ERISA1

Thanks Tom. I am seeing a consensus forming (on BenefitsLink and outside) that the Special Gateway ought not be required if a participant does not receive a benefit in either plan. If anyone has heard differently, I will appreciate it if you will add a reply to this topic.

Thanks Mike for noticing the critical omission of the word NOT. I have edited my June 8th post by inserting NOT in the last sentence of my third paragraph.

Others read the preambles differently. For example, Sal Tripodi's EOB, Chapter 9, Section IV, Part B, item 4a cites Treas. Reg. section 1.401(a)(4)-8(b)(1)(iv)(B) which requires Gateway only for those who Benefit. This exception doesn't fit in many cases because everyone must get an allocation in Top Heavy or Safe harbor non-elective contributions plans. However, non Top Heavy plans offer opportunities. The issue becomes more complicated when there's a combination DC/DB, because the term "benefitting" only applies to DC plans. In combos, the Special Gateway rules (under the -9 regulations) apply. While the terminology is different, I believe the concepts are the same. That is, a participant is counted as covered under a DB plan if she "accrues a benefit". The difference between (a) benefitting from an allocation under a DC plan, and (b) accruing a benefit under a DB plan is semantic only. Therefore, it seems the same exception should apply under the Special Gateway requirement. That is, if a participant does not accrue a benefit under either plan they should not be required to get a Special Gateway minimum. Thanks for any feedback.

Hi - I believe there is a difference between the conditions one can impose to receive a Gateway minimum in a standalone DC Plan versus conditions for Special Gateway (in combo DB/DC Plans). I believe the Special Gateway is more liberal because you cannot condition entitlement on whether or not an NHCE is "Benefitting" (within the meaning of 1.410(b)-3). If my impression is correct, there may be a need for different language in standalone DC's versus DC's that are part of a combo. I have attached a memo outlining the issues. I will greatly appreciate any feedback. Thanks. Q re Gateway Minimums in standalone DC plans versus DB-DC combos.pdf

I was glad to see Voluntary Contributions go by the wayside 20 years ago. Now, I have to re-learn the rules because of IRS Notice 2014- 54 and the incredible amount of press that is making clients feel like they are loosing out on the greatest opportunity since living trusts. I've been trying to do research in the ERISA Outline Book but cannot make any progress. This forum is f far more helpful. Can anyone tell me how/whether Voluntary Contributions fit into the 401(k) Safe Harbor rules? Thanks

We're looking at a potential takeover in which HCEs have been allowed to defer but none of the eligible NHCEs were offered the opportunity to defer. As a result, the NHCE's ADP is 0% Appendix A Section .05(2) of Rev Proc 2013-12 calls for a contribution equal to the "missed deferral opportunity"; defined as 50% of the actual deferral percentage. The employer can argue that the ADP is 0%, and therefore 50% of 0% is 0. However, in this case, the employer created the 0% ADP. It seems he should not be allowed to benefit from the wholesale exclusion What is a reliable correction under these facts? Should we assume there is a minimum 3% ADP? Your feedback is much appreciated.

Hi - Historically, we have delivered documents to our clients in hard copy binders. We want to switch to a digital vault. 1 Has anyone been working with vaults? What is your experiences? 2 Do you know of any service providers whose product is well suited to retirement plan administration? 3 Are using a secure system to send emails? Does that tie in to the vault? If not, can you recommend vendor? Thank you very much. Dave

We had a Safe Harbor 401(k) plan in 2013. During that year we adopted a Cash Balance plan. It had started with an eligibility window that brought in Employee "A". ("A" is not eligible for the 401(k) Plan in 2013 as of the date of this post.) Turns out, the plans cannot satisfy the Special Gateway requirement because "A" did not get a benefit in the 401(k) plan. The perfect solution would be to adopt a corrective amendment within 9.5 months admitting "A" into the 401(k) plan and giving him the same 7% as all others. Question: Would a corrective amendment that admits a new participant constitute an impermissible (mid-year) amendment of a Safe Harbor plan? I think it is permissible because it does not conflict with anything in the 2013 Safe Harbor Notice. It is also the kind of amendment that IRS says it would be inclined to permit (but to my knowledge, they have not yet expressly permitted). What do you think? Thank you very much.

