Belgarath

As usual, just want to make sure I'm not missing something. I've just seen a couple of plans that did perform the Key employee concentration test and the DCAP testing. However, they did none of the eligibility or benefits testing. It so happens that even on a cursory glance, they obviously pass eligibility testing, so maybe they just looked at it informally and, reasonably enough, said "it passes." Ditto for the "Availability Standard" test. However, for the Utilization Standard test, the HCP ratio is app. 10%,and the non-HCP ratio is about 5%. And it looks like this has been going on for about a million years, give or take a year or three... So, - am I missing something with regards to the Utilization test? Is there some special way around this that I don't know about? And for the past failures, I'm not aware of any "correction" procedure - if audited, they are screwed, right? All they can do is correct this going forward? Any thoughts appreciated!

Thanks for the responses!

Well, you might have to file under VCP, for example.

When you think you've heard it all... Non-profit ERISA 403(b) plan. The business decided to install a 457 plan so that they could contribute for the lone HC executive. Fine. Due to a new and inexperienced Human Resources person, they not only didn't timely adopt the 457 plan, but the employer contributions were just sent to and deposited into the 403(b) plan! This happened for several months until it was finally noticed. Now, I know about PLR 9144041, etc., and although this situation doesn't clearly fall under the stated "mathematical errors", etc., it does seem like there should be some latitude to consider a contribution to the wrong plan (even though other plan not yet established) as a mistake of fact. For example, if a client has a DB plan and a DC plan, and the DB contribution sent to the DC plan, I'd feel comfortable having that refunded under a mistake of fact. Thoughts on this situation? I know this interpretation may be pushing the envelope, but it doesn't seem that far-fetched to me.

Nope. the two businesses are a controlled group, and as such, the owner is already maxed out. Now, I'm assuming when you say "contributed the max profit sharing" that you mean they maxed out on the full 415 limit dollar amount. If not, there may be room for a contribution - but you can't use an IRS model SEP, you'd have to use a prototype SEP that allows it.

I would absolutely defer to the employer's definition. If the employer classifies it as a "bonus" then it should be excluded. Make the employer decide if this should be treated as a "bonus" or regular salary. Don't let the employer push you into making the decision. Just my opinion...

Unusual question came up. Sole prop - plan is a 3% SH plan, HC's are NOT excluded. It has been proposed that the plan be amended to exclude the sole prop from receiving the SH for 2019, on the grounds that since the sole prop isn't required to receive a SH (if the plan is set up that way) that it is ok. To me, this seems like a very aggressive approach, and I wouldn't do it. However, I always like to hear the opinions of others - anyone have a different viewpoint?

Also, again an assumption - if an employee voluntarily opts out of participation in the HRA (why would they typically do that, when it is all employer money?) they would still be included in the testing, right? I see nothing in the regulation that indicates otherwise...but if included, are they included as benefiting or not benefiting?

Thanks Chaz. FWIW, although the employer didn't mention the Service Contract Act (and I certainly didn't ask, since I'd never heard of it!) the employer did mention that for this employee(s) the grant specifies certain mandated benefits, but the HRA is not among them. Anyway, your comments have been very helpful!!

Thanks Chaz. I can see I'll have to do some research, as to be honest, I've never even heard of (or at least, have no memory of) the Service Contract Act and FAR. This may be moot, as it is apparently a very small plan that has never been tested, and it may fail miserably regardless of an employee or two funded through a government grant...

As a follow-up to this question, an entirely different question! Let's say an employer is hiring employees whose salaries are funded by, say, a government grant. The government grant that pays for them to hire these people specifies the benefits that they must receive, and an HRA is not one of those benefits. First, I'm assuming there is nothing that would preclude the employer covering them under the HRA if they WANT to? Second, if the HRA plan says that everyone who is eligible for employer's medical plan is eligible to participate, then the fact that their salaries are funded through a government grant is immaterial - these employees, who are covered under the medical plan because the government grant specifies that they must be covered, must be considered for testing purposes, right? If the employer wants to EXCLUDE these people, then they must be considered in testing, unless they are otherwise excludable under a different, allowable category?

