Belgarath

Thanks Luke. I thought I had deleted this post, but apparently I was unsuccessful!

deleted post

Does this follow the same rules as qualified plans, or is there a whole separate regulatory scheme?

While that is arguably a reasonable interpretation of the statutory language, I don't believe the IRS subscribes to that interpretation. Although PLR's can't be cited as precedent, see PLR's 201221059, and 201147032 for an indication of IRS stance (granted that they may have changed their approach since then). I'd recommend a client get an opinion from an EISA attorney before taking the "aggressive" approach, if the amounts involved are substantial.

Hi Austin - yes, this can be done. I think the mechanics are relatively simple IF the client has only 1 IRA with basis. Your example lays it out pretty clearly. However, I'd want to do a little digging on this, because my recollection (and I don't mess with this stuff with any frequency) is that if there is more than one IRA with basis, then ALL of the taxable amounts in ALL of the non-Roth IRA's have to be rolled into the plan in order to have only non-taxable basis left in the IRA's. Otherwise there's a whole crappy pro-rata thing. But caveat emptor - this ain't my thing - I never worry about it since the 401(k) plans can only allow the otherwise taxable amount. The rest ain't my problem!!!

Yes, and Yes. (My response to Austin was purely regarding the nondeductible contributions.)

Austin - plans don't allow the rollover of nondeductible IRA contributions because of IRC 408(d)(3)(A)(ii). So no can do.

For your partial plan termination question, it might be instructive to review this IRS snapshot, as well as Revenue Ruling 2007-43. See particularly this excerpt - emphasis is mine. Assuming they were in fact voluntary, and that there is no partial termination, it is back to the question of whether an allocation to terminated participants who are 0% vested will satisfy the coverage/nondiscrimination testing. That's a tough one. In a design-based safe harbor plan, I think it is clearly acceptable. When you get into a new comparability plan, certainly a lot of potential for abuse, and I'm not certain there is a bright line standard. For example, even in a new comparability plan that has no allocation requirements, allocating up to the 415 limit for all of the 0% vested terminated participants in order to skew testing results might invite an auditor to put the hammer down. Facts, Circumstances and Presumption of Partial Termination The presumption of a partial termination happens when the turnover rate is 20% or greater. If the plan sponsor can provide evidence that the turnover rate was not the result of employer-initiated severance from employment and the severance was purely voluntary, the IRS may find that there was no partial termination. This type of evidence may include information from personnel files, employee statements or other corporate records. The employer may also provide evidence that the turnover rate is routine. To determine if a turnover rate is routine, the employer must show the turnover rate in other periods and the extent to which terminated employees were actually replaced. The IRS will also consider whether or not the new employees did the same types of work, had the same job classification or title, and received comparable compensation. Rev. Rul. 2002-42 provided that the merger or conversion of a money purchase pension plan, without other indications of a partial termination, does not result in a partial termination. If the employer cannot provide sufficient evidence to show that the turnover rate was routine or was not the result of employer-initiated severance from employment, the presumption of a partial termination will stand and the affected participants, including those who voluntarily terminated during the applicable period, must be fully vested. https://www.irs.gov/retirement-plans/partial-termination-of-plan

I don't know if this will help, or is totally the wrong thing you are looking for - I don't use the Relius Admin system. But here's a response they sent re lifetime income disclosures in response to a query a while back: Tables Prior to generating any reports or results, the user must download needed tables and updates into Relius. These are global and are done by choosing Utilities / Update Global Tables from the main menu. The two tables are (a) the Ten-Year Uniform Life and (b) the Ten-Year constant maturity Treasury (CMT) securities yield rate for the first business day of the last month of the period to which the benefit statement relates. These rates must be updated monthly and are available from FIS. They are typically available for download by the fifth business day of the following month. Report Lifetime Income Disclosures are required all participants. For those over the age of 67, the disclosure will use their current age. For participants under this age, the disclosure will be provided such that age 67 is assumed. Relius Administration provides a report for this. The report is called "DOLLifetimeIncome.rpt" and is located in the original reports directory. It is currently listed under the Participant Certificate / Standard report node on the ReportWriter Front-End. The report is a standalone report only. However, users are free to use it to customize certificates by inserting this as a sub-report. Lifetime Income Disclosures have also been added as an selection in the Relius Communication Bundle (RCB) or RCOMM setup.

It does smell funny, but on the other hand, suppose it was a design-based safe harbor - basic pro-rata allocation, no requirements to receive an allocation. They would receive an allocation, and still be 0% vested and ultimately not receive a dime of it.

Thanks. Agreed if they have no HCE's, but when I said "most likely" that's my own assessment, without census information. We'll see.