I think we would all agree that if deferrals are withheld from back pay they be included in ADP/ACP tests. The only question is whether they should be tested as deferred in the year of deposit or the year to which the back pay relates. Given that the 415 regs require the comp to be counted "in the limitation year with respect to which the payments relate", it seems to me the deferrals must be included in the ADP/ACP tests for those years, and therefore, the tests must be re-run. Back pay will also would impact HCE determinations. Given that the compensation test is based on 415 compensation, it is possible that some employees will become HCEs in the year following the one with respect to which the award is made.

Our (Datair) document defaults to impose a 1 year marriage requirement before a spouse is deemed to be a "Spouse" for QJSA and QPSA consent requirements. We have some clients saying it is difficult to administer this; e.g., distribution paperwork asks 'Are you married'; not 'Have you been married for 1 Year'. The clients want us to amend their plans, but first, want to know whether the 1 Year rule is the common approach or not. I will greatly appreciate your responses as to your approach and your thoughts about how the industry in general draft their plans. Thanks.

Distributions were paid in March of 2013 with respect to (incorrectly calculated) Excess Deferrals for 2008. Why does time matter?

I am taking over a case in which the old TPA says the plan failed ADP and that Excess Deferrals were refunded more than 12 months after the year in which the test failed. They recommend client file VCP to correct late refund with a QNEC (or One-to-One). Here's the interesting part - The ADP test actually passed! (They omitted several HCEs who were not deferring.) The upshot; however, is that participants under age 59.5 received impermissible in-service distributions of deferrals. 1. Would you agree that this an operational violation which requires a VCP filing? 2. What correction should we propose? I'd like to allow employees to re-defer the distributions, but can I get a waiver of 402(g) limit and ADP test? (I doubt it.) Thanks.

I know this discussion is old, and frankly, I wish I wouldn't have to re-open it. However, I've got a potential client who will hire me if I can tell her whether disability payments made under an insurance policy, that is reported on W-2, to an employee who is classified as on leave; not terminated, can be excluded from compensation. I believe this kind of income is referred to as Section 104 compensation. The current document definitely includes it; however, the question is whether one can possibly draft a plan to exclude it? I have been reading the 415 and 414(s) regs and the ERISA Outline Book. They seem to indicate (but not clearly) that such disability income can be excluded from Compensation and still satisfy a Safe Harbor definition of compensation. The answer may revolve around whether the document defines 415 comp using the "SIMPLIFIED" definition of compensation allowed under 1.415-2(d)(10). Does anyone agree that excluding section 104 disability income can satisfy a safe harbor under in 415 and 414(s)? (Let's assume the document will be 'individually designed'.) If it's not a safe harbor, it is my impression that the definition will have to be tested under 414(s). This plan would not pass the test because, at present, the exclusion of 104 comp would only impact NHCEs. I don't want to give the prospect a response that could be (relatively easily proven wrong. Would you tell them such disability can be excluded? Thank you very much.

By "unrelated", I mean the employers are not members of a controlled or affiliated service group with each other. There is a very low level of common ownership. The motivating factor is to share investments without the need for a Common Trust. I understand that discrimination testing is perfored on a disagregated (separate plan) basis. However, my question is focused on 5500 disclosure. It seems fairly clear to me that under these circumstances the Plan is a multiple employer plan for reporting purposes; must the identity of the co-sponsor be disclosed? Thanks

In the case of a "Multiple Employer" Plan, must the unrelated co-sponsors be identified on Form 5500 filings? I seem to recall that you needed to attach additional first pages of 5500 for each co-sponsors; however, I cannot find that requirement in the current 5500 instruction. Am I correct in thinking the co-sponsor need not be identified? (Was there ever a requirement to do so?) Thanks very much. PS - This is a DC Plan, so there is no concern regarding Schedule SB.

