The plan sponsor wishes to replace 3 funds in the 401k plan because a new share class with lower expenses is available 2) The plan has 6000 total participants but only 550 have balances 3) 404a5 requires that the 6000 participants receive the 30 day notice indicating the change 4) Once the change occurs no follow up with a fully updated 404a5 disclosure is required (outside of when the 12 month period ends from when we last sent a full disclosure to all 6000 people) So - to minimize the cost of providing all these notices and disclosures would we want to time the fund change and 30 day notice to when the 12 month period is up to resend the full 404a5 disclosures (which will actually not reference the change in the 30 day notice because it hasn't happened yet). We are also tying to when we send the Summary Annual Report which goes to the same audience. 3 Birds, 1 Stone - Right? The quandary, you have a fund that should be replaced for a better fund immediately, but the cost of providing the 30 day notice is prohibitive on a plan with many more total participants than participants with balances. Seems like taking the risk of not sending the 30 day notice to all 6000, outweighs waiting to make the change.

In which case, the dermatology practice just adopts the current plan and we aggregate everyone together.... If the derm practice opened it's own plan, I'd have to aggregate the 2 plans together anyway so we'd essentially be in the same place I appreciate the feedback

Here are answers to those questions 1) They live in Ohio which is not a community property state (Ohio is a marital property state) 2) They have a 5 year old daughter

Dr. X has a 401k plan - he's the 100% owner of his practice (he's an eye doctor) and has had his plan for a good 10 years Dr. X's wife is also a Dr. - she has started her own practice (she's a dermatologist) - their practices are entirely separate except that the docs are each 50% owners of the derm practice. They would like to have the derm practice adopt the eye practice's 401k plan to contain cost (plan doc, investment platform, etc) - Is this permissible? and then do I have some sort of MEP that requires me to do any special work? Based on ownership, they are not a controlled group (not more than 50% identical ownership) Clearly, a separate 401k plan could be set up for the derm practice since the derm and eye practice's are not a controlled group. Thanks for your help anyone - it's always appreciated

Are ADP, ACP refunds considered in-service distributions for 5 year look back purposes - seems obvious that they would be, but as I'm looking how the recordkeeper shows the refund in their system (as a negative contribution and the earnings offsetting the total earnings for the year) - It made me wonder - ERISA outline book uses hardship withdrawal as an example of an in-service but no others (unless i didn't read far enough)....

Plan permits entry after 1 month of service - no age requirement - entry dates are 1st of each month I'm using the carve out method to do 401k testing - removing all those not meeting statutory eligibility Through an asset sale effective 12/31/12 - the plan sponsor acquired an entity - it has a couple hundred employees many who have been with the entity for many years The employees of the acquired entity are eligible to participate in the purchasing employers 401k plan effective 1/1/13 The plan sponsor wishes to recognize service with the prior employer for vesting Question - can I carve these people out of the ADP test since they became employees 12/31/12 despite the employer permitting them entry at 1/1/13 and giving vesting service?. Thanks

Facts: Partnership of Doctors - not entirely clear on how they are partners but each has his / her own SEP. There are 2-3 individuals considered to be "shared staff." They are paid by the 'parntership.' In 2013, the shared staff went from being paid by 1099 to W-2. 1) Can the docs continue to maintain their individual SEP's - I believe the answer here is no. 2) Do the shared staff people need to be covered - the answer would be YES Could they establish a new SEP that covers all the docs in the partnership and the staff? If they are a partnership in the literal sense, they could not have a SEP - only an employer and not a partnership can set up a SEP. SEP is murky for me - I'd think a straightforward profit sharing plan would make more sense all the way around.

It's a related rollover - so the client had a MP plan, terminated it and balances were rolled into the sponsors 401k PS Plan - so distribution is permitted at NRA from the original MP plan it appears

401(k) Profit Sharing plan has Money Purchase related rollover dollars in it.... It no longer requires J & S annuity - but the MP rollover piece still retains that requirement from the transferring plan (i.e. the MP) - so you'd require spousal consent... Also, if the 401(k) PS permits in-service at 59 1/2 is the MP rollover piece precluded until either age 62 or the NRA in the plan... I'm looking up the rules, but not putting my finger on it! Thanks

Participants in the plan are eligible upon hire. An individual's start date is 12/30/2013. The participant will have no W-2 wages for 2013 since the hours worked were after the employer submitted his last hourly payroll for 2013 to the payroll provider. The hours worked will fall into the first pay in 2014. So despite the entry date, would the person receive TH minimum for pay earned on 12/30 and 12/31? My thought is no since the document states that compensation is defined as compensation for a Plan Year for which the Employer is required to furnish the Participant ... Form W-2 - I'll have no 2013 W-2 for this individual, therefore no pay. Any others have different thoughts?

Participant's 4% election was stopped in the plan sponsor's payroll system 12/31/2009 - this was done in error. In 2013, the participant realized that she was not having 401k withheld from her paycheck - so she's missed 4 years of elective... Correction is 1/2 the elective as a QNEC + missed match + earnings Anyone know of any limit of time that we need to go back here - from my viewpoint, it's the full history so we need to calculate 4% on all wages from 2010 to 2013 - determine missed match, half the elective missed is QNEC and fund with earnings

i'm looking at 408b2 on CB, DB plans - so no 404a5 is required - we would have for instance investment advisory fees, plan administration and distribution processing fees that may be paid out of the plan which would need to be disclosed - since we act as the financial advisor as well as the TPA we have a full disclosure of all fees and I'm wondering if I really need to list the mutual funds within the 408b2 disclosure - my thought is that I don't need to do that - and only list our administrative and advisory fees... Thanks! I appreciate the quick response

For DB / CB plan 408b2 disclosures - do the mutual funds need to be listed in the 408b2 disclosure with net expense ratio, 12b-1, etc.? - we have been including the current funds in which the plan is invested in our 408b2's, but since these are not directed plans and thus there are no designated investment alternatives, i don't think we need to list the funds out... thanks!

Scenario: Participant does $15,000 401k in calendar year 2013. Participant is over age 50. Participant receives PS of $41,500. In the ADP test, I will use $9,500 for the elective for this participant since total annual additions will be $56,500 for him / her meaning $5,500 of the $15k elective has to be catch-up. Agreement? Any thoughts?

Is any type of notice required to participants in a plan that has simply an ACA? I believe the answer is no and notice requirement only applies to EACA and QACA per IRS website Under just an ACA, can a participant request refund of their elective within the first 90 days or is that just under an EACA? It appears this is just under an EACA (and the 10% early withdrawal penalty does not apply). Can the participant request a distribution of elective in the first 90 days under an ACA at all? My thought would be, No, their funds have to stay in the plan until there is a distributable event. Thanks!