shERPA

Agreed, sounds fine. I think "the Gold Standard" memo was for really abusive practices, such as bringing in very short term employees for December to skew testing results. Have no issue with someone who was in the plan half the year. IAW Larry & Tom vesting is not an issue here - only if bringing them in after the fact via -11(g). My only caution is that employers may not want to do this for personnel reasons. Different clients have different thoughts on this, but it's not unheard of for employees compare notes on things like PS contributions. It's easier when the dollar amounts are close even though percentage wise one employee is getting a lot more to pass the test.

I don't think the few extra dollars inadvertently added to the match automatically constitute a PS contribution. The employer did not declare any PS contribution, they simply made an error in the match calc. If it's really small I'd say ignore it. Or "forfeit" it and use it to adjust a match deposit this year.

This is a debate that goes back at least 30 years. The form instructions are clear for unallocated contracts and contracts that guarantee a specific benefit. But as Bird notes this is not what most policies do, and on all these other policies the instructions are silent. I don't really care if they have to be reported or not, I would just like DOL to state whichever it wants clearly in the instructions, so we can put this to bed and argue about other stuff, like amending safe harbor plans! ?

This is probably better most of the time anyway. I'd hazard to guess that Larry occasionally stars as one of the experts, so now Austin's question has been asked and answered! ?

Be careful what you wish for, you may get it - good and hard. Look at it this way, if the IRS had wanted to, they could have written the reg to say that the SH provisions had to be in the plan and the SH notice distributed at least 30 days prior to the BOY. They didn't say this.

Honestly, I think a reading of -3 of the (k) regs gives us the answers. Why ask a Q&A that gives an IRS representative the chance to misspeak? The regs specifically say amended before the beginning of the year. And the regs specifically say the timing of the notice is based on all relevant facts and circumstances. I'd say an amendment to the plan is relevant:

The 30 day thing is just a deemed timely period for the notice. There is nothing that prevents an employer from amending a 401(k) plan in or out of SH, or changing the form of SH for the following plan year, up thru 12/31. If it is changed then a new notice is needed ASAP. Once the new year starts, then the rules limiting SH changes apply.

I recall the same as Mike.

Thanks Larry, yes 401(a)(10). I don't know who the prior firm is but will see if we can put the question to them. But I agree, I don't think they can, I certainly don't see the authority for it. I do this a lot with 3 year cliff, but never 5. I do clearly remember hearing this once at a conference session, but it was probably 15 years ago, I don't remember the speaker and certainly don't have the outline. It's never come up in my world until now. Absent a relevant cite, looks like we'll need to recommend VCP for both the document failure (not providing for a 416 compliant vesting schedule) and 2 missed RMDs.

BITD I remember attending a conference session where the presenter stated that an owner-only plan with no non-key employees did not need to include 416 provisions. The reason would be to set up a plan with a 5 year cliff vesting schedule to delay RMDs as long as possible. But I can't find any authority for this. 410(a)(10) and the 416 regs flatly state that all plans except those mentioned in Q&A T-38 must have such provisions. And the vesting language applies to all employer-derived benefits, not just those of non-keys. We just took over an owner only DB and the prior firm had used a 5 year cliff vesting and in the TH section it states that the TH schedule is the plan schedule. As luck would have it, a 3 year cliff would have required 2016 and 2017 RMDs. Anyone know of any authority for using a non-top heavy vesting schedule in an plan with just a single key ee/owner participant?

Maybe Tom should send IRS his spreadsheet? ?

Yes to what Larry and Bill say. Big difference between an employer who has problems but wants to comply and one with problems and doesn't want to comply. The latter don't make good clients, they eventually turn into really bad former clients who badmouth you, and they can also turn into expensive plaintiffs it if all goes sideways while on your watch.

Yes, the table won't affect the results unless imputing PD or with participants past NRA (otherwise you are just dividing the projected contribution by a constant [test age APR] for all participants). IME depending on demographics it helps to use either the shortest or the longest table. In practice I've used 71 GAM, 83 IAF, or the applicable table. I can't recall where anything in between ever helped, but it's been a long time since I experimented with this.

I'd love to be able to do 401(h). We did it BITD before the '84 act made the contributions an annual addition. Yes, if used to pay retiree medical, it is a tax-free distribution. But there are problems: 1. Can't terminate the plan. Or if they do the 401(h) assets revert. There is someone out there circulating marketing info that says otherwise, but IRS guidance is very clear. Could probably terminate the DB and transfer to a frozen MP to continue the med account, this would simplify a bit, but still have to have a plan sponsor until the med account is spent. 2. No VS plan documents that I'm aware of support this. And doing individual plans now is difficult WRT ongoing determination letters. 3. Like any ancillary benefit it has to be non-discriminatory. Life insurance in the plan? Not a fan. If it is a law firm it should be a combo plan. If it is a combo plan then the NHCEs are likely getting close to the (a)(26) minimum 1/2% benefit. If ancillary death benefits are added at the 100x factor, the HCEs get discriminatory death benefits. Adding life insurance in the DC is not a solution because the premium expense reduces the ultimate DC retirement benefit whereas in a DB the retirement benefit is not reduced. IOW in a DC the life insurance is ER paid, in the DB it is ER paid. Someone is offering this with an extra ER DC contribution to NHCEs to pay for the insurance. Might work, but lots of brain damage. And lots of expense to the employer that never get to the ees due to ee turnover and policy surrender charges. Also must annually report cost of insurance as income to participants (Ins cos and agents love to hang this on TPAs). Ya think?

