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A profit sharing plan allows for participant-directed investments only for rollover accounts, all other amounts are pooled. The only participants with ROs are a majority owner and an NHCE, and they have chosen to invest their RO balances in employer securities (company is privately held), which the plan allows (FT William doc). They now would like to sell their employer securities to a financial advisor who assists with the appraisal of the stock and were wondering if this could somehow be legally accomplished without it being considered a PT. If these participants elect to change their RO investments to cash and get out of the stock, could the plan then sell it to the FA? When the plan was first set up (but before this stock sale was considered) FT William indicated that transactions involving the stock would generally not be considered PTs because it is not publicly traded stock and, therefore, not qualifying employer securities. It seems that 407(d)(5) can be interpreted that way but I would like to be sure. I can't say I have ever come across such a situation and would appreciate any guidance offered.

I understand your position, Rosemary, but if I could play devil's advocate for a moment - it would seem that one would also would have to check the box 'yes' whenever a substantial owner takes a permitted participant loan to be consistent. Likewise, wouldn't it be generally acceptable to answer 'no' regarding the OP's transaction, as it's ultimately a permissible transaction (or PT exemption)? I don't think answering 'yes' is incorrect, but throwing up a red flag for the stock purchase (or for something as common as a participant loan) may be impractical compared to answering 'no' and then having to explain that the transaction was legal, should a random audit occur that questions the answer. Wouldn't it be very likely that no action would be taken once the auditor understands that it was not a PT and not claim that the 5500 was incorrectly prepared? What is the board's opinion on this?

The trustees for the plan mentioned above are now considering making a profit sharing contribution and, of course, the ABT would fail even if it was done on a comp-to-comp basis. In this scenario, would the PS allocations be considered nondiscriminatory if they also were done on a comp-to-comp basis? More than 70% of the NHCEs would benefit.

Is there a requirement that participants must receive a notice every quarter that states that info regarding their account may be provided to them via multiple statements (e.g., a statement from the investment company and one from the TPA)?

Thank you

A 401k plan has a safe harbor design using matching contributions. The plan is not top heavy. There are no profit sharing contributions but there are a small amount of forfeitures to be allocated to participants who work at least 1,000 hours and are employed at the end of the year. New comparability (with each participant as a group) is normally used to allocate the forfeitures, however, doing the average benefit test and including the deferrals and match produce results much worse than if the forfeitures were allocated on a comp-to-comp basis. If the forfeitures are allocated on a comp-to-comp basis, would the ABT still be needed to be done? Can this type of allocation be considered nondiscriminatory?

A 50-year-old participant had comp of $24,000 for the 2017 plan year, and he deferred all $24,000 of it. Since catch-up contributions can be disregarded for the 415 dollar limit, can the participant be allocated up to another $6,000 in employer contributions, bringing his annual addition to over 100% of comp?

The plan document can be drafted/amended to specify that the sole prop can be named as a predecessor employer, and that service with the predecessor employer will be recognized. This is an option that even most prototype docs offer.

One of several participants in a 401(k) plan is age 50+ and has compensation of $28,000. He is an HCE and defers $24,000. The company will be making a profit sharing contribution - will he be able to be allocated $10,000 as a PS contribution ($28,000 comp + $6,000 catch up - $24,000 deferral), or will he be limited to only a $4,000 contribution due to the 100% of comp 415 limitation?

A participant who has been taking required minimum distributions dies, her beneficiary takes one RMD on the deceased participant's benefit the following year and is then paid the remainder of the benefit the year after that - would that last payment be considered a lump sum distribution for purposes of line 3?

Thank, you, especially for the cite - I was incorrectly focusing on 401(a)(4).

Can catch-up contributions be excluded from the ABT?

Thank you all for your responses and for sharing your experiences.

A DB plan is undergoing an IRS audit for which the sponsor has assigned her longtime CPA to be the POA. We administer the plan and are working closely with the POA and have provided all of the items initially requested by the auditor. The auditor has since requested additional copies of prior year paperwork and although there's still ample time to provide this additional info, a DOL rep has contacted the POA to inform her that they will be requesting in writing copies of various plan items. The DOL rep also said that they will be calling to interview the sponsor, the TPA, and anyone else involved with the plan, and said that a conference call will not be acceptable - every conversation has to be a 1 on 1. I suppose anyone who is contacted should ask that any info requests be made in writing rather than answering questions on the phone. Has anyone ever had this type of experience? Since it's been quite a while since our last DOL audit, we're wondering whether this is how the DOL now conducts inquiries or whether they're overstepping their bounds. It's hard not to think this is overkill since the IRS hasn't yet finished its audit and the DOL is taking such a broad approach - is there anything that can be done to limit their scope, or at least establish a POA situation where they contact only one person? If the IRS has found a problem would they involve the DOL before sending out correspondence announcing their conclusion? All help is greatly appreciated.

