Belgarath

I agree with MWeddell. I also infer "all" in such situations. For example, if you infer "any" such conditions, it renders a normal of 1,000/last day meaningless - as soon as someone attains 1,000 hours, you can no longer amend the plan to reduce/remove. This flies in the face of everything I've ever seen, been taught, or done (and back in the day, when determination letters were made all the time, the IRS had to see all the amendments and never once (with us) raised this issue on such mid-year amendments which were very common). Is your answer the same if it just a straight Profit Sharing Plan? If not, how do you arrive at that distinction? Anyway, FWIW, I would not hesitate to currently amend a discretionary match plan with 1,000/last day requirement to receive a match allocation, and remove the discretionary match for the entire year, if the the amendment is done prior to the last day.

And this is the key, which I didn't really fully grasp during the document presentation (the brain starts to go numb after a certain amount of information packed into a session) and I thank you for highlighting this. For many of our clients, I think this will work well. For the others, well, sometimes you can't have your cake and eat it too. If you want maximum flexibility, the Notice is the price you pay. Sort of like Gateway - if you want to cross-test, that's the price of admission. (Having said that, I still think the Notice requirement, to use the technical term, sucks.) But I think FIS did a good job of providing options.

Maybe I'm cracked. Plan has 2 year eligibility. (Money Purchase plan) Years of Service for eligibility are 1,000 hours, measured on employment ANNIVERSARY years. Participant must have "two consecutive years of service" without an intervening break year to be eligible. Let's call the end of the employment anniversary years in question, for ease of discussion, 2017, 2018 2019, 2020. So first employment anniversary year ending in 2017, has 1,000+ hours. Terminates before the end of the first employment anniversary year, then is rehired during second 1-year period. Has LESS than 1,000 hours, but MORE than 500 hours, during the second employment anniversary year period, so no break in service for Anniversary year 2018. Has 1,000+ for both employment anniversary years ending in 2019 and 2020. Since there was no break year, I believe the 2 year requirement, even though it is a "consecutive" years requirement, is satisfied on employment anniversary year ending in 2019. Participant isn't treated as a new hire, to start counting "2 consecutive years" from rehire date, since no Break in Service. So year two is "washed out" and year 3 counts as the second "consecutive year." Agree/disagree? Should it still have to be two "consecutive 1,000 hour years" STARTING AFTER the rehire? I don't think so... Gracias.

Right, not a 1-participant plan.

Agree, I'd expect this to be in the BPD.

I think you are "combining" part of 415 and 402(g)? I don't see any "lesser of" provision in 402(g).

BG - I believe that it should be spelled out in your plan document. If the document says that the requirements for an allocation are "proportionately reduced" or some such language - so that in your case, apparently 250 hours would suffice to get a contribution - then I think you can't rely on the 500 hours to consider this person an "excludable employee" under 410(b). At least, that's my recollection.

Thanks, but I'm forced to disagree, if by "excess deferral" you mean a violation of the 402(g) limit? That limit is a dollar limit, and that dollar limit hasn't been violated here. It isn't an ADP failure, so I don't see any option other than to consider it a 415 violation. Perhaps I'm misunderstanding what you are saying?

Well, that's what the CPA would like, and to a certain extent, I understand where he is coming from. Let's say he defers maximum in 2020 based upon the draw, but it turns out there is really a $250,000 loss. If this amount had not been deferred, his loss would still be such that he has zero taxable income. So in a way, this is turning non-taxable funds into taxable income. Sort of a doubly whammy in a way. I'm just not aware of any applicable special reporting code for the 1099-R that states that the distribution is non-taxable, but I want to be sure I'm not missing something.

Florida Swampland Realtors is a sole proprietorship, no common-law employees. The owner and sole employee, I. M. Cheating, defers maximum based on a salary draw for 2020. After end of year, taxes get done, and it turns out he has zero earned income - actually a big loss. So there's a 415 excess, plus earnings, to be refunded. Refunded in February of 2021. 1099-R is issued with the amount being shown as taxable, right? In other words, no way to use a special code to report this as non-taxable? A CPA is questioning this, and I want to make sure I'm not cracked. Thanks.