Agree with the others, no such requirement. And there is a definite downside, especially to an MP plan that will have a specific contribution amount for the year. In a prior firm we worked with an advisor who always opened an account with $100 in it before year end. Problem came up when we later told the client the total contribution for the year they forgot about the $100 and deposited the full amount. And would repeat this year over year. Creates more trouble than it is worth (which isn't saying much because opening the account is worth nothing).

Some common sense on notices would be good. MEPs - the commonality stuff is DOL interpretation, IIRC the bad apple rule is a treasury reg, not code, so these can be changed by the agencies. Whether or not it moves the coverage needle significantly, we'll have to see. IMO the existing rules are unnecessarily restrictive and not necessarily consistent with the underlying law. RMDs - the requirements are in the code. Other than tweaking the tables don't know what IRS can do. The individual account method is already pretty back loaded because there is no earnings factor built in, just account balance divided by life expectancy. Upping the RBD is probably a good idea now, but will need Congress to act.

it is a systemic problem, it just happened to a client of mine last week and it happened to me personally a few years ago. IRA custodians issue 1099-Rs, but 401(k) plans don't issue 5498s or anything else that would match up the 401(k) plan roll-in with the IRA distribution. In my own case I had properly reflected this on my 1040 with a net zero taxable amount, but that didn't stop the inquiry. Letter, copy of statement or other evidence of deposit to the 401(k) clears it up. On the first try, at least for me. It's a bit disconcerting for clients who are not used to dealing with IRS to get something from them, and it's not exactly a friendly inquiry, it is basically a statement telling the taxpayer they have recalculated their taxable income and tax.

My policy as well. Life's too short to deal with this.

Agreed, how could it not be a PT?

Three whole weeks?!? Good grief. She is a former participant. What Bird said.

Why? PW has to be paid to comply with the PW contract. If it is done as a match, then for ees who don't defer it must be paid in cash (costing the ER more money in payroll taxes and workers comp premium), or it is put into the plan via another bucket (so all the PW ees end up with the contribution whether they defer or not), effectively defeating the "match" aspect. Why?

Service is service, whether they are in an ineligible classification or not. 410(a) provides for the exclusion of the NRA employee, not the NRA employee's service. Same with collective bargaining exclusion. the CB employee is excludable, not the service. But she's not an excludable NRA in 2015 anyway, based on my understanding of the facts. She had US source income in 2015 because she performed the services in the US and was here more than 90 days per 861(a)(3) noted above. If she had US source income she's not an excludable NRA.

She's not statutorily excludable. The exclusion in Section 410(a) is: (C) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)). She was paid earned income from a source within the US (would have to be <+90 days and <= $3,000 to be treated as non-US), so she doesn't meet this exclusion. Follow the above cites to verify.

Yes, she is an employee from day 1 in 2015. Someone is either an employee or an independent contractor. Hard to see how she would be an IC under common law. This would also mean she'd been self-employed, but the visa itself has employment restrictions that would preclude this. Furthermore social security tax does not determine employment where there is a specific exemption from it in the law. See below from IRS and note the repeated use of the term "employment". IRS considers her an employee. https://www.irs.gov/individuals/international-taxpayers/alien-liability-for-social-security-and-medicare-taxes-of-foreign-teachers-foreign-researchers-and-other-foreign-professionals ------------------------------------------------------------------------------------------- Nonresident aliens, in general, are also liable for Social Security/Medicare Taxes on wages paid to them for services performed by them in the United States, with certain exceptions based on their nonimmigrant status. The following classes of nonimmigrants and nonresident aliens are exempt from U.S. Social Security and Medicare taxes: J-visas, and Q-visas. Nonresident Alien scholars, professors, teachers, trainees, researchers, physicians, au pairs, summer camp workers, and other non-student aliens temporarily present in the United States in J-1, or Q-1/Q-2 nonimmigrant status are exempt on wages paid to them for services performed within the United States, as long as such services are allowed by United States Citizenship and Immigration Services (USCIS) for these nonimmigrant statuses, and such services are performed to carry out the purposes for which such visas were issued to them. Exempt Employment includes: Employment as a professor, teacher or researcher. Employment as a physician, au pair, summer camp worker, or any other non-student category of exchange visitor. Limitations on exemption: The exemption does not apply to spouses and children in J-2, or Q-3 nonimmigrant status. The exemption does not apply to employment not allowed by USCIS or to employment not closely connected to the purpose for which the visa was issued. The exemption does not apply to J-1, or Q-1/Q-2 nonimmigrants who change to an immigration status which is not exempt or to a special protected status. The exemption does not apply to J-1, or Q-1/Q-2 nonimmigrants who become resident aliens. H-visas. Certain nonimmigrants in H-2 and H-2A status are exempt as follows: An H-2 nonimmigrant who is a resident of the Philippines and who performs services in Guam; An H-2A nonimmigrant admitted into United States temporarily to do agricultural labor. For more information on foreign agricultural workers, see Foreign Agricultural Workers, Exemption from Withholding of U.S. Federal Income Tax and U.S. FICA Taxes.

Quite right. Participants, APs and their attorneys often try to get the plan and employer involved in things beyond their scope.