Belgarath

They need to give employees the Notice of the SIMPLE termination no later than November 2. So you are already are technically too late to terminate it for 2022.

Trying to fight through Monday morning brain fog - must... get... coffee!...but my recollection is that the restriction applies to employer contributions, so I'd say no.

Also, for example, are all or most of the LLC employees union employees covered by a good faith collective bargaining agreement? Are you using 1 year eligibility (or potentially 2 years if not a 401(k)) where none of the LLC employees will ever meet eligibility? Etc... Granted it is dubious that things will work out so that you can exclude everyone in the LLC's, it isn't automatically (by statute or regulation) impossible as everyone has pointed out.

Luke's position seems reasonable to me. The participant voluntarily took the distribution, and then invested it in highly speculative stocks. If they hit a home run and the stocks quadruple in value, they get to keep the gain. If they lose, why should the Plan Fiduciary be liable? (This is my general thought, NOT a valid legal argument - I leave that to the attorneys!)

To be more precise, correct on the withholding. Since the RMD amount is not an eligible rollover distribution, no 20% withholding, but 10% withholding applies unless participant elects out of it. For the "overage" it is an eligible rollover distribution, and mandatory 20% withholding applies. Generally all this is on one form, but recordkeeper could certainly require separate forms.

Take a look at Rev. Proc. 2021-30, Section 6(.06)(4).

Many documents restrict the deferral amount to 92% of pay for just this reason. But my answer is that you can't defer money that you can't receive, and since the SS is mandatory, there's no option to receive $5,000, hence you can't defer it. For me, what passes as common sense. Doesn't mean I'm right...

Hey MoJo - we had a client that was "audited" by the DOL, yet the DOL "investigator" was actually rather huffy when we committed what was evidently an unpardonable sin, and referred to it as an audit. We were told in no uncertain terms that it was an investigation. Probably someone new with a chip on their shoulder...

I know this has been discussed in the past, but I'd like to see what, if any, experience you've had. And if so, has it been different for 401(k) and 403(b). We just had a 403(b) client receive a letter from the DOL, inviting them to use the VFC program. First one we've seen. This was generated from the 2019 5500 form, which showed late deposit of deferrals. Total interest correction was something like 30 dollars, it was corrected promptly, and excise tax was paid. The DOL calculator was used to determine the lost interest, but VFC program was NOT utilized. I know that the Philadelphia region was saying that the DOL could consider it not "fully corrected" if the DOL calculator was used but not VFC filing was done. This letter was out of the Boston region, not Philadelphia. So, first, is everyone getting these letters, and in other regions? Or maybe this was just random. Second, has anyone yet contacted the DOL person listed on the letter in such a situation with extremely minor amounts involved, and if so, with what result? Third, has anyone heard of/experienced an audit that was initiated because, after receiving this letter, they did not utilize the VFC program? It just goes against the grain to have to do a whole VFC filing on some of these plans where the lost interest is $1.18. But if an audit is triggered absent a VFC filing... Thank you for any thoughts or actual experience on this.

Thanks - I don't suppose there's any dispensation if it is a multiemployer money purchase plan where the formula is dictated by the collective bargaining agreement, and the collective bargaining agreement is modified as of July 1? I don't see that it helps any...

Brain cramp! Assume calendar year MP plan. Client wants to convert to a PS plan mid-year. Let's say July 1. 204(h) notice is done timely. Mus the AMENDMENT be signed by July 1, or can it be signed by December 31, as long as the 204(h) notice was provided timely?

I assume your plan document is an IRS pre-approved document? If so, it should already have this language. Admittedly, sometimes rather convoluted to wade through it....

Thanks all.

FWIW, we did informally run this by an ERISA attorney, who agreed.

