Molly the cat

Depends upon the plan document being used. At least one of the "big" payroll companies that I know of has the 59-1/2 in their Basic Plan Document, so I doubt a change is allowed. The document I use does allow for it. But even if you lower the age or age/service for in-service distributions, Elective Deferrals, QNECs, QMACs and any portion of any Account used to satisfy the safe harbor requirements of Code sections 401(k)/(12) or 401(k)(13) and/or 401(m)(11) or 401(m)(12) aren't eligible for withdrawal until age 59-1/2 (or 59-1/2 and completes required service if age/service).

It's looking like you might be using the same document that I do. The way they wrote it leaves it so that if the participant requests the refund on 4/13, it can be processed. For whatever reason, they chose not to allow for a date the request needs to be made by into the AA like other documents. Three paragraphs earlier in the BPD is where it lists the 4/15 date. And if you are using the same document as I do, you see what I mean in that it isn't even discussed in the SPD what to do if a participant realizes they exceeded the limit - so you don't have that to refer the participant to. The only thing the SPD says is "Federal law also limits the amount you may elect to defer under this Plan and any other retirement plan permitting...."

They have a remedy if they request a distribution from one of the plans prior to the 4/15 402(g) refund date. I believe most prototype document providers allow for the participant to request (in writing) a refund from one of the plans when they've exceeded the limit. Some documents will have a date listed that the participant must request the refund by and the explanation of exceeding the limit when you are in more than one plan is included in the SPD. Not mine, but I've seen it in takeover documents. Under EPCRS when the limit is exceeded in just one plan and the refund is completed after the 4/15 due date - the participant is double taxed. They are taxed in the year that deferrals were withheld & then the year of distribution. I don't want to think any harder about this, but the fact that the participant didn't take the distribution timely and it's two unrelated plans may work in their favor. They will be taxed on the excess deferral for 2018, but the double taxation may not happen for years.

Appendix A. 04 of RP 2019-19 says ".04 Failure to distribute elective deferrals in excess of the § 402(g) limit (in contravention of § 401(a)(30)). " IRC Section 401(a)(30) provides that, for a plan to be qualified, it must provide that the amount of elective deferrals for each participant under all plans of the same employer not exceed the 402(g) limits Since this employee contributed to plans of two different employers, I don't think even EPCRS allows for this distribution - because neither Employer's plan exceeded any limit separately. Yes, the employee still has double taxation (but they would anyway), but the money stays in the plan.

Has anyone heard anything more on this subject? We forgot to enter the information in Line 4, so were not surprised when a late filing. We completed the section on the notice that mirrored Line 4 of form 5500-SF figuring that it was resolved and faxed it on 12/7/2018. On 3/18/2019, client received a final notice (after the shutdown was over). So, called the IRS and got the answer that AlbanyConsultant did that started this topic. We were told go back and amdne the 2016 Form 5500-SF as a final (changing participants and eoy balances to 0) and indicate that the assets transferred to the new 'plan' EIN. And explain on the late notice what happened. But she didn't indicate that a new Form 5500 needed to be filed for 2016 under the correct EIN - and if we did, it would be late. So, what is section 4 for? (pretty much a rhetorical question at this point) Has anyone else found a way to make this work. It doesn't make a lot of sense to do what AlbanyConsultant referred to as that means filing 2 Form 5500s proactively. Not easy to do in the software. Any insight would be helpful.

I am a TPA that received a request from a Financial Advisor asking if participant could get a 30 year principal residence loan (allowed in plan) under the following circumstances: Divorce situation - spouse doesn't want a QDRO, but he needs the money to pay his (ex?)spouse. Can't afford to keep his home unless he receives a loan or hardship distribution Hardships use the Safe Harbor criteria so states 'Costs directly related to the purchase of a principal residence for the Employee (excluding mortgage payments)'. The loan policy states that the loan can be for 30 years if proceeds are used to acquire a dwelling unit which within a reasonable time will be used as your principal residence. He already lives in the house, so I don't think he can do the 30 year loan as he is not acquiring the residence. So it appears that the maximum loan could be only 5 years. I don't see a way for him to do either a 30 year loan or a hardship distribution. Is that an accurate interpretation based upon this information? Looks like the spouse's lawyer is smarter is getting her the money without a QDRO so she doesn't have to pay taxes on it, but that's outside of my hands. I've asked for more information to see if there are any other options, such as distribution from Rollover source and/or in-service at age 59.5. But the Financial Advisor may have already looked into these options. Thank you in advance for any thoughts/options.

Update to original question. Investment company sent me an e-mail on 8/1/2017 indicating that the Schedule C information was available. Since 5558 extension had been filed, I let client and auditor know and completed the Schedule C and sent them an updated Draft 5500 with the Schedule C completed. At least my fear that it wouldn't be ready before 10/15/2017 didn't come to fruition.

