Bri

Right, no change there.

Are you suggesting the plan sponsor just unilaterally choose not to honor the deferral requests? Or is it a matter of having potential "post-severance compensation" coming up for a couple of weeks?

The instructions to Form 5330 don't indicate any exception. I suppose if you absolutely KNEW what the match formula would be, and there was already money in their accounts from prior years, you could withdraw from the hard assets rather than the receivable. And it's not like the sponsor could just pay the person the would-be-refunded amounts early, because that's not a payment from the plan itself.

(Although I've seen plan documents explicitly prohibit the QNEC in a prior-year testing situation, I always wanted one sponsor to finalize their payroll on 12/28 and figure out the QNEC in time to deposit it before the 31st.)

Larry's on it - I would just double-check your BPD to confirm that there isn't tiny print guaranteeing the gateway anyway, as an as-needed sort of override.

Is it not noon on the 16th? I may sound like I'm trying to be a wise guy, but does the Code define half a month legally? I honestly would think an 11/30 year end plan might have a 2/14 deadline (noon on the 15th this leap year)

I gotta dig some more, try to find out if the attorney is still practicing even. (Not finding a website for the firm, but do see a search result for her LinkedIn profile.) It looks like the former TPA owner mentioned the issue to her about the lump sum issue, but after he'd received a copy of the already-executed signed-by-the-judge order (which even has the word Qualified in it....sigh). But no sign of a revision to the Order.

Background: DB plan is terminating, I've just begun the PBGC application. Traditional DB plan was frozen 30+ years ago. Two participants, vested terminees, remain as they'd been awaiting age 65. Plan never had a lump sum option, only annuities. As part of the decision to terminate, the company that now administers the plan (bought the prior company, which is no longer in business) decides they should just offer a lump sum option, so it's been written into their final PPA restatement as of 1/1/2020. The lump sum option also helps so the plan doesn't end up with maybe 5,000 in residual assets, too. Now, one of the two participants immediately returned his form for a lump sum. (Although he hadn't asked for early retirement benefits, he's past the plan's ERA of 55 and so he's eligible to be paid now, independent of the PBGC review.) Anyway. he scanned over a QDRO for an unrelated plan. But that had me thinking, and I reviewed the prior TPA's distribution files which we have. I found a QDRO from 2006 signed by a judge. Or, at least it was meant to be a QDRO. I'm concerned when I read it, because the order assigns 50% of the participant's account balance as of some date in late 2005, with all the earnings thereon, to his ex-wife. Seems normal enough except that the plan did not offer a lump sum option at all, and so technically there's no account balance to speak of. Now that there is a lump sum option, there's at least some substance to the request to assign 50% of the lump sum value to the Alternate Payee. What's the actual legal rule for something like this - The order indicated a form not authorized by the plan. At the time. But now the plan does authorize such a payment. I am suspecting that a revised Order will be needed, if for no other reason that there never really has been an "account balance" to divide and assign. But I also want to learn the legal standing of something like that, where it's as if a would-be QDRO suddenly flips to being legitimate after the fact, so to speak. (In other words, the "account balance" terminology notwithstanding, would an order like this be acceptable, now that the plan was amended in such a way that the original order now is properly compliant with the terms of the plan as they now are. Something like, well, it wasn't Qualified when it was written, but it is now.) thanks. --Bri

Along CuseFan's line..... Could the plan run its allocation for the 50K in new money plus one-seventh the DB transfer? I don't recall the rules as to whether or not the whole suspense account gets used before any new money contributed can be.

Since plan contributions of Davis-Bacon amounts are only one way to meet the employer's obligation to meet the Prevailing Wage, I'd suggest reviewing whether or not the employer (in the future) might simply *opt* to provide the benefits to the HCE in any other manner besides a plan contribution. Unless it's spelled out somewhere else, why not pay the amounts to the HCE as additional wages instead of as a plan contribution? Sure, there are payroll taxes, but it sounds like those might be less than the contributions necessary to bring the plan into 401a4 compliance.

