ETA Consulting LLC

My SSN ends in 5 as well. My next renewal is April 1, 2017. The form 8554 hasn't been updated to reflect the 2016, 2017, and 2018 renewal years. So, you and I are in the same boat. If RatherBeGolfing is wrong, then we are both screwed. At any rate, RBG communicated the understanding as I know it. My years are 2014, 2015, and 2016 for CPE; and I will submit my renewal April 1, 2017. Good Luck!

Each year, I end up doing a different program. This year, I did Beacon Hill Financial Educators (bhfe.com) CPE. Just thinking, our discussions on this board should qualify as CPE. Perhaps we should reach out to the owners and see if we can get some certificates printed 5 minutes for each post would satisfy all my CPE Good Luck!

Well, there is a testing option to include the otherwise excludable HCEs in the main group while excluding all otherwise excludable NHCEs. You have to read your plan (even if you refer to the Basic Plan Document). Back in my first two years in the industry, I used to hate when a director would ask me 'what does the plan say'. 99% of the time, this is the answer. Good Luck!

Sure. It's easier to do once the case has been assigned to an agent; you'd just reach out to that agent with the revised submission. In some instances, the agent will have you revise the submission (especially when you include something that they refuse to issue a letter on). Good Luck!

He's HCE for 2016. The only place you'd need to look for that is the definition of HCE in your plan document. Obviously, 414(q) is the statutory definition, but the plan's language will align with that (plus will specify whether or not the sponsor is actually using the top paid group election). For 2016, he can be an otherwise excludable HCE for testing purposes. He's going to be an HCE either way. I'm not sure about what road block you are running into because of his HCE status. Usually, and HCE who gets zero helps the test. Good Luck!

You're reading it correctly. It's a factor, but just not as much of a factor. As these guys stated, it's a facts & circumstances case to show that the safe harbor (actually being used) was provided withing a reasonable amount of time prior to the beginning of the year. So, my contention was (without vetting it) that they've already missed the '30 day' notification period. As these guys pointed out, there are instances where the change of the safe harbor method may be used (still prior to the beginning of the year, but inside the 30 day window); but you'd need to document that the notification was within a reasonable period (under facts & circumstances) since you clearly missed the 30 day advance notice. I actually agree with them :-) Good Luck!

I knew this day would eventually come "If everyone is thinking alike, then someone isn't thinking." -- W. Edwards Deming

I don't think you can. There is a clear distinction of a plan that already has a 401(k) provision and a plan that doesn't. "IF" you don't currently have a 401(k), then you may establish one and issue your safe harbor notice concurrently with the establishment of the plan (at any time prior to October 1st of the year you are establishing the Safe Harbor). In your instance, that would be October 1, 2017. However, the fact that you already have a 401(k) plan that you intend to make safe harbor will require your notice get distributed at least 30 days prior to the year. So, December 1, 2016 was your deadline for determining which Safe Harbor you were intending you use and to ensure you had the appropriate notice distributed. I have no opinion on part 2 of your question. Good Luck!

Bill, this is [[[Generally]]] my take, but each case is different There are situations where HCEs should be limited around the beginning of the year from Maximizing their deferrals (e.g. deferring $18,000 on the first $25,000 in salary). In few instances, a couple of those HCEs may end up deferring $3,000 on the first $4,000 in salary and then leaving the company in January. Mathematically, you'd have $6000 in deferrals that sent two 75% deferral rates for HCEs in the ADP test; and the failures will cause those who deferred at $18,000 to receive distributions. I just say this to re-emphasize that each case is different. So, the demographics of the employees should be studied and the clients should be made aware of the different possibilities and then counseled into avoiding these types of pit falls. But, I do agree that most of the time it's not worth it. It does get challenging when you have HCEs who have low Compensation during the year but high (percentage of salary) deferrals. Good Luck!

Never! If you read the plan carefully, perhaps the BPD, it should have boiler plate language permitting the sponsor to limit deferrals for HCEs in order to help pass the ADP test. Believe it or not, nothing is as arbitrary as having an exemption from following the terms of the plan. We know at least one instance; when the plan has language that is contrary to the Regulations. Good Luck!

