M Norton

Thanks for the great advice! Per a review of the plan document, I find "If the Adoption Agreement does not permit Participant self-direction, any assets that are held in the form of a Participant loan ... shall be treated as a segregated investment." I had looked at the plan document but somehow didn't pick up on this until I saw your responses, especially Luke Bailey who added his comment about it being unusual for a loan not to be a segregated investment. Much appreciated!!

Last year we took over TPA work on a medical practice's SH 401(k) with all assets held in pooled Schwab account. Doctor took out plan loan at the end of 2019, and during 2020 made regular loan payments as deductions from his pay check. When allocating earnings for 2020, do you allocate the loan interest only to the doctor? Or is that interest combined with other plan earnings/losses and allocated across the board to all eligible participants the same as other plan investment income or losses? Thanks!

Not-for-profit client adopted a SEP on a Merrill Lynch SEP document (not IRS form) with a fiscal year end of 9/30. Can a SEP have a fiscal year? I have seen only calendar-year SEPs. Thanks.

Doesn't the custodian of plan assets have some liability here? After all, the money appears to have been distributed without approval from the plan administrator or the plan trustee.

thanks, BG5150!

Widowed male (age 81) put pre-tax money in a 401(k) plan during employment; on retirement at age 62 he began receiving a monthly distribution. The plan accounts are now managed by T Rowe Price. The monthly payments have never increased. The individual is concerned that the required minimum amount for 2021 (based on his age and account balance) will be more than the annual total of monthly payments. What is his best option for determining whether the payments must be increased? (The original plan was sponsored by Westinghouse). Thanks!

It was our understanding that the plan sponsor could decide each year what safe harbor contribution would be made, and had to notify the employees before the beginning of the year what the SH contribution would be for the coming year.

In 2018, small plan sponsor adopted a SH 401(k) plan with SH match provisions, using the FtWilliam BPD. For 2019 plan sponsor wanted to switch to the SH NEC so we prepared the SH notice with that language to hand out to employees by 12/1/2018. Again for 2020 he wanted to do the SH NEC so again the SH notice had the SH NEC language and was distributed to employees around 12/1/2019 (right before the SECURE Act was signed). Now that notices are no longer required if a plan sponsor wants to do the SH NEC, does the plan document need to be amended to remove the SH match language? Thanks.

401(k) plan, sponsor has bi-weekly payroll, every other Friday. Deferrals are withheld from payroll Friday, the 10th of the month. The due date, seven business days, would be Tuesday, the 21st. Plan sponsor writes a check for the deferrals and mails it on Monday, the 20th. It is received and posted to the brokerage on Thursday, the 23rd. Just looking at the activity in the plan brokerage account it appears the deferrals were late, but the payment was mailed timely. Does the check date count? The postmark on the envelope? Help appreciated to resolve a discussion here. Thanks!

Thanks, Gary!

THANK YOU, C. B. Zeller - that language is in my FtW plan document - exactly what I needed. I really appreciate you pointing out what I should have seen for myself. Just in too big a hurry this time of year.

I have a client - a one-physician office, wife manages the office - with SH 401(k). Plan provides the SH NEC 3%, but has last-day rule for PS allocation. 8 NHCEs, 2 of whom terminated during the year, so they get the 3% in addition to their deferrals, but no PS. I pass coverage at 75% but I can't get through the gateway because all the terminated are getting is 3% instead of the 5% needed for the gateway. I need to allocate 2% to them to get through the gateway using FtWilliam basic plan document. Can I use an 11(g) plan amendment to allocate that 2% for 2019? Thanks!

SIMPLE IRA plan has excess Employer match contributed for 2 participants for 2019 plan year. The excess match totals $120, but excess is less than $100 for each participant. Rev Proc 2019-19 says if the excess amount is $100 or less, the Plan Sponsor is not required to distribute the excess.. The question is whether that $100 limit applies by participant or does it apply to the plan as a whole? Thanks!

Husband and wife own a small business and sponsor a qualified retirement plan. Both are over age 70 1/2, and take RMDs. Husband died in 2019 before taking RMD. As his beneficiary, wife took his RMD, and also took her RMD. The balance in the plan was then rolled from the pooled account into an IRA in the wife's name and the plan was terminated, in 2019. The questions is: how many 1099-R forms must be filed? One for his RMD paid to her from the plan as beneficiary, and one to her for her own RMD from her account in the plan, and a third to her for the rollover to the IRA. Is there any reason to do a separate RMD for his remaining balance in the plan that rolled to her IRA? Thanks!

To clarify and confirm: RatherBeGolfing is correct - the plan sponsor distributed the Safe Harbor notice in 2018 for the 2019 plan year. The SH notice for the 2020 plan year was not provided to the client and so was not distributed to the participants. Thanks for the responses and the advice!

