Belgarath

Anti-cutback rule only protects accrued benefits - not the right to accrue future benefits. So, if you have immediate eligibility, and you amend for the next year to be one year of service, then those folks who participated previously but do NOT have a year of service in any year will not be eligible to participate. You CAN grandfather in existing participants, but aren't required to. Of course, if they have already satisfied a year of service, then the amendment won't exclude them. You'd have to find a valid exclusion classification to then exclude any such people. I see ETA replied while I was typing...I type very slowly with all these extra thumbs.

If truly a new plan, and not adding a safe harbor provision to an already existing 401(k) plan, then you could give the SH notice as late as January 1, 2017.

Hmmm...interesting question. Without doing any additional research, I'm inclined to think that 414(a) would require crediting service with the prior employer. As an aside, IF the technique is valid, could you use two year eligibility rather than one year, and get one more year before freezing?

Thanks Peter, that's very generous of you!

Thanks all. Peter, thank you very much for your offer, and it is great to know that you have specific expertise in this area. If it becomes necessary, we'll certainly refer the client to you - but this particular client generally prefers the "ostrich" approach, and isn't going to take any steps unless DOL actions make it mandatory. It'll be interesting to see where this goes...

So, suppose the following: A 401(k) plan is selected for DOL review. They send the normal checklist requesting documents, etc., within 10 business days. This, (naturally) happens to be a messy plan, not in terms of any malfeasance, but the sponsor had tremendous financial difficulties and is just now emerging from bankruptcy, although not yet formally approved. 5500's have not been filed for a couple of years, because they had absolutely no funds to pay for plan audits, etc. - plan sponsor was aware of the problems/risk, and was planning to file under DFVCP as soon as possible. Here's the question, because I've had very little experience with bankruptcy situations. When the client submits the documents, which obviously will highlight the fact that 5500's have not been filed for 2 years, should they also submit any sort of explanatory statement, referencing the bankruptcy and including a copy of the bankruptcy filing? Or, do they just submit only the documents that were requested (practically everything) and wait for the next step? My normal inclination would always be to submit it "up front" and get it all out in the open, but as I said, I have no experience in such a situation, and wondered if someone else did, and might have some pearls of wisdom? Thanks!

I say 100%. If the document required 1 year of service with at least 1,000 hours to be eligible, then I'd say she never became a participant, but that's obviously not the case here, since she as profit sharing contributions. So she "participates" each year, and is 100% vested.

Thanks. I wondered about that aspect as well, but I couldn't find any hard guidance prohibiting the amendment. Might not be the best practice in terms of employee relations, etc., but I haven't yet been able to find anything saying you can't do it. Hope you all have a great holiday!

Plan is subsequently (prior to 12/31/2016) AMENDED to remove the safe harbor provision for 2017. I see no problem with this, but I've had several different people disagree with me. I don't see any legal obligation to continue the plan as a safe harbor plan for 2017 just because a safe harbor notice was distributed, as long as the plan is amended prior to the beginning of 2017. Am I wrong on this?

Congratulations on your impending retirement! Kevin - I had forgotten about this case. But as you can see, given my level of general distrust, if I had an ex (or KNOWINGLY soon-to-be ex, you can bet I would have taken precautions! Of course, one never knows, perhaps my spouse is secretly plotting about how to become an ex, after draining our accounts to run off with some young masseur (we don't have poolboys here in the frozen North - season is too short).

Truth is stranger than fiction, isn't it? The idea of payout to an incorrect person is of personal interest to me at the moment. This is off-topic, but a short version of the story. My own 401(k) account with a prior employer is currently with a MAJOR insurance company - my former employer switched platforms/investments last year. When I went to set up my on-line access, the following appeared (just one paragraph in a much longer disclaimer - and I've deleted the name of the insurance company): Any transaction(s) entered by an individual using your User ID and Password will be deemed to have been authorized by you, unless you have previously notified **********, in a timely manner, of the loss, theft or unauthorized use of these personal identifiers. If you become aware of the loss, theft or unauthorized use of your User ID and Password, you must notify ********** by phone or in writing (delivered via U.S. Mail, certified, return receipt requested) at the address below. Note, too, that if an accountholder authorizes a third party to access his/her account and/or our services, the accountholder agrees to defend, indemnify, and hold ********* and parties contracting with ********** not responsible for any liability, losses, damages and reasonable costs and expenses (including attorney fees) arising out of claims or suits by any such third parties based upon or relating to such access and use. It is the first sentence that is of concern to me (I have no problem with the rest). If someone somehow steals my identifier, or obtains it through hacking into the insurance company's website/database, etc., how would I ever know, until my account has already been emptied? When I brought this to the attention of the Plan Administrator, as expected, I got nothing. They referred me to the insurance company. After 3 months of back and forth with the insurance company, and the typical obfuscatory BS statements crafted by their legal department, all of which when translated, say, "just trust us" I am finally in the last stages of finalizing a procedure whereby no DISTRIBUTION may be made based on an on-line request. My account will be flagged to only send out distribution forms to my address of record based upon a telephone request with a special "challenge" question. Now, I realize that I can just roll the money out of there, but I'm wondering if this type of disclaimer is standard in the financial services industry? And it may seem like I'm being overly paranoid, but almost daily we read about major security breaches, etc., so I'm less trusting than I used to be. Any observations?

