Belgarath

So, if you have a salaried employee who has an employment contract that says the employment contract begins on January 1, 2017, and ends on December 31, 2017, at a stipulated monthly salary of "x" - do you keep this person out on the 7/1/entry date? Just curious. We take whatever employment commencement date the employer gives us (unless there is something obviously wrong) and run with that. Sal puts it nicely, as usual, when discussing this issue. To paraphrase, he says it is a matter of interpretation, and that the "benefit of the doubt" is usually given to the participant. Also says "The terms of the employment agreement (if any), the manner in which compensation is calculated for the individual, or other relevant factors may need to be considered in identifying the appropriate ECD."

Yup, precisely illustrates my point. Up to the employer to determine "hire date." And the employer can't artificially keep people OUT of the plan either. For example, if you have an employment contract stating you are an employee as of 1/1, (but due to the weekend you don't actually perform an hour of service until 1/4) then I'd argue that you cannot be kept out of the plan on the 7/1 entry date because you didn't start "work" until 1/4.

Ah, but how do you KNOW you exist? Welcome to...The Twilight Zone.

It depends upon what the employer defines as the "hire date." If the actual "hire date" is 1/3, then I say no, not eligible on 7/1. If the "hire date" was officially determined as 1/1 or 1/2, then enters on 7/1. I agree that consistency is necessary.

Thanks.

What's interesting about this is that the transition period, unlike the transition period in 410(b)(6)(C) which is the end of the calendar year following the calendar year the transaction takes place, is a TWO year transition period. So if it takes place in 2017, and you otherwise satisfy the requirement, you can run the SIMPLE through the end of 2019.

A new one to me. Employer gives incorrect payroll data - essentially added back in deferrals twice, thus overstating comp for many participants. As it happens, this excess amount put one person over the top to be considered a HC. And this person, as incorrectly being considered HC, caused an ADP failure, resulting in refunds! So, question is, can this be corrected as a valid self-correction under RP 2016-51, Section 6.06(4), by notifying the affected participants, and giving them the option to repay, or not, and for those who do, issuing corrected 1099-R's showing zero? Other solutions? Even if you went through VCP, I'm not sure what other reasonable solution could be proposed anyway? This business is rarely dull. P.S. - I just found this:

Thanks. But, coverage was never the question - the question asked to us was preserving the safe harbor status. And given that it turns out that the plan was already amended to suspend safe harbor contributions, I don't see how SH status can be preserved. Thanks to all for your responses.

Thanks Kevin - good point. These aren't plans or businesses we have anything to do with - just trying to answer a question from a CPA who does some business with us, and we are operating on nearly zero information. It turns out, however, that the business sponsoring the SH plan already amended it to suspend SH contributions, so all of this is probably N/A. But good to remember the next time it comes up!

Thanks. However, I'm not certain I necessarily understand what you are saying. Are you saying that the "A" SH plan in this situation retains safe harbor status, or not? Since the buyer is assuming the plan of the seller, there's no severance of employment/distribution event. I agree that service with A must be credited for B's plan, etc.

Starting with the fact that 1.401(k)-5 is "reserved" so that there is not necessarily any clear guidance... Let us assume that both plans operate on a calendar year basis. Let's further assume that both businesses are corporations. Say Corporation A has a SH 401(k) plan. Corporation B has a non-safe harbor 401(k) plan. Corporation B buys Corporation A's assets, and all of A's employees come to work for B. B wants to assume the assets and liabilities of A's plan, and merge A's plan into its own plan while still preserving the safe harbor status of A's plan for the year. I'm not sure I see any way to do this. I think corporation A's plan could be TERMINATED, and thus preserve safe harbor status, but I don't see how it would work in a merger of the plans. Thoughts? If instead it were a stock sale, I don't see that it alters the outcome. Thoughts? (If B's plan were a safe harbor plan of the same type, then I think a good argument might be made that the plans could be merged while preserving safe harbor status, but that's another issue altogether.)

You might be. Generally not subject to FICA unless pursuant to IRC 3121(b)(7)(E) re agreements under Section 218 of SS Act, or IRC 3121(b)(7)(F) re employees who are not covered by a state or local retirement system. I'm sure some other folks here can give you a better answer - but I'd run your question by a competent tax advisor, plus asking your benefits/HR person if they are competent, because there could be substantial ramifications for your future SS benefits, as you've noted. I don't think most people ever ask this question.

