Bri

I just looked at the Code, hoping that it would say something like a plan where "the only EMPLOYER contributions are...." but it doesn't say that. (Meaning, EMPLOYEE contributions might have been a loophole. But, apparently not, indeed.)

I was going to say, I was the Relius guru in my prior jobs. Started at an ASC firm 3 years ago. ASC is a lot like using PENTABS, the old DOS precursor to Quantech/Relius. But I don't have any inkling on the cost differences. Especially if you have to factor in re-training everyone on a new system. If I started my own firm I'd choose Relius, though.

Isn't there THEN usually something where the TPA or custodian being abandoned states that they will no longer sponsor your prototype, thus making it (as of the date of termination of service) into an IDP? So the plan sponsor needs an 8905 right away....so they're not on IDP restatement rules. (Haven't thought about it in the context of the no-more-5-year-cycles)

Is the "account balance" the PVAB regardless of whether it's fully funded or not?

Our prototypes have always said each participant is his/her own group. So if I want 35 different rates for all 35 different employees, I say I'm good....assuming I pass the usual testing.

Can I please just have everyone agree with this statement so that I can link to it to show the non-believers in my office? The restriction on the number of allocation rates in a cross-tested plan was specifically dictated by LRM #94 and was solely applicable to get a prototype document approved during the EGTRRA cycle. This has been removed for the PPA cycle. And nothing in the 401(a)(4) regulations themselves even make mention of this, thus meaning PPA documents are not limited to the number of groups or rates available, nor are plans operating under them expected to comply with such a restriction when running 401(a)(4) tests. Thanks --bri

I find the more appropriate question - how about an SAR for someone who was a participant but terminated and took their money? I terminate and roll my money out in January 2016. Now it's December 14, 2017, and the plan sponsor owes an SAR to all plan participants for 2016. Hopefully I haven't moved twice. I wish we could apply the idea that if someone's already paid out by the time you'd report them on an 8955-SSA, they don't need to be listed - apply that same logic to the distribution of the SAR.

Is the contribution non-deductible specifically, because it's over the 404 limit, or is it just non-allocable to the participant in question? Could the amount be re-allocated to other participants in one form or another?

Is it enough for the plan's trustee to allow the participant's fund choices (on technically-not-yet-allocated-to-them money), under presumption that the balance would indeed be theirs eventually, and therefore it's "prudent" to agree to that particular participant's fund lineup?

Occasionally you can wind up with a poorly-drafted document in a government plan that left the J&S rules in place for the plan, even though they weren't needed.

I would presume 210 days after the year the PPA restatement was effective for. In fact, I'm eagerly awaiting my former TPA employer to send me an SPD for the first time since 2000.

Since I think the amount isn't part of the account balance until it's actually "allocated", you should be able to fall back on the plan's definition of the allocation date. A $600 profit sharing contribution sounds much more discretionary than, say, a safe harbor contribution for the year, where you know that 3% is really due - but if the plan says it's allocated 12/31, then I'd think you could still get away with forcing out the first $4,700 first, before the amount is "officially" part of the account balance.

I'd say yes, the plan has to pay the RMD "first" rather than letting the destination (IRA, you say?) handle it. But if it is indeed an IRA, would the plan document permit him to compute the RMD on a DC basis since everything else would be going to the IRA?

right - if the plan allows distributions beyond a stated age (such as 59.5 or NRA), then defaulting on the loan "should" trigger a benefit offset, which could satisfy the RMD.

I believe you also have to have no minor children with your husband, in addition to what Mike listed above. If the child is deemed to own both the businesses through the family attribution rules, then that also removes the potential exemption to the usual controlled group rules, as well.

My guess is that it's okay as long as you have a document that spells it out properly. A typical prototype might say that all the non-elective contributions are subject to one vesting schedule. And you shouldn't be able to amend later to un-vest the folks who may already have been swept in with full vesting. But I'd think new participants could be put on a 6 year schedule going forward.

As for the document, the definition of a YoP (computed to fractional parts of a year) basically mirrors the treasury regulation - The accrual computation period is defined as the plan year, and the participant has both the hours and is eligible for at least one day during the period, and therefore "The portion of a YoP credited...shall equal the amount of benefit accrual service credited to the Participant for such accrual computation period." I hadn't really skipped the "check the document" step - because I still got the same question. Is it a full year of participation as long as the hours are hit within the period? I'm starting to think, though, that if we terminate on Sept. 30, for example, that just makes it a 9 month accrual period, so that even with 1000 hours, it's definitely only 9.75 years rather than 10. thanks again....

