ETA Consulting LLC

From my understanding, this is a reason to file the Form 5500 EZ; even though the assets are below the threshold. Without filing it, the Statute of Limitations wouldn't start. Good Luck!

And with that, Your Honor, I rest my case. LOL

I don't think the rollover would be invalid in this instance because he would've made a bonafide request for an available distribution under the terms of the plan. Once that is done, then whomever is beneficiary of the IRA would become irrelevant, because the terms of the plan were followed. There are some things that cease with the death of the individual (e.g. Power of Attorney), but I don't think a distribution request is one of those things. Good Luck!

Of course. That's what you're doing, in effect. You're deferring 100% of the cash that the participant would've otherwise received had they not elected to defer it to the plan. FICA is coming out anyway. When you defer pretax, this will reduce your Federal Income Tax withholding and [state Income Tax withholding (in most instances)]. So, that is a non-issue (you're overthinking it ). Good Luck!

No concern at all since Union employees "MUST" be tested separately from non-union employees. So, as long as the plan operates pursuant to it's written language, the fact that they are under the same plan would not change how they are tested; which is separately. Good Luck!

Don't need a cite. The 10% penalty applies to corrective distributions. If you fund a QNEC, then there wouldn't be any corrective distributions. Good Luck!

When you are taxed as a Corporation, then the Compensation the owner benefits from must be W2 and NOT earned income from self employment. Hence, if the owner received no W-2, then his 415 limit is zero (as W-2 is the Compensation for plan purposes). For unincorporated businesses (e.g. sole props, Partnerships, and LLCs taxed as such), "Earned Income" from self-employment is the Plan Compensation. So, you're basically utilizing Schedule C minus 1/2 of self employment taxes (and then having this amount reduced by the 'employer' contributions to the plan). Using this method, ALL contributions to the owner would be deducted on the owner's Form 1040 (so his deferrals and nonelective would be on the same line on the Form 1040). Does this help clarify the distinction? Good Luck!

Not in all instances. A high percentage may cause a failure. When you consider that the actual distributions begin with the individuals who deferred the most dollars; it may make sense to keep the percentages lowered in "some" instances. But, you do make a good point. Good Luck

It really is just that simple. You can say, if you're catchup eligible, then you may defer above 8%. Any amount will be catchup (up to the 6,000 limit); then back below 8% you go. To add a little perspective, many many years ago the the notion of a plan limit or regulatory limit meant that the plan actually had to include a hard-written limit (i.e. 8%). The IRS has since relented and stated that a administrative limit such as this (limiting HCEs administratively in order to pass HCE) will also be considered a plan limit. So, there you have it. You're using the administrative discretion of limiting HCEs at 8% in order to help pass the ADP test. If your catchup eligible, you merely allow them to defer ANY amount over 8% until the resulting catchup reaches their $6,000 limit. Good Luck!

That amendment should merely clarify what the "Plan Administrator" meant when they requested the provision. This is not a Regulation, but merely a provision someone requested to be put into the plan. Many plans include a provision that states that "The Plan Administrator" has the responsibility for interpreting the plan's provisions. There was a court case once where participants challenged the meaning of a plan provision. When the courts ruled, they suggested that the plan could've been written to given the Plan Administrator the responsibility of interpreting the provision. So, the standard is not "the best" interpretation; it is merely a reasonable interpretation (e.g. not arbitrary and capricious). I could probably write a book on this, but want to illustrate this point: When a plan sponsor requests a provision to be included in a plan, that provision may not be articulated in the best manner. That doesn't change how the provision gets administered (i.e. you said Attribution but this is a common law state) as long as the interpretation is consistently applied (e.g. not changed after consider who is affected). When Congress changes the Code, we look to the IRS to issue Regulations (which is basically their interpretation and insight into how they plan to enforce that provision). This type of provision isn't like that. In such instance, you'd ask the plan sponsor what was meant when they wrote is and then write another amendment to merely clarify the meaning of the current provision. There was actually a court case where this was done and not considered to be 411(d)(6) violation because the new amendment was merely a clarification to an already existing provision that was poorly articulated. Good Luck!

