shERPA

Potentially, yes. But the A-T voluntary are subject to the ACP test and the SH doesn't get you out of ACP for them.

Clearly a PT - using plan assets for benefit of a disqualified person, the plan sponsor (by using it to reward clients).

How much money is in the affected funds and what is the delta on the fund expense? Calculate the potential fee savings during the proposed delay period compared to the cost of the additional notices and distribution. Seems to me if the fee savings over X months is less than the cost of the notices then the fiduciaries can prudently decide to delay the change.

Participant rolled into his employer's plan several years ago. In 2013 he requested a distribution of his rollover, and it was paid out - he did not do a direct rollover. Now that he's received the 1099-R with a taxable amount showing, he is telling us that the funds originally rolled into the plan were not from another plan, just his own personal funds that were already taxed, just because he wanted everything "in one place". He wants the 1099-R revised to reflect the same. If he is correct - and that's not certain - then it should have never rolled into the plan in the first place. But how is my client the plan sponsor supposed to know this if was originally represented as such? And what sort of documentation should the sponsor require before considering amending the 1099-R - if he should even consider this at all? Any other correction the sponsor should consider? It is out of the plan now so if it was an invalid rollover at least it is now corrected. Thanks.

I think the concept works. Tried to get traction on the idea with CPAs last year but it really didn't get much interest. But I think the $18.9K and immediately convert to Roth is a great idea. I was concerned about the conversion triggering a basis recovery ratio on the entire DC plan, but under IRC 72(d) it says that employee contributions in a DC plan may be treated as a separate contract. I had a few plans in the early 80s with voluntary after tax contributions, I don't remember the mechanics of how they were actually made to the plan. I think the ee can write a check to the plan based on our documents at least which classify them as being made by the ee.

What Kevin and Austin said. I've heard IRS answer questions that certain amendments are permissible, it is quite a stretch to take this to mean that anything other than what they've specifically permitted is disallowed. The regs don't say this.

Beyond the three and four letter agencies, the participants likely have a claim to their plan benefits under ERISA. Yes if the plan failed to qualify the contingent language could invalidate the plan retroactively. But if it failed to qualify because the ER specifically asked for the DSQ (or even a more mundane reason like not sending in a proposed amendment to change some minor language per IRS request in the DL process), perhaps the participants could allege that such ER action constituted a fiduciary breach.

I still agree with jpod and David. The plan has the participant's election for a direct rollover, a canceled check properly payable to the rollover IRA custodian and cashed by that institution. A phone call from a participant that he or she misdirected the funds does not create an error on the part of the plan. The error is with the either the financial institution, the participant, or both. jpod's recommendation that the IRA custodian issue a 1099-R is the closest thing to a "correct" way to report what happened. And even if there is no 1099-R, assuming the participant is correct he should just report the taxable income and pay the tax. IRS may eventually question it when they match up the 5498 (or lack thereof) with the 1099-R, but so what? A response that the participant did not complete the rollover would take care of it.

I agree with jpod. Sounds like the payor did everything correctly and should not amend the 1099-R. It's the participant's issue (and possibly the bank for depositing a check improperly).

Whether or not the participants entering on 7/1/13 accrue a benefit for '13 is a function of the plan document, not the valuation. What does the document say?

Durando and Durando v U.S. https://law.resource.org/pub/us/case/reporter/F3/070/70.F3d.548.94-15716.html

Penchecks Trust, http://www.penchecks.com/ also does missing participant IRAs, will search for the missing participants and enter their data in their free online database, http://www.unclaimedretirementbenefits.com. Before paying to an IRA, the plan sponsor needs to make a diligent effort to locate participants, simply "not responding" is not sufficient before defaulting to a IRA. See DOL FAB 2004-2. I also echo the PBGC caution expressed above. Years ago we did IRAs for two small DB benefits in a PBGC-covered plan. PBGC required us to send to them instead.

They are the same "employer". Original hire dates. You will likely find language in the plan document that defines service to include hours of service for any employer aggregated under 414(b), © or (m). Often in the hours of service definition.

The late deferrals constitute a separate prohibited transaction in each year, so a 5330 is due for each year. Additionally, each year the PT compounds. IOW the late deferrals in 2010 are a PT in 2010, and since they are still outstanding in 2011 there is a new PT in 2011 for the 2010 employer's use of the deferrals as well as a separate 2011 PT for the employer's continued use of the 2010 deferrals in 2011. I believe the IRS considers the PT ongoing until fully corrected with both deferrals and interest deposited to the plan, however I've seen others treat the PT as corrected when the deferrals are deposited. If you run PT and excise tax calcs on the interest, at some point the excise tax reaches ridiculously tiny amounts where the client will question your heritage, competence and sanity when they are presented with a 5330 for $0.03 (and a bill for 1000x that amount). But be aware according to the IRS phone forum on 5330 preparation from two or three years ago, there is no minimum threshold for filing the 5330.