Safe Harbor matching plan - standard matching formula - plan definition of compensation EXCLUDES bonuses. Now they want to amend to include bonuses in compensation for the 2020 plan year. From IRS Notice 2016-16, under the 'prohibited changes" section: 4. A mid-year change (i) to modify (or add) a formula used to determine matching contributions (or the definition of compensation used to determine matching contributions) if the change increases the amount of matching contributions, or (ii) to permit discretionary matching contributions. However, this prohibition does not apply if, at least 3 months prior to the end of the plan year, the change is adopted and the updated safe harbor notice and election opportunity are provided, and if the change is made retroactively effective for the entire plan year (which may require a plan that provides for periodic matching contributions as described in §§ 1.401(k)-3(c)(4) and (5)(ii) and/or 1.401(m)-3(d)(4) to be amended to provide for matching contributions based on the entire plan year). Now, here's the twist. They are making this change because 2 HCE's already received bonuses early in the year. They may or may not pay bonuses to everyone else at the end of the year. At the time this amendment is made, it seems it would be discriminatory on its face, but, if they pay bonuses at the end of the year to the NHC employees, then subject to compensation testing, it could pass. Edit - of course, after thinking about it a bit, I now realize that it isn't a matter of compensation testing - if bonuses are INCLUDED, then there isn't any compensation testing for 414(s). I am concerned, however, that a mid-year amendment changing the definition of compensation when it benefits only HCE's in this situation is a nondiscrimination issue. Thoughts?

Here's an older thread that may be helpful.

And while that may be likely, I'm sure you are aware that you cannot rely on a telephone conversation with IRS as any official guidance.

If you have access to the Erisa Outline Book, see Chapter 3b, Section XI, Part C. (Page 3b.735)

I'm inclined to thing entry date for the ESOp/SH is 1/1/20. Completion of eligibility requirements is 2/27/20. 1st entry date preceding that date is 1/1/20, right? I think the same "logic" - and I use that term loosely - applies to the second situation, so it would be 1/1/20. I see BG beat me to it.

It does rather look that way, doesn't it?

Well, let me be clear - I'm wasn't commenting on whether you will have a tax "headache" or not - that is a separate issue, and there are different definitions of a "tax headache."

Seriously?

It may not just be the Summary Plan Description (SPD) - there may be a Summary of Material Modifications (SMM) that was provided - essentially an addendum/modification to the SPD - that you might not have reviewed. The DOL issued updated disability claims regulations that might apply to your plan. Check with your Plan Administrator,or check your records/website/whatever to see. A sample of general language (and there are many variations) : In the case of a claim for disability benefits, if disability is determined by a physician (rather than relying upon a determination of disability for Social Security purposes), then instead of the above, the Administrator will provide you with written or electronic notification of the Plan's adverse benefit determination within a reasonable period of time, but not later than 45 days after receipt of the claim by the Plan. This period may be extended by the Plan for up to 30 days, provided that the Administrator both determines that such an extension is necessary due to matters beyond the control of the Plan and notifies you, prior to the expiration of the initial 45‑day period, of the circumstances requiring the extension of time and the date by which the Plan expects to render a decision. If, prior to the end of the first 30‑day extension period, the Administrator determines that, due to matters beyond the control of the Plan, a decision cannot be rendered within that extension period, the period for making the determination may be extended for up to an additional 30 days, provided that the Administrator notifies you, prior to the expiration of the first 30‑day extension period, of the circumstances requiring the extension and the date as of which the Plan expects to render a decision. In the case of any such extension, the notice of extension will specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and you will be afforded at least 45 days within which to provide the specified information. P.S. - if anyone really wants to delve deeply into it... https://www.federalregister.gov/documents/2016/12/19/2016-30070/claims-procedure-for-plans-providing-disability-benefits

Check to see if the plan allows in-service distributions at Normal Retirement Age.

Just in general... Over the years, I've seen a few (but very few) participants actually repay it after they get the letter. Mostly they say, "So sue me" and I've yet to see an Employer willing to bring suit for at most, a few hundred or thousand dollars ( why would they - legal costs exceed recovery amount, not to mention the hassle, time, and stress - although if amount was very large, it might be a different mindset) so the Employer makes the restorative contribution to the plan. The participant gets the revised 1099 - they have gotten free money; what do they care if the pay taxes on it? It is still free money in their pockets.

I don't think you can use the special correction. See this older thread, but still applicable, unless there is some new guidance of which I'm unaware. Others, of course, may disagree.

I don't read Peter's question # 3 as addressing the issue DOL lenience or enforcement. Rather it is a question about whether a prudent fiduciary might find it difficult or impossible to find a recordkeeper who would accept the pending-blackout payment, for a very small plan. I'll leave it to Peter to clarify he thinks it is necessary.

Deleted.

Well put!