Belgarath

I always find this subject confusing. Safe harbor basic matching formula - 100% of first 3%, 50% on the next 2%. Plan also allows discretionary match. If a discretionary match is made adding another 50% on deferrals of 4% and 5% - basically transforming the match to 100% of the first 5%, it seems to me that this satisfies the ACP safe harbor, still. Basic match, discretionary match is less than 4% (it is 1% max). What about nondiscrimination testing? No current availability issue, is effective availability a potential problem, (cause the discretionary match is only available if you defer more than 3%) or am I worrying about nothing?

I've always found it oddly appropriate that the abbreviation/acronym for the Statute of Limitations (SOL) is frequently used in another, less polite parlance.

I assume you are talking about a SIMPLE-IRA - yes, a controlled group can adopt the SIMPLE, but it must cover ALL employees of all CG/ASG members, who satisfy the normal eligibility requirements. There isn't any coverage testing - you just have to cover everyone who is eligible. Watch out for the 100 employee limit in the CG/ASG...

Yup, so he has service in 2013 and 2014, so you'd use 2 year eligibility to allow him to contribute for 2015. And the employee didn't have service until 2014, so is ineligible for 2015 under 2 year eligibility. One caveat - some might assert that since the owner had no income from the LLC in 2013, you can't use that 2013 service for eligibility. I don't agree with that stance (particularly for an owner - owners frequently perform service without receiving any compensation). But I bring it up for your consideration.

Yes. I'm assuming he's on a tax extension... And of course you can always make the eligibility LESS restrictive - the 3 year is just the most restrictive allowed. It sounds, from what you are saying, like the employee has been there just as long, in which case the employee must be covered as well.

Assuming you have a model SEP, although top heavy rules apply, it isn't normally an issue simply because the contribution is the same percentage for everyone. So if the Key employee contributes 25% for himself, then he also contributes 25% for all ELIGIBLE employees. Determining who is eligible is normally where the errors occur, at least in my experience. So, your eligibility is 3 out of the last 5 calendar years, PRIOR TO the calendar year for which a contribution is being made. So, when you say 3 years, do you mean 2014-16, or do you mean 2013-15, with 2016 being the year for which a contribution is being made? So if he worked 2013-15, and the other employees only worked 2014-15, and he has three year eligibility, then the employees aren't eligible for 2016. Hope this helps.

See if Rev. Proc. 2016-47 helps.

If it isn't a "safe harbor" 401(k) plan, it is at least theoretically possible to do this, but it would require separate nondiscrimination testing under 1.401(a)(4)-4 for "benefits, rights, and features." Stupid, but possible. If it is a "safe harbor" plan, then no dice, they can't do this. I would certainly raise the issue again, IN WRITING.

I'm not entirely sure I follow what you are proposing. Are you proposing that the participant write an additional check to the plan, that won't be deferred from current or future salary? So his salary for the rest of the year is $4,000, and he wants to put $5,000 into the plan, so he writes a check out of his checking account for $1,000? If so, answer is no. As to "retroactive" deferrals, no, there is no such thing.

I still don't understand the problem. If I take a bona fide participant loan, complete with appropriate paperwork, there is an obligation to repay the plan. If someone chooses to make the payments for me (my parents, employer, friends, children, The Halfway House for Wayward TPA,s, whatever) what difference does it make? The plan is whole, and the repayment obligation is satisfied. Now, the fact that someone is essentially giving me a gift may possibly have other implications for the gift giver, or perhaps under some circumstances there may somehow be taxable income to me - that's another issue, and I have no opinion on that, but I don't see how there is any PLAN problem.

Ok, why the difference? Let us assume, for the sake of simplicity, that the match is dollar for dollar up to 6% of pay. Let us further assume that the $150.00 extra deferral, plus the :normal" $50.00 for a total of $200.00 for one payroll only does not exceed 6% of pay. If you do it end of year, she gets her full match. If you do it payroll by payroll, she still gets the same match. Why should she be entitled to an additional $150.00 just because the match is calculated per payroll? You are doing self-correction of an error, so the fact that it is per payroll shouldn't preclude the same ultimate result as per year, I don't think... As you can see, I'm struggling with a proper interpretation in this issue. The conservative method would seem to be to take the Rev. Proc. language extremely literally, and give the extra $150.00 no matter what. And that's probably what we'll recommend. But I would be very interested in any thoughts from anyone.

Thanks. Anyone out there going to the ASPPA conference, and if so, is it too late to see if the IRS would address this from the podium? In this case, the amounts are so trivial it doesn't really matter much, but on a large plan with a larger number of participants, the difference could be significant. Of course, with a large number of participants, some of them would NOT do the "make up" contribution so this question wouldn't even apply to those participants.

Very doubtful that this is not addressed in the document, particularly since the 1,000-5,000 is addressed. It may just be a bit "hidden" or under some default, etc. - is it a pre-approved doc? If so, and after further research you still can't find it, you can probably contact your document provider to ask where the provision is. If you have the $1,000-$5,000 mandatory rollover, pretty likely that <$1,000 can just be distributed.