For your "twist", I thought that if she attains 70-1/2 in 2016, was still employed on 08/01/16 when she took her full distribution as a rollover to an IRA, and subsequently terminated on 09/01/16, then her 2016 RMD piece is ineligible to stay in the IRA, and has to be "removed". When it's a full distribution, then I agree with you. The twist I was imagining in my mind was where this individual received a partial distribution and rolled it over prior to termination. In such instance, there would be an interesting argument to merely satisfy the RMD by a subsequent distribution from the plan. Of course, if you take a full distribution and then terminate, you must remove the RMD from your IRA. I would argue, however, that if the distribution was a partial distribution, then there wouldn't be a need to go to the IRA when you can simply satisfy the RMD with a subsequent distribution from the plan. It's basically a 6 in one hand - a half dozen in the other. I agree with you, I was merely imagining a partial distribution prior to termination. Good Luck!

Where's your manager? Just kidding Your first step in answering this type of question would be to test Company A and B separately under 410(b) to ascertain whether they could each pass as a stand alone plan. If each plan cannot pass 410(b) separately and on its own, then the different formula for each Company would not work. Aggregation of the plans for 410(b) would require you use the same formula. [[i can immediately imagine a situation where at least one HCE defers 6% and receives a 6% match while at least one NHCE defers 6% and receives a 4% match]] Good Luck!

You should read the document as you'll likely encounter this many times again. You have a 2016 RMD because 2016 is the year she terminated and reached the age of 70-1/2. With that said, any distribution taken would first be used to satisfy the RMD. RMDs are calendar year requirements, so the plan's year end is not relevant. Now, it would've been an interesting twist had she not terminated employment until 9/1/2016, but took a distribution in August 1st. In that instance, you can argue that she was still employed and not subject to RMD. Hence, the first amounts from that distribution would not be considered RMD. In your case (however), she was already terminated (and there is nothing you could do to prevent 9/1/2016 from coming); so an RMD requirement for the year is a certainty. Even then, this is merely an argument to suggest a series of events where a distribution would not be first treated as satisfying the RMD (and may, therefore, be rolled over). In your case, I think it's a slam-dunk. The RMD should come out before the rollover Good Luck!

I think the notice can be concurrent with the plan amendment. The notice, itself, typically does not list the eligibility requirements for the plan. Instead, it says "If you are a participant in the plan". The language in the safe harbor notice would not change due to the amendment. Who actually receives it would change. So, amending the plan to add more employees into participant status would be okay. These employees would merely get the same notice previously given to other eligible employees. Good Luck!

Yes, the first part of the distribution will be considered an RMD. I am assuming the person is terminated. If still employed, then the RMD would not be due (and they could rollover the entire amount). Obviously, if the person is a 5% owner (or the plan continues to us the old RMD rules), then the first part of the distribution would be considered an RMD. One distinction to this "RMD comes out first" is if the participant dies. In such event, the death distribution rules would apply since he would've died before his RBD. Good Luck!

As for me, I worked for a Life & Annuity firm for years and had to research every single life insurance rule ever written (even the Norris vs. Arizona case). While a good part of the industry as moved away from the entire notion of having a life policy inside a qualified plan; it's still a practice that is alive and well. I continue to get questions on it from many of the advisors I support. At the end of the day, it will be up to the client to obtain the services of someone who is comfortable with providing those services. When providing those services, the plan document is, indeed, an appropriate reference; especially with respect to life policies within a plan written onto that document. As a professional, I try to instill comfort to my clients in the positions I communicate to them by adding as much perspective as possible. So, I think it is entirely fitting to have a discussion of the 'purpose of a retirement plan' anytime you're speaking of incident benefit limits. Doing so would be an equivalent of discussing the plan being in existence for 5 years when addressing a permanency issue. I think that type of perspective and insight is important, and often missing, when speaking on contentious issues With that said, I think I'm signing off as well. Good Luck!