Thank you all for the helpful perspectives. Regarding the late penalties for the 1099-R, all I could find in the IRS instructions was mention of a flat $100 fee per form if it's filed after the August 1st following the filing deadline for it. I, too, originally thought there would be daily penalties, but I guess that's not the case.

A participant defaulted on a loan and though it was a deemed distribution, a 1099-R was not filed to report it. He went on to repay the entire outstanding balance afterwards which I understand should be considered an after-tax amount within the plan. Are the repayments still considered to be after-tax amounts if the defaulted loan was not reported as a taxable event when it became a deemed distribution? If the repayments are to be treated as after-tax amounts, I presume that when it's time to distribute them that earnings on those amounts are taxable.

The financial institution who is the recordkeeper for a 401k plan with self-directed accounts replaced its money market fund with another MM fund. The amount involved was more than 5% of the plan's BOY assets but I am wondering whether this must be reported on line 4j, as it was an involuntary transaction on the employer's part. Also, if it must be reported, the required attachment for line 4j asks for the purchase and sale prices as well as the cost and the current value of the asset on the transaction date - are they not the same thing? Or is the purpose to find out whether the purchase or sale price differed from FMV? N/a in this case since share prices of both cash funds were always $1, but just curious about the redundancy.

Tom, I agree with your interpretation. Thank you for responding - that was very helpful.

A plan went through a partial plan termination where several participants had their partially-vested amounts become 100% vested. Some of these individuals have recently been rehired and the question is how to show their vesting - continue with their actual partially vested percentages using the plan's 2/20 vesting schedule, or must you maintain their vesting at 100% due to the partial termination? The doc has the standard rule of parity language regarding exclusion of certain vesting YOS for rehires but does not address this situation. Thanks in advance for all help.

We are a TPA firm who has subscribed to RIA's Pension & Benefits Week for many years. Several years ago we compared it to CCH's offering and felt that RIA was a little better as far as weekly newsletters go. Are there any similar publications that anyone can recommend?

We are the new TPA for an 80-life plan that requires cross testing. As the switch is happening in the middle of an admin cycle, we are to prepare the tax return and val showing contributions that were calculated by the old TPA and have already been deposited and allocated into self-directed accounts (we have the breakdown by participant). The problem is, the old TPA will not provide a copy of their cross testing analysis, saying that the client never receives this and it's not part of the admin work that is being paid for. The client also said that the testing has never been provided in past years and always just gets the tax return and the account valuation, and that there is nothing in writing that defines what the TPA must produce in such a situation. I described this situation to a fellow TPA who also said that her firm doesn't provide the cross testing analysis. This is a first for us, so we're curious as to whether this is the norm. Would most firms use the numbers generated by the old TPA and just caveat that they're not responsible for their validity if an audit occurs (since it would be difficult to key into the exact numbers by doing the calcs from scratch)?

I had my doubts when I first heard about this as I was under the impression that when a participant is due their first RMD and they delay it until the 4/1 of the following year that they must take a 2nd RMD in that same year by 12/31. It seems that most others who monitor this kind of stuff also believe this to be the case. However, it was recently pointed out that to me that 1.401(a)(9)-6©(1) says "Annuity payments must commence on or before the employee's required beginning date (within the meaning of A-2 of § 1.401(a)(9)-2). The first payment, which must be made on or before the employee's required beginning date, must be the payment which is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year." So it appears that if a participant must take their 1st RMD no later than 4/1/15 (i.e., the RBD), the second one wouldn't have to be taken until 12/31/16. I'm wondering what others' take on this is since so many of my colleagues haven't been using this approach.

Happy holidays y'all. This is the first time we've had a client make late quarterly payments and were wondering if an IRS audit would likely be forthcoming once they see line 20b on the SB being answered 'no' indicating such, along with the required attachment? I would guess it would be an easy target for the IRS - what is everyone's experience with this?

A top heavy PS plan uses several rate groups determined by levels of comp. The plan defines comp as only that paid while a participant, and since there are dual entry dates, some new participants must use 6-month comp for testing. If the 3% TH allocation based on a full year's comp for one such participant equals 5.5% of his 6-month comp, would everyone else in that individual's rate group have to then also receive 5.5% of their comp instead of the 5% gateway allocation? The document doesn't seem to address this possibility.

It very well may be. However, since the government's model SAR format is relatively easy to put together, why not just use it and be certain of its acceptability instead of taking a chance with the spreadsheet?