Belgarath

Hmph. I say 2 + 2 = 1 How, you may ask? 2 pecks plus 2 pecks equals 1 bushel What's a peck? A quick kiss on the cheek. Math just doesn't make any sense...

Have a client where plan defines compensation for plan purposes as W-2. A client is insisting that opposite sex health insurance premium, while taxable, shouldn't be considered as compensation for plan purposes, based upon their "research." I can find no basis for this whatsoever, and I'd just like to see if anyone knows of something I'm missing? They could amend the plan to exclude such compensation for plan purposes, but that is a separate issue - plan does not currently contain such an exclusion... Thanks.

Try 1.401(k)-1(b)(3). I think that's what you are referring to.

Can't be reduced below 1%, AND advance notice needed.

Correct. The non-governmental plans have no rollover options available, although they can permit direct transfers to another tax-exempt entity 457(b) plan.

They are not required to receive top heavy if they terminated employment prior to the last day of the plan year. See 1.416-1, M-10. However, your document may provide it, in which case you must follow the document. I've never seen a document that doesn't adequately spell this out, (albeit some of them are poorly written, making it difficult to determine) so you may want to dig a little deeper into the document and/or adoption agreement, if document utilizes an AA. Have fun!

Hi GMK - no, I meant to say once the RBD is reached. Why would a life expectancy for RMD purposes even be considered if the RBD has not yet been reached, since there is no RMD until the RBD? Maybe I'm misunderstanding your question? So employee dies prior to RBD (employee's RBD). Spouse is sole bene and is entitled to use an RBD that is the later of December 31 of the following calendar year, or December 31 of the calendar year the employee WOULD have attained age 70-1/2. Once that RBD is reached, then the spouse life expectancy is used to calculate the RMD, not the life expectancy of the deceased. At least, that's how I understand the regs.

GMK, I agree with you - I see no basis for using other than the surviving spouse life expectancy once the RBD is reached. See 1.401(a)(9)-5, Q&A-5, ©(2). I expect M-H will get back to you. A year or so ago I found an error in one of their blurbs, wrote to them, and they promptly acknowledged it.

No 402(f) notice, but you still have to give a notice re electing out of the 10% withholding, etc., as required under, (I think - didn't check reference) 3405. So you don't get to avoid notices altogether... There are penalties for failure to provide this notice, albeit pretty small as I recall. Something like 10 bucks per notice failure.

It would have helped if I had read the instructions for the darned thing first. From the instructions: "If your plan is a SEP, SARSEP, or SIMPLE IRA, leave this line blank."

If a client has a SEP, or a SIMPLE-IRA, and they freeze/"terminate" it and set up a new 401(k). do you: a. Assign plan #001 to the 401(k), or b. Consider the prior SEP or SIMPLE-IRA as plan #001, and assign the 401(k) plan #002? I do actually have a reason for asking this: in the VCP procedure for correcting a SIMPLE-IRA, the Appendix asks for the plan #, and I would normally have used option #1 above.

Thank you all. There actually is no plan - this is indeed a hypothetical question that came up in conversation, so I appreciate the responses and information! Although, I have found that most of the "hypothetical" issues that come up in conversation eventually turn out to be based on something real - albeit with substantially different facts than first discussed...

Thanks. For some reason (not being a DB person) I thought that plans were required to increase the monthly payment for late retirement, to reflect the shorter period of receiving benefits. Apparently that is not the case, and I appreciate your response.

Suppose you have a DB plan that institutes a hard freeze - no further accruals after, say, 1/1/2015. Does this negate required late retirement "adjustments" to the benefit accrued on 1/1/2015? In other words, your Normal Retirement Benefit as of 1/1/2015 (frozen) is $1,000 per month, beginning at age 65. No further accruals. But there is (or was) an actuarial adjustment of (pick a number, I have no idea - say 0.5% per month) for every month you continue to work past NRD. Does the hard freeze also negate that adjustment, or is the adjustment still required, even though there are no additional "accruals" for anyone? Thanks!

As a non-lawyer, my thoughts on this are certainly little more than random musings. But FWIW, it seems to me that the fact the new fund, whatever it may be, underperformed the old fund, may be immaterial. By that I mean that the plan investment committee which selected the investments is under no obligation to continue to offer that same fund. So if your "old" fund earned 25%, or 200%, or whatever, in one month since the transfer, that's meaningless IMHO. If the selection of the new fund was undertaken in a prudent manner, as suggested earlier, then I'm not sure you really have a lot on your side. The fact that you threw away the notice probably doesn't help your cause. Just out of curiosity, if you HAD opened the notice, and seen the available fund lineup from which to choose, what fund would you have chosen? What would this fund have earned in the 1 month period, compared to the default fund into which your account was placed? If you DO have a solid case (and again, as a non-lawyer based only upon some sketchy facts and discussion, I feel like that may be doubtful) I think this may be a more appropriate measure than comparing it to the old fund which would have been unavailable to you in any case.