So, deferral election is signed, isn't implemented properly, and 3 payrolls are missed. No QNEC, but missed match plus interest must be contributed. Here's my question. Say the participant signed a deferral form doing a flat dollar amount of, say, $50 per paycheck. Since it wasn't withheld for three paychecks, that's $150.00 her account is missing. So she does a special one-time deferral election to have $200.00 withheld from her next paycheck, then it reverts back to the $50.00 thereafter. When it comes to calculating the make-up match, assuming the $200.00 amount doesn't cause it to hit any "cap" - am I correct in assuming that the only make-up will be interest on the match that should have been made each pay period? In other words, since she will receive her full match due to the special one-time deferral increase, there shouldn't be any additional match due, as she will already receive 100% of the match she would have received had the error not occurred. Or, is a make-up match required regardless of her special election? I lean toward the former, both from a common sense viewpoint, and the general overriding principle of self corrections which is to put the participant in the same position they would have been otherwise. The amounts involved are negligible, but I'm thinking more in procedural terms if something like this occurs on a larger scale.

Interesting question. Not directly on point, but I remember talking to a claims examiner at an insurance company, and if a policy owner validly signed a surrender form, but died prior to the request being received by the insurance company, the surrender form took precedence and only the surrender value would be paid, not the death benefit. (of course, the insurance company profits by finding reasons to deny claims, so possibly that might influence the stance...Nah, couldn't be...) I don't think most plans explicitly address the situation in the IP. In that situation, is it simply a determination by the Plan Administrator, or does State law govern?

Question for the ERISA attorneys - is it worse (from plan sponsor liability perspective) to have an investment policy statement and NOT FOLLOW IT (which is by no means uncommon) or to simply not have one, and rely on a sort of "Well, we tried to do a good job for the participants..." Or are they equally bad? Just curious.

Ah, sorry, now I get it. And I don't have a good answer!

IMHO, yes, these are protected benefits. Basically, any optional form of benefit is protected unless there is a specific exemption, and as far as I can recall, no such exception exists for these. As a purely personal editorial opinion, I can't imagine why an employer would want to take away such an option for someone who is engaging in qualified military service, but of course I don't know the specific situation. My general philosophy is to make things as easy for these folks as possible.

Almost seems to me like mixing apples and oranges? In other words, the Technical release 92-01 is only necessary in this context when determining whether or not the plan is exempt from filing the 5500 form as a small unfunded or fully insured welfare plan. Once you have determined that you are not exempt from filing, as in your situation 'cause you are way over the 100 participant number, then you just look to 2520.104-44(b) to determine if the audit is required. If you satisfy those requirements, no audit. Section (b)(1)(i) provides for the audit waiver if unfunded, (ii) provides for a waiver if paid through insurance contracts (either employer or employee contributions, with certain "hooks") and (iii) provides for a combination of (i) and (ii). Sounds to me like you are probably exempt from the audit requirement, but obviously I don't know if the plan/policy/funding provisions satisfy all the "hooks" in (ii).

So, just a follow-up - I relayed this to the attorney who originally asked the question. He said that he understands the response, but is faced with this specific problem: Whatever state he and the plan sponsor are located in does not provide for non-residents (turns out that they are both citizens of Great Britain, who worked in or for a U.S. Company and participated in the 401(k)) to be able to "file" under state domestic relations law. So there is apparently this twilight zone where a divorce decree can't be enforced as a QDRO, and it can't ever become a QDRO because the State domestic court won't permit a non-resident to "file." And please understand that I'm not an attorney, so I may be getting the appropriate terminology wrong! But you get the gist. Seems like there has to be a way around this, but that's ultimately the attorney's problem. I'm just interested. He said he's seen many instances where the Plan Administrator just approved the payout as a "QDRO" without ever questioning it, but in this case, the Plan Administrator, reasonably, is saying they cannot approve it 'cause it isn't even a DRO. Good stuff!

I assume you mean it is neither an "EACA" or a "QACA" but just what I'd call a "regular" ACA? If so, it can be done any time, BUT you still have a 30 day advance notice requirement. So realistically, "any time" means at least 30 days in the future.

Thanks SoCal. So just to make sure I understand - 1. How was the original tax return filed, and how was the retirement plan calculation done? 2. After audit, what exactly had to change? Sounds like the IRS said, "no dice" on W-2, and said it all had to be converted to earned income, and the net was negative, so no contribution was permissible? Thanks!

Thanks!

Interesting question. The 403(b) exclusion is for ..."employees who are students performing services described in section 3121(b)(10)." 3121(b)(10) provides: (10) service performed in the employ of— (A) a school, college, or university, or (B) an organization described in section 509(a)(3) if the organization is organized, and at all times thereafter is operated, exclusively for the benefit of, to perform the functions of, or to carry out the purposes of a school, college, or university and is operated, supervised, or controlled by or in connection with such school, college, or university, unless it is a school, college, or university of a State or a political subdivision thereof and the services performed in its employ by a student referred to in section 218©(5) of the Social Security Act are covered under the agreement between the Commissioner of Social Security and such State entered into pursuant to section 218 of such Act; if such service is performed by a student who is enrolled and regularly attending classes at such school, college, or university;... So, basically, if I'm sponsoring a 403(b) plan, it makes no sense to me to assert that my Employee can be excluded from my plan under the 403(b) nondiscrimination rules, based upon service (and being a student) with another, completely unrelated employer.

Perhaps, once you get this straightened out, Fidelity (or the Plan Administrator) will allow your sister to provide her SSN directly to them, so you won't see it? Maybe, for whatever reason, she just doesn't want you to see it...