R. Butler

I can't remember if the earnings were based on actual rates of return or highest performing fund. I think a combination of factors triggered. Certainly the late contributions did not help, but I seem to remember that there was a balance discrepancy on a prior 5500; the end of one year was greater than the beginning of the next year. I think the DOL may have sent a simple inquiry that the plan sponsor just ignored.

About $400. This was 5 or 6 years ago. If I recall correctly employer had weekly payrolls, but were only remitting monthly. This went on for 2-3 years before they were convinced to remit each payroll. We begged them to just make the filing, but they just kept putting it off for some reason and it bit them. Unfortunate because VFCP is really a nice program.

Plan has short year plan year. YOS for eligibility is 1 year using 1000 hours of service. Document provides in a short year that both the 1 year and hours are pro-rated (the statutory standards are still maintained as an alternative. ) My question is whether the pro-rated hours must be worked during the pro-rated months or just during the short year? Document doesn't really specify. My thinking is that the hours would have to be worked during the pro-rated period, but hoping for verification. Thanks for any guidance.

The calculator can only be used if the plan sponsor is filing through VFCP. I have seen the DOL require additional lost earnings when the calculator was used but the plan sponsor didn't utilize VFCP. Plan sponsor submitted contributions late. Plan sponsor indicated that they would file through VFCP. Lost earnings were calculated and submitted based on the calculator. Plan sponsor didn't end up filing through VFCP. A year or two later the DOL audited the plan and required that the plan sponsor submit an additional $20,000 in lost earnings.

Participant pays gym membership. He has a Letter of Medical Necessity and it has been determined that it would qualify for reimbursement. He paid the 2019 membership in December 2018. Can that count as reimbursement for 2019 if it was actually paid in 2018?

Employer switched payroll companies mid-year 2018. Due to some type of error participant defers $20,000 during 2018, but the relevant parties (participant, employer, payroll company) think that only $18,500 has been deferred. The participant is catch-up eligible. The issue is that W-2 was prepared and taxes filed assuming a contribution of $18,500. Is there any way to get around this, other than by amending the W-2 and tax return? Employer prefers that it be distributed to the participant similar to an excess deferral, participant is okay with that, but I'm not aware of anything that allows that. Thanks in advance for any guidance.

Plan sponsor currently does not impose any last day/hours of service requirement to receive a match. Match is discretionary and is only made at the end of the plan year. Plan sponsor wants to add a last day/hours requirement for 2019. Can that be done effective March 1, 2019 if it only applies after March 1st? For example plan sponsor wants to apply current rules for all contributions for January and February, but impose the last day/hours requirement for any match made anything after March 1st. Thanks in advance for any guidance.

Thank you for your response. I didn't phrase my question correctly, but I think you have answered anyway. I understand the seller's plan doesn't have to be formally terminated, but the seller wants to allow the employees to continue to participate after the acquisition date during a short transition period when the employees will be paid by the seller, but leased to the acquiring company. My thought is that the employees should not be allowed to continue to participate in the seller's plan after the acquisition date My concern is, that as you mention, the employees might be considered common law employees of the acquiring company thus creating potential successor plan issues. Is there a flaw in my thinking? Thank you

Co. ABC is acquiring Co. 123 in an asset acquisition. Co. 123 currently sponsors a 401(k) plan. There will be a few week period after the acquisition date where the employees remain on Co. 123's payroll and they will be leased to Co. ABC during that time. Co. 123's 401(k) plan will be terminated. The employees will participate in Co. ABC's plan. My inclination is that Co. 123's plan should be terminated prior to the acquisition date. However, if Co. 123 continues the plan for the few weeks that the employees are leased to Co. ABC is there then a potential successor plan issue? My inclination is yes that the "leased" employees are really common law employees of Co. ABC at acquisition. Thanks for any guidance.

We aren't determining. They've asked us for guidance. If I could find some written guidance I was going to point them to it. My inclination was that it probably not a termination if there is a definitive expectation that such employees will return. Most of the written guidance of which I am aware deals with unemployment benefits, health and welfare benefits, etc. Haven't really found anything on 401(k) plans. The only discussions I found dealt with distributions and 5500s those threads generally indicated that such employees would be treated as terminated although no cites (or even aby real reasoning) was provided. Anyway thanks for the responses.

Plan has a last day requirement for employer contributions. If an employee is on furlough should that employee be treated as terminated for purposes of contribution accrual? Thanks of any guidance.

