Belgarath

Cross-tested plan. Compensation for allocation purposes excludes certain items such that 414(s) testing is required. Plan requires last day/1,000 hours to receive employer contribution. Pan is NOT top heavy, nor is it a safe harbor. Question is this: Terminated participants with more than 500 hours, so not excludable - when doing the rate group testing, for purposes of the 70% ratio test for the rate groups, do these people have to be included for purposes of 414(s) testing? Seems like I recall that they are not included in the 414(s) test for this purpose, as they are not benefiting. In other words, are they automatically included in the 414(s) test if you go to the average benefits test, or only if 1 or more rate groups fail the ratio test, and you must move on the the ABPT? The plan in question passes the 414(s) with flying colors regardless, so this is more a question to avoid a future brain cramp. Thanks.

Hi Kevin - I think we'll just agree to disagree on this issue. As far as the EOB goes, I think the sections are perfectly consistent. The plan can offer one or the other, or both. (Just as an aside, this is a purely academic exercise for me, as our plans do allow a split election.) And I don't think it is a tortured reading of the regulation, but of course I could be wrong on that. I'd love to see the actual PLAN language in OP's plan to see what, if anything, it actually says on this. I have a suspicion that the Plan may not specifically address this anyway. It's too early on a Monday morning for me to delve into the BRF issue - the coffee hasn't kicked in yet! (But I'm very much inclined to not worry about it.)

Hi Kevin - ok, so based on your EOB citation above, this I just pulled out the EOB to take a look - 2018 version. Chapter 11, Section XV, Part A.1, 1.c.1 very clearly states that the plan is not required to divide the election between pre-tax and Roth. FWIW, I just checked the 2016 EOB, which is the oldest version we have handy, and it is the same as what I cited above. So I'm still a non-believer at this point. Or to perhaps be more precise, the plan isn't required to allow an employee to divide the election between pre-tax and Roth...

Hi Kevin - not sure I agree with that interpretation. I think the phrase "to the extent permitted under the plan" allows an employer to require all deferrals to be one or the other, as long as you are permitted to change. So although nearly all plans permit a split election, I don't think they are REQUIRED to.

All right, where's Ned Ryerson? ?

C.B. - I think you hit the nail on the head. Although it LOOKS funny (on the Relius report) to have the bottom of the rate band used for the HC, (and not for the NHC) this is only for purposes of the 70% ratio test for the rate group, and all the people in that band are included. For purposes of the ABPT, then "real" benefit percentages are used. So I think it is all ok.

Based solely upon what you have stated, and assuming it is all completely correct... In a general way, this (sadly) isn't all that uncommon. The employer can go through the IRS "VCP" program, which will involve make-up contributions for the "missed deferral opportunity," make-up matching contributions, and interest. If done and calculated and submitted to the IRS properly, there's no reason why the IRS wouldn't accept this correction. Many (most, all?) of the Third Party Administrators on these boards have done corrections for similar situations, and received IRS approval. Caveat - this is just general information, and please do not view it as being tax, legal, or definitive advice of any sort.

I would merely observe that although it was handled incorrectly by the Plan, (assuming this was a direct rollover), the PLAN has nevertheless satisfied its requirement to distribute the RMD for the year. (At least, that's how I understand it...) It is just that the RMD amount was incorrectly sent as a direct rollover. And almost certainly reported incorrectly as well. A screw-up no matter how you look at it.

2018.

This really is a question for Relius, but perhaps some of you have dealt with it already. Suppose you have a midpoint EBAR (for HCE's) of 8.740. So any EBAR's within 5% above or below this midpoint are considered to have an EBAR of 8.740. This gives you a range of 9.177 to 8.303. In the Relius testing, it uses the LOW of 8.303 for the EBAR in the testing. So a HCE with an unbanded EBAR of 9.1, for example, is in the testing at 8.303. Is this correct? I thought that the testing would have to use use the midpoint of 8.740.

What Kevin said!! We have a few "legacy" plans that still use it, and it is a nightmare for compliance, particularly since the clients who tend to use it also tend to be less than stellar in the human resources arena...

I dunno. I was probably thinking about the correction for failure to implement an employee election, etc., where determining an ADP/ACP test failure in addition to the missed implementation, the plan could rely on a test performed with respect to those employees not impacted by the failure, and disregard those who do require the make-up contribution. P.S. - finally found what I was looking for which of course agrees with you - RP 2019-19, Section 6.06, .02(2)(d). Gotta fix a 401(a)(4) failure if created as a result of the correction.

