ETA Consulting LLC

I still think that

You must read your plan document. The IRS website will provide you general knowledge of the rules, but the written plan will provide you background on specific provisions. There are two types of hardship determinations: "Safe Harbor" and "Facts & Circumstances". When working on a prototype document, you cannot even apply a 'facts & circumstances' determination to a hardship from the deferral source of funds. This is why you must read your plan. It is a 'safe harbor' provision that says a distribution from the plan is deemed necessary to satisfy the hardship if the employee is suspended from deferring for 6 months. There are other requirements, but this is merely one of them. If you're providing a hardship under the facts & circumstances, then the suspension period may not be a fact or circumstance that is relevant in your determination. Again, this won't be an option when you're on a pre-approved document and the participant is taking a hardship from the deferral source of funds. So, yes, under some circumstances you may receive a hardship without a suspension. Good Luck!

The entire notion of a suspension is to 'deem a hardship exists and a distribution is necessary to satisfy the hardship'. This is what the safe harbor does. So, you're asking if you can operate outside of the safe harbor definitions of hardship and also apply a longer suspension. My question would be that why would you suspend at all if your intent is to use a 'facts & circumstances, test of a hardship. Good Luck!

Just document the oversight and retroactively amend the plan to a Non-Standardized Adoption agreement and submit under VCP. Many many many years ago, the IRS held a position that all companies were covered and the sponsor was screwed. The IRS has, since, come around to allowing this as a reasonable correction for what was clearly an oversight. My info was merely from informal conversations with attorneys over the years. I believe a similar case was referenced in the ERISA Outline Book; if memory serves. Good Luck!

I wouldn't do it. The 'reasonably equivalent basis' is prohibited transaction standard. For that matter, so is not discriminating in favor of HCEs. In theory, as soon as you hire an additional employee who reaches a vested balance of $2,000, your loan program would become a prohibited transaction. That would be my initial thought. Good Luck!

Why not code it to not run separate testing of otherwise excludable employees? Good Luck!

Well, you can always amend the plan to allow for rollovers on a prospective basis. You'd have to determine if the rollovers made 10 years ago was, indeed, an operational failure and decide the appropriate course of action after making that determination. You should ensure that these were rollovers as opposed to plan to plan transfers back in 2008. This was be part of your determination as to whether there was an operational failure back then. Good Luck!

Yep and Yep. Good Luck!

Yes. Any time you have exclusions from Compensation that aren't considered safe harbor exclusions, then you must test the definition of Compensation to prove it's non-discriminatory. Good Luck!

If you work in a division that is excluded from participating in the plan, then you will not benefit from Compensation received while working for that division. This is purely a plan design issue. You can easily write a plan to say that if you become eligible at any time during the year, then your entire Compensation (including the period of ineligibility) will be used. You must follow whatever language you decide to use. Any debate on whether or not it is reasonable is moot because you're merely following the terms of the plan. This is 'part' of what it means to have a definitely determinable allocation formula. You follow the formula, first. Then you perform whatever tests are necessary to show it to be nondiscriminatory. You don't get to arbitrarily decide that you're going to use Compensation for the entire year for a single participant. With that said, when you exclude amounts from Compensation that are not "Safe Harbor" exclusions, you must test that definition of Compensation to prove that it is non-discriminatory. So, yes, a Compensation Ratio test would be necessary. You don't get to arbitrarily decide to use another definition of Compensation. Should you test the Compensation and it fails, many plans have provisions that automatically prescribe using total Compensation for allocation purposes. Again, you're still following the written terms of your plan. Many of these issues are already anticipated and addressed in the plans language. Nothing should be an arbitrary decision such as using total year compensation for a participant (including the period of time they were not eligible) without this practice being supported in the plan's document. Good Luck!

This is not true. It's going to have to be all 'eligible' comp. The plan gets the define its Compensation for different plan purposes; and you must follow those plan terms when you're allocating contributions. How you test the plan when you exclude portions of Compensation that are not 'statutorily excludable' is another story. But, you must follow plan terms with respect to how the Contributions are calculated. Good Luck!

It's not a problem to run it for 12 months. The safe harbor contribution, itself, really doesn't have to be made to the plan that provides for the deferrals. So, you'd merely draft the document to provide for the Safe Harbor for the full 12 months. Good Luck!

I would operate as if the relief from the excise tax will be granted, unless you have a reason to suspect it would not be granted. Good Luck!

Let's look at two distinct fact patterns: Company has Division A & Division B Plan Excludes Division B During the Plan Year, Employee moves from Division B to Division A. The employee has already met the age/service requirements for the plan and was excluded only be virtue of being employed by Division B. Employee had already earned $10K working with Division B Employee Earns $20K working with Division A The plan defines Compensation is "Eligible Period Only". In this case, you'd used only the $20K for allocation purposes and testing purposes. However, this would necessitate a Compensation Ratio Test (which will not be majorly impacted) for the $10K in exclusions since this exclusion was not under a statutory exemption (safe harbor). However, if the plan defines Compensation as full year, then you'd use the whole $30K, because once he becomes eligible at any point during the year, you're using all his Compensation received from the Employer during that year. Good Luck!

