401_noob

Hello again Pension mavens! Quick question about the Plan Characteristic code 2A for DC Pension Features. If the Plan has an integrated allocation would you list 2A as a characteristic code on the 5500? The description seems to suggest that you would since the allocation method provides for an additional rate on comp above the TWB threshold. Thanks for your time!

He will receive a match on the deferrals he never made. https://www.asppa.org/News/Article/ArticleID/4784/IRS-Highlights-New-Methods-for-Correcting-Elective-Deferral-Errors They also need to issue a notice to the participant no later than 45 days after correct deferrals begin in order to be eligible for this correction method. Rev. Proc. 2015-28 describes the notice requirements. New Methods for Correcting Elective Deferral Errors.pdf - Adobe Acrobat.pdf

I thought that this wasn't a deadline that was extended if it fell on a weekend or holiday based on some IRS publication from 2008 (I don't remember what it was titled). Thanks!

I recently came across a copy of ASPPA's CPC Study Guide on google and it says differently. Corrective Distributions Several types of corrective distributions exist: excess contribution refunds (ADP), excess aggregate contribution refunds (ACP), excess deferral refunds (IRC §402(g)) and IRC §415 excess refunds. Of these corrective distributions, IRC §415 excesses are probably the least common. These occur when an employer chooses to refund deferrals to allow a participant to receive the full employer contribution. All corrective distributions have the following in common:  Not eligible for rollover;  Subject to 10 percent federal income tax withholding unless the participant elects otherwise;  Not subject to the 10 percent additional tax on early distributions;  Allocable earnings should be distributed with the excess; and  Any match attributable to refunded deferrals must be forfeited. However, matching contributions can be refunded or forfeited based on the vesting schedule for an ACP correction if the deferrals to which the match is attributable remain in the plan. Corrective distributions differ:  Starting with the 2008 plan year, all are taxable in the year distributed, except distribution of excess deferrals (i.e., violations of IRC §402(g)), which continue to be taxable in the prior year and are taxable in both the prior year and the year of distribution if not timely corrected; and  Excess deferral refunds for HCEs are included in ADP testing; all other types of corrective distributions are excluded from nondiscrimination testing.

Her K-1 earnings would be considered her net earnings from Self-employment. Her compensation to be used for retirement Plan purposes would be her earned income which has to be calculated. It is a rather circular calculation.

Thank you everyone for your input. I don't have access to the Relius/Corbel document software and my colleague that does said that she hasn't seen any amendments to facilitate forfeitures used to fund SH and asked if I had. As I don't have access to the software/system I thought that this would be the best place for me to ask and you all answered my question. Thanks again!

Has anyone seen any successful document amendments for Plans to begin using forfeitures to fund SH contributions? I was hoping that FIS Relius would have released their good-faith amendments by now, but as I understand it they haven't. https://www.relius.net/News/TechnicalUpdateDetails.aspx?T=P&1=1&ID=1103 Thanks in advance!

I found some additional text regarding the vesting. As a general rule, the plan must count all years of service for vesting purposes, including participants' service before satisfying the plan's eligibility requirements or while suspended from participation in the plan because of employment classification. Hope this helps.

I know that it will for eligibility. The plan must count all of an employee's service, even if he or she is excluded from the plan by reason of another eligibility condition, such as a minimum age requirement or a job classification exclusion. If a plan excludes employees by job category (e.g., hourly-paid employees are excluded) an employee's service earned while he or she is in that job category must be counted toward eligibility. The plan cannot require the employee to complete another year of service for eligibility purposes after he or she moves to a covered classification if the employee completed a year of service while he or she was a member of the excluded classification. I am confident that it will for vesting too because there aren't but a few reasons that you can exclude prior years of service when determining vesting (prior to plan inception, prior to age 18...)

I agree with BG5150... here is what my DC-1 book says on the matter: Pages from Chapter 7- Contributions & Allocations from DC-1 Manual (searchable)-6.pdf

yes, a separate Form 1099-R must be used to report the total annual distribution from a designated Roth account.

Quick question on hardships for medical expenses. Would a participant be able to claim a hardship to pay for medical insurance? My first though is/was no, but as I look at the text I am unsure as the IRC seems to suggest that they can. The SPD says: The Plan does allow for hardship distributions for the following qualifying expenses:  Expenses for medical care (described in Section 213(d) of the Internal Revenue Code) for you, your spouse or your dependents.... When I look at IRC §213(d), 213(d)(1)(D) says for insurance covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract. exact copy and paste of §213(d)(1)(D) from Cornell Law below: (D) for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B(b)). In the case of a qualified long-term care insurance contract (as defined in section 7702B(b)), only eligible long-term care premiums (as defined in paragraph (10)) shall be taken into account under subparagraph (D). So, this seems to suggest that a participant can request a hardship for insurance premiums. Is there anything that I am missing that would prohibit this type of expense from being a qualified hardship? Thanks in advance!