According to this Fact Sheet, "IRC 7701(j) states that the TSP [Federal Thrift Savings Plan] is to be treated as a trust described in 401(a)..." I think this answers your question WRT the TSP, for the military, pub 525 says military pensions are reported as income on the pension income line of 1040, since there is no separate line for military retirement income presumably military plans are also treats as 401(a), though I don't have a specific cite for this. https://www.tsp.gov/PDF/formspubs/oc94-20.pdf‎

The DB may very well be designed such that it stands on its own and is not aggregated with the DC plan. If this is the case, it is likely that the client is being more generous to the NHCEs than would be necessary if the plans were aggregated. Maybe that's OK with the client, maybe not. Just sayin'....

No way around it, he is a partner in the firm and the firm is the employer, he is the employee of the firm - 401©(4) I think. He can set up an LLC or a corporation and make it the partner in the firm and he can be the employee of the entity, but then it is a classic A-org ASG - 414(m) - ownership, service orgs, regularly associated - all the boxes are checked. If it were that easy to get around these rules, everyone would be doing it this way, right?

A TPA doesn't have to accept anything, be it trips, revenue sharing, a can of popcorn, etc. Trips with all the vendors we work with have been scaled way back over the last few years and are mostly just another business trip. Yes it might be in a nice spot and there may be a couple of activities in the afternoon, but it is still business. Why go? Relationships. Business is still relationship driven and if a TPA is going to hitch his or her wagon to a vendor, it is in the TPA's interest to feed, nurture and maintain relationships with key people. The vendors see it the same way, they are looking at TPAs as a distribution channel and a key driver in client retention, so they also have a vested interest in the relationship, which is why they sponsor these conferences. They send their key people to them at great expense, and they want to see their key partners there.

Focus on DB/CB and other sophisticated plan designs, not 401(k) plans. Non-producing TPA shops' 401(k) business is more and more at the mercy of the vendors and advisors, many of whom will not hesitate to throw the TPA under the bus over fees or whenever something goes wrong, regardless of the cause. Don't blame the TPAs, they are at the end of a very long tail just trying to hang on. Most plan sponsors won't pay the full price of what it takes for 401(k) compliance and recordkeeping, the advisors control the relationship (and have used 408(b)(2) fee disclosure to further beat up on TPAs). In the 401(k) world it is a race to the bottom and in this world the Paychex-type providers have the advantage They have huge distribution so they can afford to lose the small percentage of clients who will get audited and tagged for non-compliance, and they contract away their responsibility for compliance with ERISA or the IRC, (read their contract, it is right there in Section 7) - they just process what is sent to them.

Does a DC plan need to have language for the additional gateway 5.5% - 7.5% needed when aggregating and testing a DB/DC combo that is not primarily in nature? I am looking at adding a DB plan for a client, they have a 401(k)/PS with a bundled provider that is on a volume document with individual groups. They would like to leave that plan as is for now. The plan provisions work, but there is nothing about the additional gateway in this document, just the DC 3:1 and 5% rules. The volume documents I'm familiar with (Datair and Relius) do have this additional langauge.

Yes the amount commencing on 7/1/14 would include a full 2014 accrual. There would be no further increases becauses in my example this person retired. The point is that the new retiree gets his full 2014 accrual on 7/1/14, as compared to the late retiree in pay status still working getting his 2014 accrual starting [the original question - what's the right date?]. Waiting until 2015 would be the easiest way to administer it, but this seems inconsistent with what the new retiree would get. Yes they were really doing 1/12 of the increase each month. That can't be right given the 1,000 hour requirement.

That's where we're coming from 2cents. Historically, they have increased the benefit each month. So for example, if based on anticipated compensation they expect the participant to earn a $36 accrual for the year, they would increase the benefit $3 per month, and then true up the next year based on actual compensation. Clearly administratively burdensome, and doesn't make sense to increase the benefit at all prior to the participant completing 1,000 hours to accrue the benefit. And nothing in the prior documents we've seen supports this. As part of our takeover we're trying to sort these sorts of issues and then document it. We'd like to not pay any 2014-earned increase until 1/1/15, but if a participant not previously in pay had retired 7/1/14 with 1,000 hours for the year, the benefit payment would normally include the 2014 increase and start before 1/1/15.

A takeover plan is a unit credit accumulation plan formula, where the benefit is the prior year AB plus the current year's accrual based on current year pay times 1.25%. No lump sum option only life and QJSAs. 1,000 hours required to accrue each year. When participants reach NRA, the plan begins to pay the participant's monthly benefit, even if the participant does not retire. So if a participant attains NRA in 2013 and begins receiving his monthly benefit, and then accrues an additional benefit in 2014, when does the payment increase? a. First of month after completing 1,000 hours (except that the amount of the benefit is not yet known because 2014 total wages aren't known); b. First day of the next plan year? c. as soon as administratively feasible in the next plan year with a catch up back to when the benefit accrued? d. Other? The plan document has no language addressing this, the prior plan documents that we have obtained do not address it either. Thanks.

Yes, we will set up a separate PS where the existing plan's PS allocation is not favorable and no last day requirement. Sometimes they stay separate, sometimes they merge in a future year. Nothing precludes an employer from establishing multiple plans, and since PS contributions are discretionary, nothing stops an employer from choosing which plan to contribute to in a given year.

We're getting them too. 3 calls so far today. Is Treasury trying to bail out the postal service by generating lots of snail mail? What a waste of time, money, energy and trees. Don't they realize people freak out when they get letters from the IRS?