The W-2 will show the deferral of $24,018 if that is the amount that was actually deferred. The participant will have to increase line 7 of his 1040 by the $18.00. Any earnings on the excess will be taxed in 2018 (the year of the corrective distribution). Good Luck!

To your point, the notices should be written and issued so that there aren’t any surprises. There is a standard that must be met to ensure they are issued, but I don’t think the onus is on the sponsor to ensure you actually receive it. If they mail it to you and a dog breaks into your mailbox and eats the notice (along with your homework ), then that would not mean that the notice wasn’t issued timely. Good Luck

Even though you have investment authority in your individual brokerage account, it is still a plan asset and under the control of the Trustee; it is merely earmarked for your benefit. The Trustee will allow you (under the terms of the plan) to direct the investments and would advise you, in advance, when your ability to direct those investments will expire. It's not "YOUR" money; it's the plan's money but set aside for your benefit. You have an ERISA protected rights that say you and your beneficiaries will benefit, but the Trustee has the control of it while it's in the plan. When that plan decides to move from one platform to another, they're not going to stop to accommodate the wishes of one participant. They'll notify you with the intent of giving you ample opportunity to change your investments (or even take an eligible distribution and rollover) prior to them switching platforms. They're typically liquidating and transferring immediately at the end of that notification period. Good Luck!

You must first detail the series of events as they happened in order to ascertain if the plan provision or a notice was not properly followed. This would be different from saying "they did this or that" while only providing details to support that assertion. I'm not choosing sides, but merely trying to visualize the series of events as they happened. 1) 401(k) of a Former Employer is moving the plan from one investment platform to another. 2) The new platform will not allow the investments in the individual stocks that you're invested in. 3) You never received a blackout notice instructing you to take the investment actions you feel necessary given this new change. However, the Employer is saying that it was provided to you. 4) The date on the blackout notice is _________? If a blackout notice was provided, then the trades that took place would typically not have taken place until the plan was in blackout. At this point, you will no longer be able to direct your investments and the funds will be realigned pursuant to the conditions stated to you in the notice (which you did not receive). 5) You submitted distribution paperwork to them on December 28th. 6) You were advised that your account was liquidated the previous day and all your funds were liquidated; presumably pursuant to the terms previously communicated to you in the notice. If the funds were liquidated as previously communicated to you and the notice was provided to you in a manner that would satisfy "proper delivery", then you may not have any recourse. When I say "proper delivery", it's not a technical term rooted in statute. It's basically saying that a process was in place to communicate to all participants to give them ample opportunity to act. This is typically done by mailing the notice to the last known mailing address they have on file. Good Luck!

Me too! I've seen it done for a small company that was acquired by a larger company. Once I ran the numbers to show that it would require an additional $1 million to other employees in order to pass non-discrimination, several attorneys' heads began to roll. Good Luck!

I don't think there is a hard-fast date like there is for funding deadlines and corrective distributions. You should have procedures in place to enforce those force out provisions and remain consistent with those procedures. That may be 4 times per year or 6 times per year. You'd just want to consistently operate your the plan pursuant to the provisions. Good Luck!

You're overthinking it. If you defer 6% of your pay into the plan, you're going to receive a company match based on that 6% deferral. So, your company match will be (for example) $6,000 and will go into the plan as a pre-tax employer contribution. As for your deferrals, you may merely choose if it is a pre-tax or Roth. If pretax, then your W-2 will say $94,000, but that is only for Federal Income Tax purposes. For plan purposes, your Compensation will be grossed up for the $6K in deferrals; which means your plan Compensation is going to be $100K (regardless of what you contribute and how). Caveat: This is, typically, how it works. I cannot state anything definitively until I actually see your plan document or your SPD. Good Luck!

One could easily argue that when the sole prop receives 100% of its revenue from performing services to the LLC's clients; it would constitute 'regular association'. If not for the LLC, it wouldn't have any income. Otherwise, how would you measure 'regular association'? Good Luck!

In order to have a separate plan based on this revenue, you must substantiate that it is not part of a related employer group. Seems as if his work as a sole proprietor may be an Affiliated Service Group. This would by my first thought. Good Luck!

It's not going to be a 'deemed distributed' when there is a distributable event. It's going to be an 'offset' after the failure to repay. Under the new rules (assuming the bill gets signed), the participant would have until their tax filing deadline (for the year of offset) to roll the loan amount into an IRA. This used to be 60-days. Again, this is merely my understanding of the new bill that just went to the President's desk. Good Luck!

This is what I say. I filed a VCP Submission back during the summer for a non-amender. Filed another one back in October. I received the Compliance Statement for the one I filed in October. The one I filed during the summer is still pending. You can only imagine the chaos that goes on behind those doors. Ultimately, it goes to accountability; who's making who do their work? I've had submissions that lasted for a couple of years; even the simple ones (not to be confused with SIMPLE IRA, but merely a streamlined submission). Once filed, you're immune to the failures included withing that submission. Good Luck!