One of the investment companies has been promising the Schedule C information for our calendar year audited plans since May 3. The last communication we received is that they suggested we go ahead and file for an extension. Even if we do that, I'm concerned that the information still won't be available in time to meet the 10/15/17 due date. They don't seem to be too concerned that the clients don't want to file an extension. Can you file the Schedule C with a notation that the information is not available? What other options are there?

Client would like to have one match formula for executives & office staff and a second match formula for warehouse staff. We are told that the match for the warehouse staff will be a better formula than the formula for executives & office staff (which is where we are told HCEs are). We don't have a breakdown by group yet. If we do this in the FT William document, we were told to use the discretionary match of D.6.a "A discretionary amount and percentage of Matched Employee Contributions". The Note in document states "The discretionary formula in D.6.a. must meet the nondiscrimination requirements regarding benefits, rights or features described in Treas. Reg. section 1.401(a)(4)-4. While I understand that if you have different match formulas for different groups of people, you must do BRF testing, I'm not convinced that it is o.k. to use a discretionary match option in the document. Using discretionary in the document should mean having one discretionary formula for everyone in the plan, shouldn't it? And, I understand that while the client is telling us that the match formula for the warehouse staff is better than the one for executives & office staff, we wouldn't know that until we actually saw what formulas they are thinking of using. And who knows what they would think up for the match formulas for future years. Anyone else run into a formula like this or have any idea where/if it will fit into the FT William document? I'm not looking forward to this at all as the BRF will be something we have to calculate manually as the testing software doesn't do that test for any match formulas. Any thoughts? (maybe I should say useful thoughts )

Reposted to correct 401(k) message board. Haven't posted in forever and didn't watch what I was doing Client would like to have one match formula for executives & office staff and a second match formula for warehouse staff. We are told that the match for the warehouse staff will be a better formula than the formula for executives & office staff (which is where we are told HCEs are). We don't have the breakdown by group yet. We were told that if we did this in the FT William document, we were to use the discretionary match of D.6.a "A discretionary amount and percentage of Matched Employee Contributions". The Note in document states "The discretionary formula in D.6a must meet the nondiscrimination requirements regarding benefits, right or features described in Treas. Reg. section 1.401(a)(4)-4.. While I understand that if you have different match formulas for different groups of people, you must do BRF testing, I'm not convinced that it is o.k. to use a discretionary match option in the document, Using that option should mean having one discretionary formula for everyone in the plan, shouldn't it? And, I understand that while the client is telling us that the match formula for the warehouse staff will be better than the executives & office staff, we wouldn't know that until we actually saw what formulas they are thinking of using. And who knows what they would think up for the match formulas for future years. Anyone else run into a formula like this or have any idea if it will fit into the FT William document? I'm not looking forward to allowing this at all as the BRF will be something that we have to calculate manually as the testing software doesn't do that test. Any thoughts? .

I bet the response from D & T that is indicated by Sheila may be answering from a testing stand point. Because you may limit the deferrals to 5% plus catch up, but that doesn't mean that it will still pass ADP at year end. I know that doesn't mean that they can't do catch up, but due to the complication of ADP testing with multiple HCEs, you may still have a failure. And because they are limiting deferrals, I am sure they are trying to avoid ADP refunds. But I agree, if document allows catch up, HCEs need to be allowed to do catch up if eligible and the chips fall where they may when testing is completed.

TPAMan is absolutely correct. If you don't handle it that way, your 5500 doesn't balance. The actual amount deposited to the plan is what the government is looking for on the 5500, not what is allocated to the participants.

Austin - I think we are mostly on the same page. That's why I indicated that you "could" have orphan match. As you stated, it does depend upon your match formula. But I disagree that you need have to have a rich match formula (matching above 6%) to cause this problem. Because if your NHCE's % is low, your HCEs % is also limited to a lower amount. If NHCEs are only at 2.73%, HCEs can only do 4.73% but did 6%, and match is up to 6%, you have orphan match---if your document says you don't match on catch up (which in my case is most of our documents). Those darn NHCEs just really need to contribute at a higher % !!!!

austin3515 - most of our documents did not select match on catch up. I don't remember the reason behind it at this time, but we did have a reason. Even if that reason makes no sense at this time---you know how it is sometimes.... MBCarey - I agree that this is very confusing. But if you simply failed ADP, you don't match on catch up, and some or all of the deferrals are reclassified as catch up, then you could have orphan match (aka ATM). As indicated, those amounts (including gains), are forfeited regardless of vesting. If you fail the ACP test, which your subject line is indicating, then it isn't all forfeited. Just the non-vested would be forfeited, but the vested would be refunded. However, you could run the ACP test first as Tom Poje indicated and maybe it would all end up being refunded (or more if only partially vested) and none would be orphan match. Our document says this, but to be honest, it may be hard to code in your software.