Just wondering if anyone has ever encountered a situation where the one-to-one QNEC correction was so excessive that the IRS has agreed to reduce the required amount under VCP. Let's suppose (for sake of argument) that a failed corrective distribution requires a one-to-one QNEC of $10 million dollars (and that would be less than the required $20 million QNEC to actually correct the ADP test. [[i used these extremes to avoid the conversations on ALL options of late corrections of ADP tests and focus squarely on VCP submissions for one-to-one]] My question is simply whether anyone has had experience with having the one-to-one reduced to a lower percentage (let's say 0.50 to 1) utilizing the argument of the excessive level of funding for a one-to-one? I ask while imagining the answer is no, but wanted to ask in the event someone may have been successful in getting this amount lowered in certain instances. Thanks :-)

I get the feeling the you have already thought this through. Normally, I wouldn't see aggregation of plans for ACP testing as an issue since they are both tested under 401(m). For HCEs who actually contributed to both, those HCEs MUST be aggregated. However, it appears as if the HCEs contributed (and received match) to only the 403(b). This situation, then, appears to be one of permissive aggregation; and they must have the same plan year in order for that to happen. We know the 401(k) plan wouldn't be an issue because the HCE ACP rate would be 0%. The 403(b) plan may have an issue where it would've failed ACP and had to refund the excess aggregate contributions to the HCEs. I can see where a VCP submission to rework the testing could be used. Good Luck!

I don't think so. There was a court case once where an IRA was challenged and deemed (by the court) not to be an IRA because of some hard-written rules in Section 408 that states that when there is a prohibited transaction, then the IRA is no longer an IRA. During that case, the petitioner proved that the IRA owner engaged in a prohibited transaction, and it was therefore no longer an IRA, and the court agreed. This will not work on qualified plans because the court doesn't have the authority to disqualify a plan in a manner similar to an IRA. Good Luck!

I've always corrected missing documents in a manner similar to non-amenders. Just document that no document was ever signed or document was signed and misplaced (or whatever the case may be) and ask to be corrected in the same manner as if the Employer had missed the restatement deadline. It's always been a pretty straight-forward VCP submission for the ones I submitted. Good Luck!

I want to give a little more insight into why I take this position (FWIW). Earlier in my career, I actually left a daily provider to work for a Balanced Forward Provider (because balanced forward, at that time, seemed to provide the best opportunity to learn and apply all the rules). In a balanced forward environment, this would be a non-issue; the default would've happened on the December 31st valuation date. Applying many of these rules on a daily platform creates more of a challenge as everything is process prospectively while "compliance dates" or "as of dates" are used to illustrate the appropriate time-frame. When it comes to actually offsetting a loan, you'd have to actually back-date the offset; which can be done but operates against the normal operation of a daily platform. If a December 31st payroll comes in on January 8th, you'd then see that payment wasn't made and go back and process a retroactive default to December 31st (changing the Year End Reporting and each day loan balance between January 1st and January 7th. So, I agree with Bird on his argument that the Regulations are clear. I just see an potential issue on many daily platforms to administer this issue. A balanced forward platform could easily administer it because EVERYTHING is done on a accrual basis. I just wanted to add that insight because many "newbies" (and I can say that ) have never experienced a balance forward platform. Good Luck!

I see your point. The Regs, when written, seemed to have made it a point to use a date within a calendar year for their example. It's never going to be an issue whether you offset a loan on October 5th (for example) instead of September 30th. When you're crossing tax years, then it issue becomes whether it is a hard-fast line in the sand for tax purposes. I don't think it would be egregious enough to warrant this level of scrutiny given a process that has been designed to meet the 72(t) standard. The issue comes into play, in my mind, when you look back and determine (in retrospect) that you would've faired better had the amounts been taxable in an earlier year than the one reported. At the end of the day, the amount (at the time of offset), whether December 31st or early in January, could've avoided all taxation had it been rolled over to an IRA. Remember, at the point of offset, it's not a deemed distribution, but an actual distribution. I see you're point, but this is the absolute FIRST time I've ever heard of a situation where a participant is arguing for an earlier 1099R; when all could've been avoided by merely paying rolling over the loan (or requesting the loan offset distribution at the time the employment terminated). One thing that will always been constant in our industry, however, is that these types of issues will always exist at the lines where one period ends and another period begins. We recently had Regulations on post-severance Compensation because of deferrals made by employees who terminated late in the Calendar year. It's always going to be an imperfect process. I'm not suggesting to undermine any rules (even though it may appear to be that way), but this is a one-off that could've been easily avoided. Good Luck!

Mutual fund expenses appear to be part of the calculation of investment return. So, when you're selecting a mutual fund as an investment, the expense ratios for that fund would impact the return you'd expect to receive. I cannot see how an Employer could expect to fund these for each participant and have those amounts not to be considered as "Contributions". If I owned a business and had a plan with $2million in my personal account and my employees had a combined $50K, then it would behoove me to create a formula where (as the Employer) I could reimburse the mutual fund expenses to each participant's account and not have them treated as contributions. To heck with Safe Harbor, I'd sell this plan design all day everyday. But, it's never going to happen. Good Luck!