Yes it is the 3% SH nonelective - and yes the SECURE Act says plans that use the SH NEC will not be required to distribute notices to participants before the beginning of each plan year, beginning with plan years beginning after 12/31/2019. That would be this particular plan. Thanks so much, 'justanotheradmin' - you are my hero for today!

We are part of a CPA firm, and perform plan administration and reporting services for clients of the firm. Mid-2019 we billed plan sponsor for 2019 plan work. Plan Sponsor was not happy with the amount of the bill and told CPA they were going to find someone else to do TPA work, but CPA would continue to do their accounting and tax work. Today we learn they did not like other TPA options and so decided to stay with us. Unfortunately, they did not inform us (or the CPA) of that decision. They want us to continue to perform TPA work and reporting for their plan for 2019 and going forward. During the time we thought we were fired for TPA work, we prepared the SH notices for our clients, but did not prepare one for this particular client, thinking they had another TPA doing their retirement plan work. So I think it is highly probably that no SH notice was distributed to participants. They have had a SH 401(k) plan for several years, and deposit the SH contribution along with the employee deferrals every pay period. Can they still be a SH plan for 2020? Any options?? Thanks!

Thanks, ESOP Guy and Luke Bailey! You have been so helpful!

Finally have additional information: Plan has been in existence since 1987. From inception, the plan has excluded bonuses from the definition of plan compensation. In 2014 a new adoption agreement was signed to restate for PPA. The exclusion of bonuses from plan comp was inadvertently omitted from that restatement. The plan sponsor changed service providers in 2019. The new TPA prepared a new adoption agreement and asked about excluding bonuses. It was then that the plan sponsor became aware of the error in the 2014 adoption agreement. They had continued to exclude bonuses in operation as they always had, without realizing the clerical error in the 2014 adoption agreement. Could the change in the 2014 adoption agreement be classified as a "scrivener's error", because of the documented history of plan operation in which bonuses were excluded from inception of the plan, with evidence that the plan sponsor continued to operate the plan using the same definition of compensation as it always had done? Thanks!

It was determined (after year-end) that a large traditional 401(k) plan had a partial plan termination in 2018. The plan operates on the calendar year. Additional match contributions (plus earnings) were calculated and deposited to the plan in late 2019 as a correction for the 2018 partial termination. The plan administrator had originally calculated refunds to HCEs for failed ADP/ACP. Now the PA is saying that the plan had to be re-tested for the 2018 plan year after the correction for the partial plan termination, and additional refunds are due to the HCEs. Should the compliance testing for 2018 be re-run as a result of the corrective actions taken for the partial plan termination? Thanks!

Traditional large 401(k) plan (not safe harbor) with 9/30 year end - original effective date 1987. Volume submitter adoption agreement defines compensation as W-2 wages and does not exclude bonuses. This is a new client for us; our firm is doing the audit for the 9/30/2019 plan year end, taking it over from the prior auditor (who recommended us). We see that various bonuses were paid to employees for performance, safety, etc. at year-end. However, the plan sponsor did not calculated or withheld deferrals from bonuses. As far as we can tell, they have never withheld deferrals from bonuses, and did not realize they were supposed to do so. They are restating the plan to give employees the option to elect out of deferring from future bonuses. The question is: what to do about the past? The plan sponsor has been operating in a manner that would have been permissible under law but not in conformity with their plan document. Does their consistency for the past 20+ years show that they never intended to include bonuses in the definition of 401(k) compensation? Will that consistency protect them from penalties and sanctions? If not, what is the fix for this? How far back would they need to go to "make it right"? Do they need to include all plan participants who have deferred or can they elect to exclude the HCEs from the fix? Thanks!

Existing Money Purchase Pension Plan has 7% allocation. Eligibility is age 21, 1 year of service - dual entry dates. You will receive an allocation if you have met eligibility and are employed on the last day of the year OR have worked 501 hours. The plan sponsor is considering lowering the contribution percentage. What is the deadline for doing that? Can the plan be amended prior to the beginning of 2020 to reduce the contribution percent to 3%, effective 1/1/2020? Could it be lowered during 2020 if the plan sponsor chooses to do so? Thanks!

Thanks, Larry! I was getting distracted by the fact that they work in the same physical location.

Barber operates a barber shop as a Sch C. He has another barber also working in his shop and pays her as contract employee (for past two years). She has reported her income on her own Sch C, and contributed to her personal IRA. Barber owner marries barber contract employee, but working arrangement remains the same. Barber contract employee is considering starting her own SIMPLE IRA for her Sch C. Can they really maintain two Sch C's when she's working in his shop? And are there any controlled group issues that would affect a SIMPLE IRA due to attribution? Thanks!

Great idea on limiting loans to deferrals source - thanks, Bird!