kevind2010

I have seen some variations of this topic, but not my specific question. I have a client that is a partnership. The partners receive draws (at same time as the other employees' pay period) of which they each elect to defer a flat dollar of each draw. No problems there. The plan also has a discretionary match determined per pay. They calculate the match off the draw amount for the partners which I understand isn't technically "compensation". Each of the partners' actual plan compensation at year end (based off their K-1 self-employed income) is higher than their total draws for the year. So theoretically they could have received more match. Are they REQUIRED to do a true-up depositing the additional funds or are they permitted to just leave what was deposited throughout the year? I know if they deferred or match TOO MUCH, that would have to be corrected. But I wasn't sure about the other way around - if it was truly required to deposit additional money. In this particular instance, the partners would prefer not to deposit the extra $ to their own accounts.

I have a situation where a couple of employees terminated 2-3 days prior to their actual entry date. The plan defines compensation to include post-severance compensation. These employees' final paycheck was paid after what would have been their entry date. Since the pay date fell after their entry date, the client withheld 401(k) on the final paychecks from these employees either because the employee made an affirmative election, or they did not opt out of their auto enroll. Was the client wrong for doing this? (i.e., would these be considered ineligible deferrals?).

I imagine this question must have come up before, but I cannot seem to find an answer. Plan passes ADP testing (by virtue of reclassifying Excess Contributions as Catch-up), but plan also fails ACP testing (document has fixed match calculated annually). Document does not have verbiage to reduce match to HCE's in order to pass the ACP testing. The match will not actually be deposited until after March 15th. Do I have to wait until after it's deposited to process the refund - hence the client incurring the 10% penalty?? It's a fixed match, so they definitely have to and will be funding the match. It's accrued in each employee's account balance as of 12/31/14, so does that make it part of the participant's account balance to the extent we can refund it out of the participant's non-accrued money?

So we have a plan that currently states if a terminated participant's vested balance is under $5k, they can take the withdrawal immediately. If over $5k, they can't take it until they've incurred 1 Break-In-Service. They want to change the provisions to say only terminated people with vested balances under $1k can take their withdrawal immediately. If over $1k, they have to wait until the close of the first full year that they've been credited with less than 500 work hours (i.e., exclude vacation time and/or sick time hours that were paid)...so not a true "Break-In-Service" by definition. Does anyone see any issues with making such a change? Could any of this constitute a removal of a protected benefit??

Say a participant takes maximum loan of 50% of their vested balance. A few months later, they request an in-service withdrawal having met the plan's age 59 1/2 requirement. The investment provider is limiting the participant's withdrawal amount such that their remaining balance after the withdrawal is still equal to the remaining outstanding loan balance, stating the participant must maintain the collateral on the existing loan balance. We do not agree with this. The 50% limit should only apply the day the loan is originally requested. A participant should be able to take an in-service withdrawal assuming they have met the plan requirements in any amount that they want, regardless of their current loan balance. Does anyone agree/disagree?

Can someone confirm if this is true? A 401(k) plan that also has company match allows hardship withdrawals from any money type provided that the participant is 100% vested. At my previous employer, we operated such that if the hardship amount was withdrawn entirely from the employer money source, then the 6 month deferral suspension does not need to be enforced and the participant is allowed to continue deferring. I tried researching this and can't seem to find any guidance which has me second guessing the process at my old company. Any insight is greatly appreciated!

I found what the penalties are for a late 1099-R, but I can't seem to find to who or where you pay them. Does anyone have any idea? We have a client with self-directed brokerage accounts. An employee withdrew some money without notifying anyone, so no 1099-R was done. Maybe it's just an issue of filing the 1099-R and waiting to receive the penalty notification? That would seem a little odd to me, because most other IRS corrective processes require you to be proactive on paying.

We have a client that has a discretionary profit sharing provision which allocates said profit sharing to any employee that was eligible during the year, regardless of hours, employment, etc. They would like to add a 1,000 hour requirement as well as a last day of employment requirement. Can this be amended during the middle of the plan year? I understand that typically a discretionary amendment just has to be adopted before the end of the year. In this particular instance however, my concern is taking away an accrued benefit since they are trying to be more restrictive. i.e., an employee that terminates previously would have received a contribution, while under the new provisions they would not...even though the contribution is discretionary and they may decide not to even make a contribution at the end of the year. Does anyone have any insight on this?

I figured I may have been reading too much into it. Thanks!

Does anyone know if it's ok to have a Multiple Employer Plan where one non-related participating employer allows participants the option of Self-Directed Brokerage accounts while the other participating employers do not give this option to employees? If I understand, an MEP is treated as a single employer for eligibility, exclusive benefit rule, vesting, and Section 415 limits. To my knowledge, allowing SDBA's for only employees of certain employers wouldn't violate any of these. Am I correct or perhaps overlooking something? Any input is appreciated!

Can someone clarify the notice requirements for ACA and EACA plans (i.e., who gets the notices)? It's my understanding that annual notices must be provided correct? I thought the regs say to anyone covered by the ACA or EACA should receive the annual notice. I get that newly eligible employees have to be notified. But for ongoing participants, does "anyone covered by the ACA or EACA" mean all eligible participants in the plan or just those that were automatically enrolled? Either way it seems redundant and a little silly to continuously notify participants annually once they've already been enrolled (whether voluntarily or automatcially) and provided the information when they first entered the plan, no?? Maybe it's just me.

I'm not sure I fully understand the safe harbor hardship reason that allows withdrawals to pay for expenses for the repair of damage to the Participant's principal residence that would qualify for the casualty deduction under Code Section 165. I tried reading the code, but was hoping someone could explain in a more understandable way. A participant that has flood damage to their basement, but no flood insurance - would that be considered a hardship for which they could withdraw? Code section 165 talks about federally declared disasters. Must the residence be located in a disaster area or can anyone who incurs a bad rain storm that results in a flooded basement request a hardship? Any clarification is appreciated. Thanks!

Thank you all for the input and insight. Very helpful! I agree, that it is a little bit silly for the employer to now have to correct nearly a decade worth of missed deferrals if the employee had not noticed it all that time. jpod - the QNEC is a little under $11k not having adjusted for earnings yet!

One of our clients discovered a completed employee deferral election for an employee that was filled out way back in 2002. Somehow this was over looked by both the plan sponsor and employee and money has never been withheld from the employee's paycheck. I understand the calculation of the QNEC in order to fix this error, but my question is does anyone know whether this can this be fixed via self correction (SCP) or must they file through the VCP since this dates back more than 2 years? Thank you for any insight!

If you amend a plan to exclude HCE's from receiving Davis Bacon/Prevailing Wage contributions, is there any limitation in amending the plan back to include the HCE's in the DB/PW contributions again or vice versa? In other words, can you turn it on and off like a light switch at will via amendment to include/exclude HCE's from DB/PW contributions?