Thanks for pointing out that we don't need to update investment performance. That means republishing can be as simple as redistributing the same package. The one client with whom we are discussing republishing is enthusiastic because it puts all of the other notices (e.g., EACA, QDIA, SH) on the same schedule. It's sad to think that the hassle of republishing the 404a-5 notice is small compared to the nonsense of having to distribute 4 or more updated notices every year. Nuts

Let's say an employer mails an automatic rollover notice by first class mail to a participant's last known address. The notice is not returned. Can the employer safely assume the employee is non-responsive, and therefore, rollover the benefit to an IRA? Or, should the employer take additional steps ("due dilligence") to prove that the participant received the notice? If additional steps must be taken to prove that a participant is NOT lost, what would you suggest? Certified Mail would provide proof only if you can confirm that the Participant signed the receipt. What if the Participant refuses to sign the receipt; how do you document that? Should you use a locator service to confirm you wrote to the correct address? I would suggest that due dilligence follow-up is required only if there evidence that the Participant is lost. That is, only if a first class letter is returned. Thanks

Thank you. Seems like, if you want to put the fee disclosure (for calendar year plans) on the same December 1 cycle as all other notices, you will have to re-publish the fee disclosure by December 1 of the same year.

Hi - Now that we've made it past the August 30, 2012 deadline, what is the due date for the next annual report under the 404(a)-5 Regs? Thanks

I've been working with CPS. Do you know of any other Head Hunter firms that specialize in the needs of TPAs? Thanks

Hi All - Thanks for your feedback and insights. I am learning, even as we correspond, that there are administrators available; but, they are not in active search mode and/or don't want to put their resumes out in the public realm. I always identify my firm by name on BenefitsLink ads - to assure applicants they are not applying to their current employer. I'm realizing; however, that our commuity is small. So, even if person is eager to speak, they might not want to get started by responding to a public ad. I am learning that (1) you've got to network and reach out to potential contacts instead of merely posting an ad and expecting candidates to come knocking; and (2) Recruiters offer value (at high price) because they are taking the time to network and reach out. I will still advertise on BenefitsLink; but I am taking supplemental steps. PS - If you know of any potential candidates in the Philadelphia area, I will greatly appreciate it if you will give me a call or suggest that they call me - in complete confidence. My number is 215-322-4202. Have a great day.

We have been looking for DC Administrators for our full service, non-producing TPA practice (which includes Balance Forward Plans). We have had a very hard time finding candidates with experience in this type of firm. We get lots of applications from people who've worked in very big firms such as Vanguard, ExpertPlan, etc. But very few from small, full service, firms. We've advertised repeatedly on BenefitsLink and Monster. We're considering using head-hunters, but their fees are very high for a small TPA. Do you have any insights into how to find Administrators? We used to be able to hire well-educated administrators straight out of the Philadelphia Institute for Paralegal Training; they had a certificate program in retirement plans. Where do they grow administrators now - and how can they be found? We are located in the Philadelphia suburb of Bucks County. If you, or anyone you know is a potential candidate, please check our ad - Law Offices of R. David Danziger. As mentioned in the ad, we are offering a referral fee. Thanks. Dave

Forgive the studipity of this question, but are 403(b)'s exempt from ADP testing?

Hi - I am picking up a plan that has (1) self directed investments for 401(k) accounts (at John Hancock); and (2) Trustee Directed ("pooled") investments for Profit Sharing Contributions. Participants may not elect to self-direct their profit sharing accounts. If the plan were entirely Trustee Directed, it would be exempt from Participant-level disclosure requirements. However, given that part of the plan is self-directed, does anyone know whether the pooled account becomes subject to participant disclosure? {Remember, participants DO NOT have a choice about investing in the pooled account. They cannot self direct profit sharing funds; and they cannot elect to invest 401(k) accounts in the pooled profit sharing account.} I'm thinking the pooled account is not 'Designated Investment Alternative' (DIA), but I can't find anything on point.. What do you think? Thanks very much.

Hi - I am picking up a plan that has (1) self directed investments for 401(k) accounts (at John Hancock); and (2) Trustee Directed ("pooled") investments for Profit Sharing Contributions. If the plan were entirely Trustee Directed, it would be exempt from Participant-level disclosure requirements. However, given that part of the plan is self-directed, does anyone know whether the pooled account becomes subject to participant disclosure? {Note that participants DO NOT have a choice between pooled and self-directed; i.e., profit sharing is pooled and 401k is self-directed. No choice.} I'm thinking the pooled account is not 'tainted' with disclosure requirements. But my thinking and the DOL's often don't coincide. What do you know about this? Thanks very much.