A sole proprietor and a partnership sponsor both a DB & a DC plan. The DB plan was frozen in 2017. One last contribution is being made to the DB plan. The entire DB contribution is being allocated to the sole proprietor and not the partnership. Is there any issue with that? if that is permissible than the entire DB is just used to reduce net income of the sole proprietor when I'm figuring the calculations the DC plan? I'm sure this is an easy question; I just don't really handle DB plans and want to make sure I'm not screwing up the DC plan. I am aware of how the deduction limits work with the combo plans, but a little uneasy about the decision to allocate the entire DB contrib to the sole proprietor. Thanks for any guidance.

Thank you. Now as to the wisdom. He has held the stock for several years. It has no basis. If he contributes the stock to the plan wouldn't he be exchanging the long term capital gains rates for ordinary income rates? I am going to refer him to his CPA on this question, but when I refer I want to make sure he asking the CPA the right questions.

Sole proprietor wants to make contribution by contributing stock that he already owns to the retirement plan. Without regard to the wisdom of doing so, is it even permissible? Thanks in advance for any guidance.

Company A sponsors a 401(k) safe harbor plan with about 80 participants. Company A is going to acquire Co. B in an asset acquisition. Co. B has about 40 employees. Company A only requires a 60 day wait for participation. We are trying to avoid the audit requirement for 2019. Can Co. A adopt another new 401(k) plan by October cover the acquired employees? If the new plan can be adopted is there an issue with amending the current safe harbor plan to exclude these employees that would be covered under the new plan? My inclination is that we can't do what we are hoping, but still thought it worth checking. Thank you.

I struggle with this particular scenario. Plan has a 90 day service requirement and monthly entry dates. Plan includes rule of parity provisions, but not a one year hold out rule. Plan further provides that eligible employees who had not satisfied the eligibility requirements will become a participant in accordance with the requirements of the plan. Employee is not treated as a new hire unless service is disregarded under the Rule of Parity provisions. Employee completes 45 days of service prior to terminating. Employee is rehired 2 years later. Employee was gone more than 12 months so I don't that service spanning applies. There isn't any service is excluded under the Rule of Parity. My understanding is that since service spanning doesn't apply and that since no service is excluded the rehired employee must work 45 more days and then enters on the first day of the month after that. Does that sound correct or am I missing something? Thank you for any guidance.

We came up with that same thought after I posted this.

Participant has a minor child with a disability that qualifies for SSI payments. Participant has a small balance 401(k) that needs to be distributed so that resources are below the threshold. Participant is only 35 so finding a distributable event is difficult. Has anyone had this situation? The only potential distributable event that we have thought of so far is a hardship if their is a qualifying medical expense or perhaps amending the plan to facts and circumstances and qualifying this situation as a hardship irrespective of whether there is an event that would qualify under the safe harbor definition. Thanks for any thoughts on this issue?

I should be able to find this jut by searching, but the search feature seems to have changed and I'm not finding anything. Employer sponsors safe harbor 401(k) plan. Employer is closing its doors. They are not being acquired, simply going out of business. Since there isn't a merger/acquisition I don't see nay 410(b)(6) help. There isn't a business hardship; the owners are simply retiring. I think if they terminate mid year they have to meet top heavy and are subject to ADP testing. Am I missing anything? Thank you for any guidance.

Agreed, but for a affiliated service group it is 318, not 1563 and the rules are slightly different under 318.

Wouldn't we have constructive ownership under 318?

The father's business does have a profit sharing plan in place. Among other things, they want the son to be able to have a 401(k) without offering the same to the father's employees. Also if the son is treated as a separate, unrelated employer the son would get a larger employer contribution than nondiscrimination testing currently allows.

Essentially have a father/son medical practice. Father owns 100% and is taxed as a sole proprietor. Son has been practicing at the business for years as an employee. Multiple CPAs have advised them that the son should incorporate and work for the father as a contractor. They have advised them that one of the benefits is that the son can set up his own 401(k). Am Is missing something? Even if they could assert that the son is no longer an employee I don't see how they get around the related group issues. Thanks for any guidance.

Probably will just refund it as a 402(g) excess for simplicities, but it is not really a question of trying to beat the system. It is a question of whether a self employed can really have a 402(g) excess. The money isn't withheld from a paycheck as it would be with a W-2 employee, It just contributed out of a draw. If this money were in a brokerage account and the 401(k) and employer money isn't tracked separately at the investment level I would have no issue doing exactly what Bird suggested. The only difference is that this in a record-keeper account and two partners called it a 401(k) contribution so that is the source record-keeper used. The total excess is about $4,000 so somewhere around $1,500. Not a huge amount, but still why pay $10 more than you have to? The only reason why Bird's solution may not be feasible is that there 10,000 participants in the plan. That is might be difficult to allocate. Thanks for all of the answers.

Do you see an issue with reallocating as a 2017 contribution?