Got a quick one - Doctor has had a DB plan for his one-man consulting business since 1/1/2008, and he earns well over any limits to worry about. So 2017 is going to be his tenth year of participation (nominally defined as 1000 hours), and so once he gets his full 415 limit, the idea is to terminate and have him roll over a lump sum. The 415 regulations define a year of participation as calculated to fractions of a year. But they also say the year is credited if the hours are worked. Should I be interpreting that to say it's a full tenth year of participation as of the moment he gets to 1000 hours? Or does it mean he has to actually have the twelve months in the bank? He might get to 1000 hours in June, but if we terminate the plan right at that point, I don't want the surprise that he would only get 9.5/10ths of the $215,000 limit. He'd obviously rather go for the full limit, and so if it's legitimate to count 2017 as a full year 10 before the end of the year, he could terminate and distribute before December 31, thus avoiding any 2018 plan year with its additional costs. Thanks... --Brian Gordon

Anyone get this issue, where the accountant is throwing the 2014 staff contributions on line 19 of the 2015 Schedule C before sending it our way to finish the pension calculations? (Amounts deposited in 2015 but FOR 2014.) I didn't think it was a legitimate option, but would be willing to hear comments on it. I've typically grossed the net earnings back up by that prior-year number and started from there, providing them with the contributions for 2015 as what really should go on line 19. But if there is indeed flexibility on that, then I suppose it's okay. (Although I'd be more likely to frown if he tries to deduct the 2014 employee amounts with his 2015 owner amounts on his 2015 return.) Thanks. -bri

Hey yeah, thanks - I forgot that he could go back to "regular" (non-catchup) deferrals in Q4. (Good thing, too, when I get an email like, "he's not going to take a refund"!)

Plan year end is 9-30-14. With the audit just about done, it's a good time to do the 401(k) test, right? (Shh!) Plan fails. Three HCEs, all over 59½, would be in line to get refunds of about $1,000 each. But, they hadn't used any of their 2014 catchup amounts yet, and so those amounts are supposed to be recharacterized as 2014 catchups. (Calendar year in which the plan year ends.) None of them actually got to 17,500 by Sept. 30, though. The problem is, at least one, if not all of them, probably got to 23,000 total when you throw on their 4th Q 2014 amounts. That's clearly a problem - they will have done too much in catchups, since their catchup limit for 2014 should then have been 5,500 MINUS that thousand dollars to be recharacterized. And so amounts over the catchup limit are deemed to be excess deferrals. So that's why I'm glad they're over 59½ - I can't refund the amounts as excess contributions from the test. It's after April 15, so at least their age provides a distributable event to get the money out. So typically you'd say the amounts are subject to double taxation. But their W-2s will not have shown an excess deferral, as back in January before the tests were run it certainly didn't SEEM like a problem to have $23,000 on the W-2. Are they going to beat the double taxation, or should tax forms and returns be amended? Thanks... --bri

My client's 401(k) profit sharing plan document (I believe it's Sungard Corbel-generated) says that contribtuions may be conditioned upon deductibility. And "to the extent any such deduction is disallowed....whether by agreement with the Internal Revenue Service or by final decision of a court...." the Employer could get the money back within one year. My question is, what constitutes "agreement" with the IRS? Here's the backstory - small doctor's office, and they advance-fund their profit sharing throughout the year and true up the rest after 12/31. Last spring they adopted a DB plan for 2014 to get a huge deduction. But as a non-PBGC plan, that capped DC contributions to 6%. Which they easily exceeded by December. (And they were pretty close to the actual 6% number in the DC plan by the time the first DB deposit was made last June.) Does 404 basically constitute "agreement" by the IRS that the excess amounts are not deductible? Or is this something that requires a written edict formally disallowing the deduction? thanks.... -bri

My vote was that they did indeed qualify, which is why I brought it up with the actuary. The counterargument being if they aren't considered a participant for 401(a)(26), then why should they be a participant for purposes of top heavy accruals either. Not sure to the strength of that argument, since plenty of times folks don't qualify for an accrual year but don't lose their standing as participants. Seems like the actuary threw it to TAG and got the same answer. (And the warning not to exclude them by name in the document for reasonable classification purposes..) thanks.

So, I've taken a job where some of the DB plans have separate accrual rates for separate groups of employees. A lot of the times, the accrual rate for a specific group is 0%. We're not counting people in these groups towards our 401(a)(26) count, since there's no meaningful benefit accruing for them. Now - let's take an example where the plan is combined with a 401(k) plan, and they're top heavy. The employee in question is Highly Compensated but not Key, and he's in one of those 0% accrual groups. Who out here thinks he counts as a participant in the DB plan, for purposes of needing to get a 5% top heavy minimum in the DC plan (the plan where the top heavy is taken care of for all)? Versus who'd think he's not really a participant in the DB and can get by with just 3% in the DC.... I wish the document had excluded these employees in the eligibility section, where it would be much clearer that they're definitely not "in" the DB plan. But that's not what I've got. Thanks... --bri (insert witty signature here....)

Agreed - I've got a profit sharing plan that allows in-service after 5 years of participation. Folks would take hardship distributions for their kids' college expenses. Then suddently when they hit 5 years of participation, they were subject to the 20% mandatory withholding, which caught them by surprise, since they could elect out of withholding on hardships. -bri