The term default merely means that you failed to meet the terms of the loan agreement (and must now cure the failure by the end of the cure period). For instance, you may have a loan provision that require to remained employed. If you terminate, then that would be a default, You must now cure that default by paying the loan off. So, it goes to your definition of default. I've often heard people in our industry define "default" as an offset, but that's not the case. Default only means that you've began to operate outside the terms of your loan agreement (and must remedy in order to continue to maintain the loan). Good Luck!

In layman's terms: There is no "deemed" distribution when you have a distributable event (e.g. termination or age 59-1/2), The "deemed" part comes in when there is no right to a distribution, but the amount is being taxed as if there was. Another piece of relevant info (which amounts to missed opportunity). A "deemed distribution" may not be rolled over, but an 'actual distribution' may be rolled over. As soon as your loan was offset in 2014, you had 60 days to write a check to an IRA of the amount in order to avoid taxation. This "may" have been reflected in your Special Tax Notice you would've received after you terminated employment. Good Luck!

Yes. When the amount is reclassified as an employee after-tax contribution, then a 1099R is issued and those amounts are subject to the ACP test (if applicable). All this does is create a post-tax basis in the 401(k) Deferral account. The withdrawal restrictions would remain (so it's not treated as employee after-tax contributions for withdrawal availability). It's my understanding that this must be done within 2-1/2 months after the year ended. So, if you're testing the plan year ended December 31, 2015, then it would not be an option today. Good Luck!

I think the ABC company got it right. Your loan would've been defaulted at the end of the calendar quarter following the calendar quarter in which the first payment was missed (or you terminated employment and failed to pay the loan current). So, you terminated employment in the quarter ending September 30th. The end of the following quarter would've been December 31st. No payment by that time would've become a taxable event shortly afterward (in 2014). That's a typically process. When the loan default date is the last day of a taxable year, then it's only reasonable that there is a delay. As a practical matter, many last week of December payrolls are actually processed in early January. So, the recordkeeper would have no confirmation as to whether or not a payment was actually made by December 31st until December 31st has actually passed. If it was your desire to have this amount taxed in 2013, you could've made a distribution request have termination to have your loan treated as an offset distribution. You did not have to wait for the ABC company to act. Good Luck!

I agree, but you should ensure you follow the specific terms of the plan when reclassifying these amounts. If I'm not mistaken, the Regulations on this requires that it is done within the first 2-1/2 months after the plan year end (that is being tested). The reclassification is deemed to happen on the date the notices is provided to the HCEs that the reclassification was done. These amounts continue to remain in the 401(k) account and subject to the withdrawal restrictions, but they merely create a post-tax basis in that source. You should ensure you keep 'all your ducks in a row when doing this'. It's a procedure I really had seen since the late 90's :-) Good Luck!

Each case is different. I, typically, tailor the questions specific to each client in order to ensure ALL compliance requirements are met. This reduces the pages each client receives, even though some clients will get questions that others do not. The larger companies may send 33 page booklets (which have the potential of overwhelming clients) of information requests were only 10 pages may be relevant to any particular client. At the end of the day, there is no one-size fits all method; unless you opt for the 33 page book to ask ever single question that could possibly be posed to every client who may sponsor a qualified plan. Good Luck!

I cannot provide you an immediate cite, but researched this issue over 15 years ago. I'll give you what I came up with at that time. Prior to 1989, the hardship withdrawal amounts from 401(k) accounts included gains on the deferrals. When the rule changed to allow 'deferrals only' for years 1989 and beyond, there was some question about you exact issue. Many software developers (back at that time TrustMark was the industry leader IMHO) believed that the final rules would reflect that only the "Frozen 1988" amount (unadjusted for gains) would be available. When the final rules were issued, it did allow for accrued earnings on those pre-89 deferrals, but there were no software programs recordkeeping it that way. In order to have properly recordkeep this provision, you would've needed to create an entirely new source for 401(k) deferrals. Back at that time, TrustMark only had a field to track "Frozen 88". But, based on my research at that time, the rules did allow for the continued earnings to be allocated on the pre-89 deferrals when calculating the amount available for hardship. Good Luck!

Ultimately, the policy is going to be distributed at the greater of the PERC amount or the CSV. When you have to trustee take out a policy loan and place the cash in the trust, you can rollover the cash and distribute the policy at the deflated value. Keep in mind, this is NOT a springing cash value issue [[as spring cash value dealt with artificial surrender charges that reduced the CSV that were never intended to be paid]]. Here, you're actually taking cash out of the policy through a policy loan (thereby reducing the CSV, and the FMV). Good Luck!