Any chance it is exempt under the following? Not all wording copied over properly... Do Not File a Form 5500 for a Welfare Benefit Plan That Is Any of the Following: 1. A welfare benefit plan that covered fewer than 100 participants as of the beginning of the plan year and is unfunded, fully insured, or a combination of insu unfunded, as specified in 29 CFR 2520.104-20. 2. A welfare benefit plan maintained outside the United States primarily for persons substantially all of whom are nonresident aliens. 3. A governmental plan. 4. An unfunded or insured welfare benefit plan maintained for a select group of management or highly compensated employees, which meets the requirements of 29 CFR 2520.104-24. 5. An employee benefit plan maintained only to comply with workers’ compensation, unemployment compensation, or disability insurance laws. 6. A welfare benefit plan that participates in a group insurance arrangement that files a Form 5500 on behalf of the welfare benefit plan as specified in 29 CFR 2520.103-2. See 29 CFR 2520.104-43. 7. An apprenticeship or training plan meeting all of the conditions specified in 29 CFR 2520.104-22. 8. An unfunded dues financed welfare benefit plan exempted by 29 CFR 2520.104-26. 9. A church plan under ERISA section 3(33). 10. A welfare benefit plan maintained solely for (1) an individual or an individual and his or her spouse, who wholly own a trade or business, whether incorporated or unincorporated, or (2) partners or the partners and the partners’ spouses in a partnership. See 29 CFR 2510.3-3(b). §2520.104-21 Limited exemption for certain group insurance arrangements. (a) Scope. Under the authority of section 104(a)(3) of the Act, the administrator of any employee welfare benefit plan which covers fewer than 100 participants at the beginning of the plan year and which meets the requirements of paragraph (b) of this section is exempted from certain reporting and disclosure provisions of the Act. Specifically, the administrator of such plan is not required to file with the Secretary a terminal report or furnish upon written request of any participant or beneficiary a copy of any terminal report as required by section 104(b)(4) of the Act. (b) Application. This exemption applies only to welfare plans, each of which has fewer than 100 participants at the beginning of the plan year and which are part of a group insurance arrangement if such arrangement: (1) Provides benefits to the employees of two or more unaffiliated employers, but not in connection with a multiemployer plan as defined in section 3(37) of the Act and any regulations prescribed under the Act concerning section 3(37); (2) Fully insures one or more welfare plans of each participating employer through insurance contracts purchased solely by the employers or purchased partly by the employers and partly by their participating employees, with all benefit payments made by the insurance company: Provided, That— (i) Contributions by participating employees are forwarded by the employers within three months of receipt, (ii) Refunds, to which contributing participants are entitled, are returned to them within three months of receipt, and (iii) Contributing participants are informed upon entry into the plan of the provisions of the plan concerning the allocation of refunds; and (3) Uses a trust (or other entity such as a trade association) as the holder of the insurance contracts and uses a trust as the conduit for payment of premiums to the insurance company. (c) Limitations. This exemption does not exempt the administrator of an employee benefit plan from any other requirement of title I of the Act, including the provisions which require that plan administrators furnish copies of the summary plan description to participants and beneficiaries (section 104(b)(1)), file an annual report with the Secretary of Labor (section 104(a)(1)) and furnish certain documents to the Secretary of Labor upon request (section 104(a)(6)), and authorize the Secretary of Labor to collect information and data from employee benefit plans for research and analysis (section 513). (d) Examples. (1) A welfare plan has 25 participants at the beginning of the plan year. It is part of a group insurance arrangement of a trade association which provides benefits to employees of two or more unaffiliated employers, but not in connection with a multiemployer plan as defined in the Act. Plan benefits are fully insured pursuant to insurance contracts purchased with premium payments derived half from employee contributions (which the employer forwards within three months of receipt) and half from the general assets of each participating employer. Refunds to the plan are paid to participating employees within three months of receipt as provided in the plan and as described to each participant upon entering the plan. The trade association holds the insurance contracts. A trust acts as a conduit for payments, receiving premium payments from participating employers and paying the insurance company. The plan appoints the trade association as its plan administrator. The association, as plan administrator, provides summary plan descriptions to participants and beneficiaries, enlisting the help of participating employers in carrying out this distribution. The plan administrator also makes copies of certain plan documents available to the plan's principal office and such other places as necessary to give participants reasonable access to them. The plan administrator files with the Secretary an annual report covering activities of the plan, as required by the Act and such regulations as the Secretary may issue. The exemption provided by this section applies because the conditions of paragraph (b) have been satisfied. (2) Assume the same facts as paragraph (d)(1) of this section except that the premium payments for the insurance company are paid from the trust to an independent insurance brokerage firm acting as the agent of the insurance company. The trade association is the holder of the insurance contract. The plan appoints an officer of the participating employer as the plan administrator. The officer, as plan administrator, performs the same reporting and disclosure functions as the administrator in paragraph (d)(1) of this section, enlisting the help of the association in providing summary plan descriptions and necessary information. The exemption provided by this section applies. (3) The facts are the same as paragraph (d)(1) of this section except the welfare plan has 125 participants at the beginning of the plan year. The exemption provided by this section does not apply because the plan had 100 or more participants at the beginning of the plan year. See, however, §2520.104-43. (4) The facts are the same as paragraph (d)(2) of this section except the welfare plan has 125 participants. The exemption provided by this section does not apply because the plan had 100 or more participants at the beginning of the plan year. See, however, §2520.104-43. (e) Applicability date. For purposes of paragraph (b)(3) of this section, the arrangement may continue to use an entity (such as a trade association) as the conduit for the payment of insurance premiums to the insurance company for reporting years of the arrangement beginning before January 1, 2001. [43 FR 10149, Mar. 10, 1978, as amended at 65 FR 21084, Apr. 19, 2000; 67 FR 776, Jan. 7, 2002]

So, employee defaults on a loan, and no 1099 issued for deemed distribution. Payer penalty for failure to issue 1099 (let's suppose it was defaulted in 2016) before August 1 (from memory) is I think $260.00. I can look that up. But here's my question - since participant didn't get 1099, taxes filed incorrectly, since participant didn't "know" it was a distribution. How do you typically see this handled? By that I mean, does the employer/plan administrator/TPA/guilty party pony up any expenses top reimburse the participant for refiling expenses, if any, and interest/penalties? Could be expensive if it happened years ago...