Questioning myself a bit on this. Suppose you have a plan that allows immediate deferrals, but for eligibility requirements for the safe harbor nonelective, wants to have 3 consecutive months with 250 hours to be eligible. Now, automatic top heavy exemption is blown, but that's immaterial for this plan. Shouldn't be any problem with this, if you pass testing using the OEE, right? Or is there something else I'm missing? Most likely this isn't going to be an issue anyway, as prospective client most likely doesn't have any HCE's...

Amen to RGB's response. We send them an invoice with a "courtesy discount" which shows the full fee, minus the discount to zero it out. They can see how nice we are that way. And in some cases, we bill the full or partial amount if appropriate in the circumstances.

I like Rockn's suggestion. Not being an attorney, I wonder if such a provision is valid under State law in all 50 States? This isn't a provision I've seen, although honestly I haven't looked for it before...

An interesting observation was made yesterday in the "Pensions on Peachtree" webinar. According to Ilene, (and I hope I'm not misquoting her) there is not AUTOMATICALLY a CG just because you are in a community property state. If the businesses were totally separate prior to the marriage, then they don't fall under the community property ownership rules. There was a term for this that I didn't quite catch. (Maybe one of the attorneys here can chime in with the appropriate terminology.) I toss this out as one more reason to have clients make the CG determination in consultation with their ERISA attorney!

So Peter, what happens if the plan doesn't "allow" a beneficiary to disclaim? Suppose the plan eventually cuts a check to the beneficiary, and the beneficiary refuses to cash it, etc., etc. - and maybe this gets into deep mud, and please don't waste a lot of time on this on my account - just idle curiosity on my part. Thanks.

I agree with Bri. These "pass through" distributions aren't eligible for plan purposes. There was a court case way back, (Durando) that ruled an S-corporation owner could not have a plan as a self employed. Therefore, W-2 as a common law employee is what is used. Also, I'm quite sure the IRS has publicly taken this approach, although I couldn't give you a specific citation or reference.

I agree.

Based on what I've seen I believe it is FIS (Relius), but I can't state that with absolute certainty.

Thanks. Makes sense to me!

So, suppose the 12/31/2021 statement was already mailed, but without the lifetime income illustration. Can the illustration be sent now as a "stand alone" or must the EBS be re-sent with the lifetime illustration attached? I believe it is the latter - I haven't seen anything allowing a stand-alone in this situation - wondered if I've missed anything.

Under 401(a)(26)(A)(ii)(II), if there is only one employee, it doesn't have to have 2 benefiting. Under 1.401(a)(26)-2(b), a frozen plan is deemed to satisfy 401(a)(26), assuming it passes the prior benefit structure test. If there have never been any employees, I don't see how it could fail. But I'm not a DB person, so maybe someone else comes up with a different result somehow?

It seems questionable to me that the following is permissible, but thought I'd solicit other opinions, as it is a sticky question. Thoughts? Thanks! Plan is a QACA, with 1-year vesting. The plan currently utilizes the Plan Year (calendar) as the vesting computation period. Client wants to amend the plan, for vesting purposes only, in 2022, to be elapsed time. At the very least, even IF it is permissible, it would require a 30 day advanced notice. Is it permissible? When the service crediting method is changed from Years of Service to Periods of Service, the participant receives credit for the GREATER of ..."(the Periods of Service that would be credited to the Employee under the elapsed time method for service during the entire computation period in which the transfer occurs, or the service taken into account under the Hour of Service method as of the date of the amendment.)" So, let's say a participant has less than 1,000 hours as of the date of the amendment - let's say May 1. Participant would receive 5 months of service as credit toward a "Period of Service." But, let's say participant terminates employment in October, with 1,000 hours or more of service. Participant would only get credit for 10 months toward a "period of service" for vesting purposes, so would NOT have a 12-month Period of Service, but would have had 1-year of service for vesting under the prior method. This would seem to violate the following requirement of IRS Notice 2016-16 for prohibited mid-year amendments. (My emphasis) 1. A mid-year change to increase the number of completed years of service required for an employee to have a nonforfeitable right to the employee’s account balance attributable to safe harbor contributions under a QACA pursuant to the safe harbor rules under § 1.401(k)-3(k)(3) or 1.401(m)-3(a)(2).

Ugh, I missed that - not sure how. Thanks!

PS Plan has no allocation requirements for contribution. Participant terminates in December of 2020, has eligible post-severance comp the next year (2021) so receives 2021 allocation, but has zero hours. Would you include in coverage testing for 2021, or toss out? I'd include - I don't see how this meets the 410(b) requirements for the term w/<500 hour exclusion. A bit of discussion going on with this question. Thanks for any opinions.