It isn't entirely clear to me as to who can be excluded when performing the eligibility test. 1.105-11(c)(2)(iii) lists certain categories of employees who may be excluded. But, if some of these people are already eligible to participate, it doesn't make any sense whatsoever to exclude them. For example, you can exclude employees with less than 3 years of service. However, suppose the plan already allows everyone with 1 year of service to participate. I'd include anyone already eligible to participate, in the testing. Anyone else have a different opinion?

Can I ask for a clarification on this? I know you can't have the "age 50" catch-up, but can't you have the "last 3 years before NRA" catch-up?

Identity theft is so scary on these accounts. I think I have mentioned this before - my 401(k) at my former employer changed over to Prudential as the recordkeeper. When I read their long, convoluted and crepuscular disclaimer, I was horrified to find that they claimed they had no liability for unauthorized withdrawals unless I had previously notified them of password theft. Well, how would I know until it is too late that my password was stolen/hacked and my account was emptied? (I give my password to NOBODY, but some hackers are evil geniuses.) So, after protracted unsuccessful responses with BS statements carefully crafted by their legal department, we worked out a system whereby my account is flagged so that NO DISTRIBUTIONS may be made using on-line tools. I must CALL in, and answer a special challenge password before withdrawal forms are MAILED to my address of record. Address cannot be changed without similar steps. Call me paranoid, but I feel a lot more comfortable this way.

Too funny!

What is your definition of "senior" - ??? I just lean towards "yeah, I'm a senior" - it covers all contingencies. I have to say that the benefits of growing older have largely escaped me. Maybe I'll think otherwise when I retire! And as Elmer Fudd would say, "Be vewy cafew." Some people on these boards lack a good sense of humor.

1/1/2010.

It does, but that right isn't unlimited. Anyway, I'm not going to spend much time on this until (or if) they engage our services! Thanks for the response.

Hi John - sorry I didn't make it clearer - I agree with you - the amendment I referred to was in fact signed by the client. I should have said that the TPA prepared the amendment for the client to sign. I haven't delved into the details yet, but after a cursory glance I have a feeling that this blanket override of all non-required provisions isn't accurate in terms of the actual plan operation...

Ain't that the truth!! Just saw one of those yesterday, in fact.

I understand the viewpoint - filing it is cheap insurance. However, I do have a question - when, if ever, have you had the IRS propose to disqualify a plan that you administer, where the SOL prevented taxation prior to the 3 year SOL period?

I came upon an interesting situation here. Governmental (Indian Tribal) 401(k) Plan is using an FIS VS document. The FIS VS document removes all ERISA items, but DOES NOT remove the IRS requirements normal for private plans. So, even though normal nondiscrimination testing, for example, is not REQUIRED by the IRS, the document requires it. To overcome this, the TPA did an "omnibus" type of amendment that, to paraphrase, says that notwithstanding any other language in the document to the contrary, the requirements of the IRC and regulations from which Governmental plans are exempt, shall not apply to this plan, specifically including but not limited to 401(a)(4), 410(a), 401(b), etc., etc... Now, this probably works ok, but it would clearly take it out of pre-approved VS status and the corresponding automatic reliance, so they should have applied for a determination letter, right? Or am I missing something?

Good news!

How did all you folks in the coastal sections make out? Is everything ok?

So let's say you have a "basic" 457 for a non-profit. They allow for both elective deferrals and (discretionary) employer nonelective contributions. The employer lets eligible employees know, at some point during the year, how much employer contribution they will be receiving so they can coordinate their elective deferrals, and not go over the limit. So let's say that for 2019, employer says they will contribute $10,000 for employee. Employee defers $9,000. All accounts are 100% vested. The document is silent regarding any deposit timing for the EMPLOYER nonelective contribution. Since this is an unfunded promise to pay, it would seems reasonable that there is never any deposit deadline, until payment is actually due. FICA tax is paid for 2019 as Austin mentions above, right? As a practical matter, if the plan permits participant direction of investments, as many do, then it is unlikely that the "decision makers" will allow an unreasonable delay in actually depositing the contributions, but there's no IRS deadline, correct?