Bri

There's no actual failure of nondiscrim, but it's not required to do an 11g amendment. (Been to enough seminar sessions on the topic to have that committed to memory.) I do realize the 2-year rule could be an issue, though. Thanks.

Looking for some confirmation on my thought train here: Client has a cash balance plan and a safe harbor 401(k) plan. Because the owner is over 70½, he's been taking in-service distributions of his entire vested benefit so that he can use the DC method and have a smaller RMD while the rest of his benefit goes to his IRA. The plans are general tested - DB plan has a $100k credit for the owner against 3% of pay for the staff, so the staff gets the rest of their gateway on the PS side (and the owner's also getting maxed out there in this PBGC-covered setup). Now, because of all the great deductions they've been taking, they've got basically no room for a contribution for 2018. Of course, an -11g amendment would allow the plan to increase benefits, but they must be done in a nondiscriminatory manner. I think that means, if they want to dump more money in, then the corresponding benefits must pass 401a4 on their own - meaning there's going to be a brand new additional gateway requirement to pass, just on the new amounts, such that anything they may have already received doesn't count. I don't expect the new gateway to be an additional 7.5%, but depending on how much more the owner's benefit might be, could I be looking at such a second minimum? And, does an amendment like this actually open up new deductibility on the DB side? Isn't there something where the deduction rules are determined by the plan's provisions as they already were in effect on 12/31, rather than what they're being amended to? Oh right, and basically I need an 'amendment for both plans, right? Is it okay to increase benefits in one plan that are discriminatory, if the other plan's increased benefits take care of the overall 401a4? Thanks in advance for any insight or experience with this. --bri

And of course, it's possible that the plan allows for in-service withdrawals at an age earlier than 70½, which could offer a hint of the odor of these being done at the participant's election.

I'm curious on this, because I want to hear more about the concept of kicking out a sponsoring employer....

How'd she get eligible in the first place?

Then that would be okay.

Forfeit it to suspense, make her whole outside the plan. Or, issue a payment with code E on the 1099-R. Or....if she was an NHCE in an even earlier prior year like 2017, retroactively make her eligible all the way back to THAT date and do whatever corrective contribution would have been needed for that year since she wasn't given the opportunity to defer. (spitballin' - not sure that last idea passes the blink test!)

If nothing else, they really gotta get rid of the 10% penalty tax. Wasn't this in place because refunds used to be taxable for the year of the contribution rather than the distribution, so you had to give the employee enough time after March 15 to complete his taxes?

This can be a bit of a hassle when the PS plan has gateway issues to work through, too.

Yeah, the plan sponsor can change the eligibility and delay the participation. They're not plan participants yet, so it's not like this would be a cutback.

Client has had a DB plan for his self-employment venture he's run since 2015. And a 401(k) plan. Now he's hired some employees for the first time as of 12-1-2018. Under the plan's current adoption agreement, employees would be eligible for both plans as of 1-1-2020. (Standard 1 year, age 21, dual entry.) But there may be a request by these new employees to see if the 401(k) eligibility can be accelerated to something less than a year. We're also thinking about changing the DB eligibility, too, to 2-year at some point during 2019. Just want to make sure I don't have any weird issues. If we do change to a two year wait, then I'd surmise (and let me know if I've messed up here, please): a. 401(a)(26) is fine for 2019 and 2020, because nobody else has met the DB eligibility requirements. b. For 2019, the staff employees are otherwise excludable. So they can be tested for their DC benefits separately against the otherwise excludable HCEs (none), while the statutory employee test only consists of one HCE. So they both pass. Staff might only need a 3% THM depending on what other employer contributions are in play. c. For 2020, the staff are no longer "otherwise excludable" even though they're still out of the DB plan. So they may need substantial DC allocations to pass 401(a)(4) against the accruals for the owner in the DB plan. I'm not missing anything, am I? Thanks! -Bri

I was at Relius's Advanced Pension Conference last year in Chicago, and we had a discussion on -11g amendments to retroactively increase benefits. The opinion of the presenter was that any new contributions created by the amendment wouldn't be deductible for the prior year. The argument was that the tax deduction rules only let you consider the compensation for those covered under the plan as of the actual 12/31 date as it's occurring, and that there's no retroactive fix for that. Obviously I'm not doing a great job of summarizing it here, but perhaps someone else can speak to it more fully. Since it would seem to work against you getting the outcome you're hoping for.

I'd make sure the vesting definition spells out that the vesting for each match is considered separately, so that you're not running the risk of introducing a class vesting situation on new benefits. The document might already inadvertently be counting all years even though the source "feels" new.

(And of course, if you're netting deferrals, you're netting ALL deferrals, including stuff like 125 plan amounts, if you want to remain a safe harbor comp. definition)

So that's not something EFAST's filters wouldn't have caught upon the filing being submitted? Or does it fall back to perhaps the 5500 software's vendor in its data-check/validation procedures?

Does the other employee have more match coming to him/her as of the end of the year? Could this be an erroneous match allocation to the wrong particpant's account?

I'm amused because Boris Badenov himself seems to have started the prior discussion. (I know...."I always have fiendish plan!!")

Hmm, that might be it, indeed. Of course, then you run the chance of the "number of participants with account balances as of the end of the plan year" exceeding the total of the subcategories (6a2, 6b, 6c, 6e) that a rollover-only person doesn't actually fit in any of.

Actually, I don't think they count as a participant on the 5500, either. But I can't find a cite to that currently....Does anyone else remember a cite from either a Janice Wegesin or Steve Forbes 5500 manual that addresses this? They're "limited participants" and for some reason I recall reading not to include them. (Willing to be proven wrong here, though....)

I would go for the EPCRS rules for Overpayments from a DC plan.

And if it's a brand new company, too, then all the non-HCEs are carved out of the ADP test, leaving you with just the owners/spouses, possibly, to square off against the zero NHCEs in the ADP arena.

They probably do, although we're not privy to the details. We're just local to this one business that eventually got swallowed up the merger/acquisition ladder years ago - US headquarters are hundreds of miles away. Assets are fine, they just now had their first minimum due in years. (Only about 125,000 in assets, annuities have run around 20-25k each when retirees do hit 65.) So they shouldn't have to worry about having leftover funds.

I've got a plan that's been frozen "forever" - the plan sponsor was taken over by a multinational corporation long after the plan was frozen. Everyone's been terminated since the late 1980s, I believe. The plan has no lump sum feature, and payouts (commercial annuities purchased from trust assets) start at NRA of age 65. Or, early retirement (.5% reduction per month) starting at 55. At this point the last 5 folks are all in their late 50s / early 60s and could elect to begin payments if they want. Unless the plan sponsor elects to terminate the plan sooner, they could potentially keep the plan open until the last person turns 65 in a few years. If they wait, what's the typical reaction of the PBGC when you file to terminate a plan with 0 participants left? Will they want to see X number of previous payments to participants not connected to the plan termination? Or are they more likely to figure with no participants or assets, and the final premium payment in good order, that their file would quickly and easily be closed with the plan just going away after the final 5500? Thanks....

I'm just here waiting for Larry's tone when he just tells you to get a payroll provider who will accommodate both! ?

I think excess GTL (gym, tan, laundry?) is the usual "obvious" difference between 3401(a) and W-2 wages. If your plan's using 3401(a) I'd suspect you exclude it then.