First, although they are sometimes helpful, you must always remember that IRS comments from the podium are not official guidance. If you do some searches here, you will find many opinions and threads on timing of safe harbor amendments. If you want iron-clad, unassailable safety, then you don't do any mid-year amendments other than those that the IRS has OFFICIALLY sanctioned. Beyond that, in the situation you describe, even though I'm generally pretty conservative on this whole issue, I'd allow it.

Try EBIA - they do all kinds of seminars, including intermediate and advanced. I haven't attended one, so I can't give you any feedback on how good they are. http://www.ebia.com/Seminars/InPerson

No way to tell from the information given. Deferrals only is a good start, but so much depends upon also satisfying the "limited employer involvement" - such as hardship determinations, QDRO determination, and all the rest. You'd need to look very carefully at your document and vendor agreements. It shouldn't be this difficult!!! I wish the DOL would be more reasonable (i.e. loosen up) on some of this foolishness.

I have an entirely different approach, and perhaps this is impossible if you want to keep the client on your books...but I would make the client CERTIFY on the census 1,000 hour, 500-1,000 hours, or less than 500 hours. Exact number not needed. Put the onus on them, where it belongs. If a client is unwilling to make that decision and certify data, I'd politely show them the door. I certainly wouldn't make myself crazy trying to use an estimate that may or may not be accurate. I caveat this by freely admitting that there may be other intricacies in your particular document/administration/situation that would make my approach impractical or impossible.

What I'm asking about is something along these lines: Yes, the plan is "unfunded" but the Plan states that the Participant's "account" will be credited with earnings or losses. The employer invests the money in an "employer" account - not a trust, and not a Rabbi Trust. Although part of the general assets of the employer and subject to creditors, etc., nevertheless, if after 15 years, the participant has lost 30% because the "account" was invested foolishly, there may be a problem. IF the ERISA preemption shield is intact and precludes any recovery, breach of contract, promise, whatever (I'm not a lawyer) than all should be fine. If there is room for something else to override the ERISA preemption, then it should be a cause for concern for whoever does the "investing" of the funds. In essence, does the ERISA preemption allow for unlimited stupidity or neglect, or is it not so clear-cut. I use this absurd example just to illustrate why I'm even asking the question. Thanks.

Yeah, I was just wondering if there had been mandatory "interim" amendments for 457(f) plans, or other mandatory changes, etc... So, thank you for the response.

Well, my answer would be that ERISA preemption should apply. But it seems to me that the issue of ERISA preemption is constantly being litigated, which is why I'm interested in the opinions (general opinions, obviously not case-specific!) of you experts in this arena.

Potential client apparently wants to adopt 401(k) in 2015, but already mistakenly allowed deferrals into their SIMPLE-IRA plan. I don't have any dollar amounts available, but I believe they are small, as only one payroll deduction for January in a small company. Now, RP 2013-12 says this can be corrected under VCP - filing fee of $250, plus the 10% if the assets are retained rather than distributed. I'm interested in any thoughts on the following: 1. Any thought on retain vs. distribute? 2. It isn't clear from the instructions - is the employer still required to make the match? I would presume so - and if so, is it deductible? I would presume not, as this would be an "excess" contribution? (I changed my mind - if the correction is approved, it should be deductible, I think) 3. Is it necessary to request a waiver of excise tax under 4972? If the entire amount of the match, if required, is a nondeductible contribution, then it would seem like requesting the waiver would be routine? (if I'm correct on 2 above, this is N/A) 4. Tax consequences, if any, to the participants, if the deferrals are retained rather than distributed? (none, if 2 above is correct) 5. New edit - does anyone consider the SIMPLE as Plan #001, 002, etc.? For example, if someone previously had a SIMPLE, and properly terminated it, then establishes a 401(k), do you count the 401(k) plan as Plan #001, or 002? Reason I ask is that the Revenue Procedure asks for the Plan # of the SIMPLE, and I would not normally have assigned it a Plan #. Any other thoughts? I've not actually seen one of these until now... P.S. another thought that occurs to me - how does all this tie in with the "requirement" where the IRS says that in order to terminate a SIMPLE, you must notify the employees prior to November 2. I would say that the existence of the "fixes" in this Revenue Procedure override the IRS information on their website - otherwise, an employer that fails to provide the SIMPLE notice can't establish a 401(k) for the following year, and has no recourse if they do! But it does seem to bring up a strange inconsistency - if you have a SIMPLE, and don't give the advance notice of the termination, you are theoretically stuck with it for all of the next year. If, on the other hand, you just establish the 401(k), then you can fix this with IRS blessing under RP 2013-12. ???

Some interesting insight into the whole issue in general. http://www.ca5.uscourts.gov/opinions/pub/12/12-20294-CV0.wpd.pdf

Let's say you have a non-governmental 457(b) plan that qualifies as a "top hat" plan. There is no Rabbi Trust. 457 plans are subject to ERISA, except to the extent that a specific exemption applies. ERISA 401(a)(1) exempts the plan from ERISA fiduciary responsibility. So, is there potentially State law fiduciary liability? Or, does the fact that the plan is subject to ERISA mean that ERISA preempts any State fiduciary laws, in spite of the fact that ERISA fiduciary rules do not apply? Or, is this one of those dreaded "gray" areas?