Just want to see if you agree with my interpretation. Plan with many operational violations. The plan does NOT provide for the 20 hour exclusion, but they have been operating as if it did. Now, since employees were incorrectly excluded form deferring, there will have to be make-up contributions, etc. My question is this - under 1.403(b)-5(b)(4)(i), if any employee in the "less than 20 hour" exclusion category is permitted to participate, then no one in that category may be excluded. So, in this case, since some of the "under 20 hour" folks are going to have to participate since they weren't previously excluded, then this precludes amending the document for future years to institute this exclusion? Or have I got that wrong?

All excellent points. EBE - I suspect, for many reasons, that the employer does NOT want to attempt to claw back any funds already contributed, but I'm just exploring possibilities before talking to them. I was assuming the retroactive amendment would be the path taken. About the only thing that can be said that this plan did RIGHT was to properly restate, and file 5500 forms. Peter, great point - I'm pretty sure that these are in fact annuity contracts with TIAA, rather than custodial accounts.

This is a general question - have just been presented with an ERISA 403(b) plan that has been operationally botched for an as yet untold number of years - could be 4, could be 13. VCP all the way unless ERISA attorney advises them to ignore the problems and start clean next year. Very doubtful... Among the MANY transgressions, people ineligible for employer nonelective contributions have received them, for as far back as this goes. Plan is 100% immediately vested. Just wondered if anyone has ever SUCCESSFULLY negotiated with the IRS to have such contributions removed from their accounts and reallocated? I can't imagine that the IRS would allow this, but maybe someone has tried it with success?

A controlled group is based on ownership. There doesn't need to be any relationship in the business activities. Example, I own 100% of A and B. It doesn't matter that A manufactures firearms, and B is a clown service that plays at Birthday parties. As to your other questions, you have ownership attribution between spouses, and you would have a controlled group. There is such a thing as the "spousal noninvolvement" clause under IRC 1563(e)(5) and the regulations thereunder - if you can satisfy all those requirements, then not a controlled group. But watch out for community property states.

Brian and Peter - I only have a copy of the document, but I'd LIKE to think they kept records of such notification. Thank you both for your comments. Leevena - good question, I'll be interested to see how they respond.

A question came up on a HRA. I was able to obtain a copy of the Plan document, and the language is, shall we , a bit sparse, and not terribly enlightening. But here goes. Plan was established in 2008. In the adoption agreement, under "Maximum Benefits Per Coverage Period" it says: "Other: A discretionary amount to be announced by the Employer at the beginning of each Coverage Period." It then goes on to list the maximums for 2008. So here's the question - the coverage limits have been increased several times since then. Do you think this language would be sufficient, if the amounts are properly communicated to employees each year, or should a Plan amendment have been done each time the limits increased?

Very interesting. Thanks so much!!

Thanks Brian, I appreciate it. I have very limited involvement with cafeteria plans, but I have seen a number of failures on the 25% key employee test - but this is on very small plans, family businesses, etc. They don't have a TPA and are very surprised when they find out they are subject to testing! And yes, on these small plans, if even one HCE utilizes the DCAP, then it usually fails. Again, my experience is limited, and involves just a very small slice of the possible plans/situations. Some of those people might possibly benefit from the SIMPLE if they were willing to make the employer contribution, but the cost might well exceed the benefit! If you don't mind expanding a bit, what other added complications might you encounter with a SIMPLE? Again, just curious - please don't waste your time if it requires any effort!

Curious as to thoughts on this. I don't think I've actually seen anyone utilizing one. Any thoughts on why? Is it that the 2% employer contribution is a major sticking point, or are there other reasons? Seems like it would work well for many really small employers, if it isn't the required employer contribution that's the problem. Thanks for any thoughts.

Without taking time to look up "the rules" - I think it might depend on facts and circumstances. If your spouse is the client's CPA, or the client's investment advisor, for example, then I'd say yes - even if not necessarily required, likely a good idea. If your spouse is the client's veterinarian, then I'd say no. But you can always "over disclose" if there's any doubt - doesn't hurt anything. Just my gut response.

Yeah, coffee hadn't kicked in yet. (My standard excuse for being dense...)