Monday brain cramp. Suppose you have a DC plan utilizing cross testing. The rate groups either pass the ratio test, or the plan passes the ABT test. Fast forward a year, and it is discovered that census data was incorrect, and a participant or participants were improperly excluded. So the employer has to do make-up contributions, matches, whatever. Do you have to go back and re-run the nondiscrimination testing taking into account the corrections? I don't think you do, but I'm not putting my finger on the guidance to back that up. Thanks.

I'm not familiar with these - (other than hearing them advertised on the radio) - blurb from IRS included in link. Are these expenses allowable as "premiums" under a cafeteria plan? If not, can the expenses be considered an allowable expense under a Health FSA? https://apps.irs.gov/app/IPAR/resources/help/acamnstry.html

In addition to 5500 filings, the plan document must be constantly updated as required by the IRS in order to retain qualified status. Have you done so? If not, I recommend you consider hiring a local TPA to assist you with the IRS filing under Revenue Procedure 2019-19, or the updated version is it is updated. This isn't an issue to be taken lightly. As to the advisability of keeping the plan "open" - this isn't something that can be answered here - it requires full knowledge of your specific situation, circumstances, and wants/needs, as well as your tolerance for expense to keep you out of further trouble maintaining this plan. I can't recommend strongly enough that you engage the services of a good local TPA. I've seen so many disasters on these damned "solo 401(k)" accounts that's it is almost hard to believe. They are almost always set up through a financial advisor/brokerage house, and they rarely receive the attention and oversight they need. Of course, maybe I shouldn't complain, because we've charged a whole lot of fees over the years cleaning up the messes, but I do hate to see folks get stuck in these situations, when they could have been so easily avoided. Good luck.

You aren't going to be able to exclude the employee. The minimum participation test under IRC 401(a)(26) would fail. First, see a local TPA/Actuary to go over your options. They will be able to suggest what works best for your situation. Perhaps you could give this employee a minimal benefit. Or put in a 401(k) plan - you CAN exclude the HC employee from receiving any employer contributions in this.

Agreed, and trying to remember ancient history, I thought the S/E did not get to recover the TTC. It has thankfully been a long time since I had to deal with life insurance in a plan.

Carefully avoiding any indication of taking one side or the other, (as emotions run high) this is anything but a "trial" - it is merely a farce. The only good thing about it is that while Congress is wasting taxpayer dollars, they are not engaged in wasting far more taxpayer dollars on a plethora of bad ideas.

No way to cure it that I know of. If there is, I'd love to hear about it!

If you have access to the EOB, the 2018 version (the 2019 is in the other room, and I'm too lazy to go get it) has a discussion of this issue starting on page 15.788.

"(3) You have represented in writing or by electronic medium that you have insufficient cash or other liquid assets to satisfy the financial need." But the Plan Administrator is still required to be supplied with documentation of the financial need, correct? (Unless they are willing to rely on the participant having and retaining the pertinent documents - good luck with that...) - what are folks doing with this?

There will have to be some relief issued for such situations. It is simply not possible for plan sponsors to modify all their programs, administrative procedures, etc., for a piece of legislation passed with little warning like this. The plan sponsor obviously reasonably complied as soon as possible based upon what you say. I would be very inclined to ignore reporting it as a taxable distribution, but I'll be interested to see what others think. And tax/legal counsel should be used before a decision to ignore is made.

Agree.

"Why would employees opt out of a free (to them) benefit?" Well, it ain't necessarily "free" as there is generally current income that must be declared on the taxable term cost. Particularly at older ages, this can be substantial, depending upon your definition of "substantial." Avoiding the general insurance vs. no insurance debate, I'll just observe that some participants do not want to pay the taxable term cost, as they either don't want insurance, have sufficient insurance (by their reckoning) outside of the plan, etc. - so there are valid reasons for a participant not to want insurance in a DB plan.

I had added an edit to my response, but evidently I hit a wrong button or something before "accepting" the edit. While I can''t remember the exact wording, it was something to the effect of, if you WANT to deduct , see Larry's comments. But not all insurance companies necessarily have such a procedure or are willing to help out on this.