Yes. But, if you had a retroactive amendment that ended up somehow benefiting mostly HC's, then I don't know that it would necessarily be viewed favorably... Have only had a couple of these, but IRS has been reasonable. Good documentation will be necessary.

I'm not in sales, but I do mention, when asked, or doing presentations on plans in general where a match is provided, something along the lines of, "Your employer is doing a great thing for you here. Aside from any interest you may earn, your return on your deposit is (50%, 100%, whatever the match is - tailor it to your plan) - that's better than a license to steal! There is no other way to legally obtain that kind of return on your investment, with any degree of safety, and if you don't take advantage of it, you are probably missing out on the greatest investment opportunity of your lifetime." Dressed up, expanded, etc. - but that's the gist. I can say this since we don't sell any product - if we did, not sure how the new fiduciary regulations would impact such a statement (if at all).

Just an fyi - Sal suggested that they may be relying on the fact that an irrevocable election under 1.401(k)-1(a)(3)(v) is not a CODA. I had considered this, but apparently I misunderstood the term "election." To my way of thinking, since it is a condition of employment, there's no opportunity to elect NOT to participate, hence there's no election. This is why I love to solicit the opinions of others! I should hasten to add that Sal did not express an opinion as to whether such reliance was correct or not - he merely pointed out that this was probably what they were relying on. I want to be very careful not to put words in his mouth!

A MOOving response which is UDDERLY ridiculous. You are MILKING this situation for all it is worth. Although your knowledge puts you in the CREAM of the crop, and your responses are legenDAIRY, there's no point in trying to BUTTER me up here. However, in spite of all the BULL, I appreciate you STEERing me in the right direction, and not succumbing to the HERD mentality. This could go on and on, but I lack the time to COW-tow any further.

Thank you. You've confirmed that (in this one instance) I'm not crazy!

Well, if you are completely convinced that the CPA is giving you accurate information, you could always adopt the policy of "Brave Sir Robin" - "When danger reared its ugly head, he bravely turned his tail and fled..." I'm just shocked that a CPA, (regardless of whether or not such disclosure violates any professional ethics) would actually tell this to anyone. Oh well, fortunately not my problem. Good luck with this client relationship.

But there may be something funky going on anyway. Just filed a 5500 this morning, and I always print the screen that shows status as "accepted" with the acknowledgement id, etc. - this morning, for the first time ever, this wouldn't print and I got some error message that the requested URL "was not found on this server." So I just cut and pasted it so I could print, but strange nonetheless. If it persists, I'll have to contact them. Then there was an "Apache/2.2.15 (Red Hat) Server at www,ftwilliam.com Port 443" below the error message. Since I'm not computer literate, I don't know if this means the problem is with FT William, or the DOL, or whatever. At least the 5500 status was "accepted" so that's good!

So, you have a SH nonelective 3%. Client wants to amend plan mid-year to exclude certain compensation categories. 1. Can this be done, with appropriate advance notice of 30-90 days? I've heard varying arguments on this. Some yes, some no. 2. If yes, I presume you would credit the 3% on this comp through the effective date of the amendment. Although for the non-SH contributions, such as PS, if they have a last day/1,000 hour requirement, could use the reduced comp for the whole year for that portion.

Yeah, I've seen TIAA references to TAMRA mandatory contributions in 403(b) plans. Problem is, many 403(b) plans are governmental anyway. And it may be that TIAA is just talking about the fact that your calculation of the elective deferral limit under 402(g) isn't reduced due to the mandatory contributions. Oh well, I'm not going to delve into this any further. Thanks for the responses.

We just use them for 5500 forms. Have not had any such issues.

Eve- I had understood (maybe incorrectly) that these TAMRA contributions applied to 403(b) plans. The plan is question is a Money Purchase plan. Can you confirm that you believe this applies to Money Purchase plans as well? John - I don't think that applies here - even though it may be a pre-ERISA MP plan, the employee does NOT have any option to receive in cash, so it wouldn't be considered a CODA regardless, right? (Turns out to be moot - plan started in 1985, s post-ERISA anyway.) Cuse - so you have a non-governmental tax exempt MP plan that requires 5% mandatory employee contributions, and they are pre-tax. Are you using a pre-approved document? And does anyone have a citation as to the authority for such contributions being pre-tax? I'm not finding such a cite - looking for love in all the wrong places, I guess... Thanks to all for the responses. This one is a head-scratcher for me.