Hey, if the plan allows for 401(k) rate changes any time (rather than quarterly), then the move to make is to go in and alternate weeks between Roth and pre-tax. HR will love you, and the point will have been made. And, you'll have the amounts split the way you wanted the whole time.

This is where the phrase "coinciding with or next following" differs from straight-up "next following". At least we do all agree the YOS ends on 1/1, right?

Correct. No reduction in one's personal income simply based on the fact there was extra money already in the plan's trust.

The ABPT is going to include all sources, and the definition of pay for the 401(k) is the whole year's worth, though. (But hmmm, if you're able to pass all the rate groups at 70%, might you be able to justify doing that only on post-source earnings?)

I'd make sure of how the plan spells out its compensation for allocation purposes. You're mentioning safe harbor is based on post-7/1 earnings, but also saying the plan uses full year for all purposes. (As in, check specifically whether there is indeed a source-specific definition restricting the safe harbor amount. I've seen it both ways, where you completely mimic the 401k source, versus mimicking non-elective source definitions.)

I think if you want this as 2019 earnings, you'd have to re-do his W-2. Otherwise you're getting a code E on the 1099 for the EPCRS correction, and it's taxable in the year of distribution. The guy didn't exceed the 402(g) limitation, but rather the plan's own limitation ($0, since ineligible).

It does not. Your plan language may say otherwise, but nothing regulatory requires it.

Hi Larry - The argument I'm making is based on the fact that the plan itself doesn't have a formula for allocating contributions. The safe harbors under 1.401(a)(4)-2(b)(2) reference the plan allocating contributions under an "allocation formula" that's uniform (with the disclaimer in subparagraph (ii) that permitted disparity is okay). But in the case above, the plan doesn't allocate on a formula. Each participant is assigned a single contribution amount (that just happens to mimic an integrated formula). So that's the language/technicality I get hung up on. The plan is allocating based on a list of individual names and amounts directed by the Administrator, rather than a formula (which makes it feel less "safe" of a harbor in my mind). Honestly, I'm not going for anything beyond a semantics argument, I suppose. (p.s. Are you guys still getting Pizzeria Uno at the Relius meetings?)

My impression has been that, if your plan language doesn't actually state that it's using a safe harbor formula - such as integrated at something less than the TWB, that the general non-discrimination test has to use the full TWB when imputing the disparity. I've seen it one time where the general test then didn't work due to crazy circumstances, but it wasn't my client. The plan document said everyone's his own group, but they ran it identical to a plan integrated at 80,000. One HCE was only at 108,200, below the TWB, and so the person's rate imputed allocation rate was actually higher than anyone else's. (Which is probably the kind of example Bird was referring to.)

If the enrollment form is a PDF, you'd at least have an email trail from the HR lady's account showing it sent. Is the workforce a computer-using group? Obviously in a factory or warehouse that might not be so applicable. (Not only that, you could have an email subsequently saying, due to not receiving a form, we're instituting you at 0%.) Can the forms be included in the paycheck envelopes?

I presume the IRS will at some point issue guidance on when these remedial amendments would be necessary. It's not like we've all crammed in our 2019 hardship provisions onto amendments yet. (Or have we?)

EPCRS doesn't really spell out (at least as a safe harbor method of correction) simply doubling-up next week's amounts, does it....(With an employer adjustment for missed earnings for the late week, perhaps?)

Of course not, but a compassionate plan advisor would find an out for an uptight worry-wart prospect! ?

If it's that concerning on the 30 days, why not just make the deferrals effective 2/1 but the plan as a whole (for nonelective contributions or what-have-you) effective 1/1?

Are you sure? I would think this is an overpayment. Since the basic tenet of EPCRS is "put the plan back in the position it would have been in, absent the error", I'd argue you could return the excess distributions and revise the 1099s. Would have to "think about" how to address earnings lost (or realized outside the plan).