The ASPPA conference being referenced was in 2010. I'm not aware of anything on this since then. And with the penalty being so extreme, certainly not worth taking the aggressive position as far as I'm concerned.

I agree with Kevin. That's what I was saying as well, although I was using a calendar year plan as an example, since I find it easier to illustrate calendar years...

Yes, I agree.

Don't know the context of the rest of what was being said. If in the first year, employee goes over 1,000, then would have to be covered starting in year 2. For example - hire date of 1/1/2016 - "expected" to work less than 1,000 hours, so is excluded. But ends up working more hours for whatever reason, hits 1,000 hours in September. Doesn't have to be covered (eligible) for remainder of 2016, but will be eligible as of 1/1/2017, and all years thereafter.

Might be tough to condense into 15 pages. I'm reminded of a "Peanuts" cartoon. Frame 1 - Peppermint Patty sitting at a desk - frame entitled "History Test." Frame 2 - "Explain the Civil War." Frame 3 - Peppermint Patty saying, "Explain the Civil War?!" Frame 4 - "Use both sides of the paper if necessary."

Wow, I wish all of our employers would do this. When I think of the headaches and errors that would be prevented... But in answer to your question, no, I have no suggestions. It is possible, depending upon how it is presented at the meeting with the employee/HR, that an auto escalation might improve deferral percentages. "You deferred 3% last year. This year it automatically goes to 4% unless you elect otherwise. Sign here." It might overcome a certain amount of inertia.

It is at least theoretically possible that the TPA isn't charging any more for the regular 5500 than they would charge for the SF.

If you are not in a community property state, you MIGHT be able to structure the businesses to rely on the "spousal noninvolvement" clause in IRC 1563(e)(5). Also, you would need to make sure there are no minor children. So a lot of "ifs" but at least a possibility. You'd want to have the CPA and an ERISA lawyer involved, as there may be other issues involved with such requirements that would, in terms of importance, override any qualified plan considerations.

We have the fees specifically disclosed in an appendix to the SPD. If they change, we do an SMM. So when it comes to a specific distribution from a plan, an additional disclosure not necessary, although some platforms do have it on distribution paperwork. And, some administrators put it on the form anyway. Personally, I would not. As far as I'm concerned, if properly disclosed in the SPD/SMM, that satisfies it.

So a little more. It appears the route that will be taken is to spinoff a portion of the plan to one of the new employers, and the other new employer will assume the assets and liabilities of the remaining portion of the plan. So far, so good. Now, this won't take place until sometime next year. Current plan provides for no allocation conditions for PS allocations. I'm thinking that to keep things cleaner, they should amend now to impose a last day/1000 hour requirement for next year, so that the existing plan will have no obligation to make any contribution for the "spinoff" employees. Does that make sense? Then when it comes to coverage/testing, each plan will just be on their own - transferor plan will just use full year 2017 comp for its remaining employees, etc., and spinoff plan will just base on comp from date new spinoff plan is established. Am I all wet on this? I should know better than to consider such questions on a Friday afternoon. Thanks.

An absolute disgrace. "We're going to charge you for a service that we won't perform in a timely fashion, and we're going to make you responsible for any adverse consequences that occur because we didn't timely perform the services for which we charged you in the first place..." How do these people sleep at night?

2 years of service.

Unanswerable question for me. Totally dependent upon facts and circumstances. If the gain or loss is small, then I'd just pay them out. If gain or loss is large, then you have to consider the issues already discussed. "Small" and "large" gains are in the eye of the beholder, so I can't give you any hard number. You give it your best shot, and present the alternatives to the Plan Administrator, who will then decide. Or more likely, ask which alternative you recommend...

Hurray!