I don't doubt that at all. I am just trying to get some documentation to provide instead of "my friends on a website said that it is okay"...

Does anyone have any credible resources that describe how a NHCE can get a $0 allocation in a cross tested plan when each EE is in their own rate group? Based on everything I read the gateway only needs to be provided to NHCEs that get an allocation, which would agree with the experts in this thread. So, if the plan can pass coverage by excluding specific NHCEs and it passes gateway for those NHCEs that do get an allocation, and it also passes rate-group testing, I don't see a reason why the ER could exclude certain NHCEs from the allocation. Does anyone know of examples of this scenario from ASPPA or the EOB? FWIW, the plan isn't TH or SH so there would be no Non-elective contribution allocated other than the discretionary PS contribution which excludes some HCEs & NHCEs. I'm trying to provide supporting documentation to show that this can be done. Thanks!!

So the company pays the HCEs taxable compensation to compensate them for the taxes that they have to pay? That seems rather circular.

Question: if a Plan's AA says that the Plan defines HCEs by TPG in the ADP/ACP testing section would it define HCEs the same way for Gateway and rate group testing? So could they say that for ADP/ACP testing the plan uses TPG to identify HCEs, but for rate group and gateway testing it uses calendar year definition to identify HCEs?

Kevin C and CuseFan are correct. The EOB says: All amounts distributed during year are ineligible for rollover until minimum distribution is satisfied. Any distributions in a year in which the participant is required to receive a minimum distribution (i.e., a distribution calendar year) are treated first as satisfying the required minimum distribution for that year. See Treas. Reg. §1.402 (c)-2, Q&A-7. This is true for distributions made in the first distribution calendar year, even though such distributions are not required to be paid until the RBD. Treas. Reg. §1.408-8, Q&A-4, provides that the same rule applies to distributions made from IRAs within a distribution calendar year.

Isn't there also something about including the excess amount from the distributing Plan in the ADP test if the participant is HCE? I seem to recall something like that but i may be mixing it up with something else. Thanks!

+1 for what ETA said, but I believe that the participant is supposed to tell the Plan Administrator which plan to distribute the excess from.

Thank you all for your input. I guess that explains why I've never run into this rule before as I don't have any interactions with DB plans. Maybe one day!

Good morning cyber friends! I have a quick question for you to help clarify something I've come across in my DC 1 book. It is in the Plan Amendments and Terminations section (Chapter 10) and deals with nondiscriminatory amendments. It goes on to say that the establishment or termination of a Plan is treated as an amendment. A subsection of the establishment of a Plan says that there is a Safe Harbor for past service credits limited to five years. "If a Plan amendment credits years of service for past periods to determine benefits, the amendment is deemed to be nondiscriminatory if no more than five years of past service is credited, the past service is granted on a reasonably uniform basis, and the service can be taken into account under service crediting rules of TR §1.401(a)(4)-11(d)(3). Say what?!?! Does this mean that a start-up Plan can only credit prior years of service for vesting benefits for the prior five years, or is this talking about contributions based on service (not applicable under a 401(k)/PS Plan)? The example in the book talks about establishing a DB plan, but the book is about Plan Qualification and Compliance, and a 401(k)/PS plan is a qualified Plan... I guess I am looking for clarification on how to apply this correctly. Thanks in advance!!!

My DC 1 book says that funding deferrals with forfeitures is not permitted. Forfeitures used to reduce elective contributions- Treasury regulations also prohibit the contribution of elective contributions made on behalf of an employee before the employee performs the services to which the elective contributions relate (or before the compensation would have otherwise become currently available had the deferral election not been made). While an exception is made for forfeitures applied to matching contributions, no exception is made for forfeitures that are allocated to satisfy the employer's contribution obligation with respect to elective contributions. Thus, the allocation of a forfeiture to another employee's account to satisfy the employer's obligation to contribute to the employee's elective contributions would be in violation of the regulations. The text cites the same thing Belgarath cited.

Valid point, I didn't think about that. The 404a5 fee disclosure would only apply to participant directed individual account plans. I am not familiar with DB plans or their respective disclosure requirements regarding fees, but I am assuming that the answer is no. Am I right?

Karonline's response regarding the QNEC is the corrective contribution for failing to implement your After-Tax contribution. I want to say that the QNEC is 40% opposed to 50% though. I don't think that After-Tax failures were included in the new methods for correcting deferral errors that I included above.

If not previously done so, wouldn't you have to disclose the fee to the participants via 404a5 fee disclosure at least 30 days prior to the fees being charged to their accounts?