I'm will Belgarath on this issue. WOW. We have us a live one!!! LOL Over my years, everything here is a repeat of all interpretations I've seen in the past. With Belgarath's approach, we acknowledge that the ancillary limit does one thing; prove that those benefits (e.g. insurance) is not why the plan exists int he first place. The whole notion here is to ensure that the retirement plan, itself, exists for the purpose of providing a retirement benefit (and not insurance). I think we should all agree on that as a matter of principle; despite our disagreements on the 'what next' issue. When it comes to 'what next': 1) Does the premium get taxed as if it were a distribution? If so, what happens if that individual was not eligible for a distribution from the plan; does that disqualify the plan? When it comes to a qualification issue (Belgarath): How to you address the fact that you have a transaction that basically undermine the entire premise of your plan being established to provide a retirement benefit? Consequences aside, I'm with Belgarath This does not mean I believe other suggestions are not valid; I just need it to fit in my neat little jigsaw puzzle Ultimately, the only authority I see on a taxable event from life insurance is the economic benefit in section 72(m)(3) which basically says that if you want then "pure death benefit" to be paid from the plan income-tax free, then you must pay the economic benefit up front. Even that rule does not mandate the economic benefit tax be paid; it seems to merely state that if you don't pay it, then the entire death benefit goes back to the trust and the ultimate distribution from it will be taxed. With that said, I clearly see no precedent for taxing premiums on life insurance policies merely because they were purchased with 'season (or even seeded)' money. Good Luck!

Technically, it's not an '11(g)' corrective amendment so the rules of "providing a meaningful benefit' are no relevant. So, they may be zero vested and such amount may ultimately be forfeited. Just on the style observation, this entire scenario may equate to the 'tail wagging the dog' where you based an entire plan design on year one circumstances without any anticipation of future circumstances. I've, personally, done a little startup design work in the past in order to get a favorable year 1 while ensuring the ultimate design strategy was in place subsequent years. I just think it's worth mentioning the importance of knowing and incorporating the difference. Good Luck!

This would be my interpretation as well (in the absence of specific plan language or company policy) Agreed. They said overtime "pay" not overtime "premium" Good Luck!

This may actually be driven by the Regulations; even though the answer may be found in the plan document. Normally, an individual who's a member of a class that becomes excluded from participation may be excluded. But, this issue goes to the actual definition of what is means to be an employee 'who normally works less than 20 hours per week'. The Treasury Regulations provide a 1000 hour definition to the year when determining whether an employee is in this class. Once it is met in any year, then that employee is deemed to meet the 20 hour requirement regardless of what 'happens next'. This is how I interpret the "if and only if" provision in the Regulations that define this class. Good Luck!

No. It "may" be doable had the subsidiary been in a separate plan under its own plan document. Right now, you're basically asking if the Employer may arbitrarily break the plan employees down into various groups and amend the plan to exclude a certain group (including NHCEs) from the safe harbor match while still maintaining the safe harbor provisions for the other groups. That would undermine the safe harbor requirement of providing it to all NHCEs eligible to defer. Good Luck!

I've dealt with similar situations and believe all is not lost. I would speak with an IRS representative and receive an impression that all is well and then discover these letters being sent to the client requesting money. I cannot remember a situation where I was not successful in getting those fee assessments abated. I'm convinced that it's a simple GIGO equation with the computers at the IRS. When the representative fails to key in the case correctly, the computers go to auto-pilot in mailing out the letters (which effectively forces you to contact that IRS). This is unlike collection agencies where they continuously contact you. So, yes, I is often an inconvenience to engage with them again. But, that's usually expected until you get a full resolution of whatever is going on. I've learned to expect some of those 'unexpected' surprises over the years Good Luck!

I'm at a bar drinking right now. And people must think I'm crazy because I'm laughing at my phone reading this board :-) I stand corrected; bigly is actually a word :-)

Or whatever date (up to October 1, 2017) that you actually start the plan in 2017. Perfect answer since your OP clearly stated January 1, 2017. There may be some newbies that read this months from now and get the wrong impression Good Luck!

Well, plan participation is not a protected right under 411(d)(6). So, that is pretty much a slam dunk; actually suprised me back in the late 90's :-) Such change, of course, would need to be done on a prospective basis. You still cannot retroactively amend a plan to take away a right that already existed under the plan's written terms. And, an amendment is all that is needed (and of course you'd consider all amendment timing issues dealing with the safe harbor and your particular situation). I'm sure you're already up to speed on the missed deferral opportunity issues. I think we've all beaten that one to death over the past few years Good Luck!