Belgarath

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Can you provide a specific example of the situation, the error, and a Relius response?

Tom - was this maybe the old 401(k) regs that were modified by TAMRA (1988) which provided such a de minimis rule for excess contributions and excess aggregate contributions that were distributed within the first 2-1/2 months? I think it was 1.401(k)-1(f)(4)(v)(B) way back when...?

No. See below for a definition of a designated Roth account. Can't have a designated Roth account if you don't meet the definition. § 1.402A-1 Designated Roth Accounts. Q-1. What is a designated Roth account? A-1. A designated Roth account is a separate account under a qualified cash or deferred arrangement under a section 401(a) plan, or under a section 403(b) plan, to which designated Roth contributions are permitted to be made in lieu of elective contributions and that satisfies the requirements of § 1.401(k)-1(f) (in the case of a section 401(a) plan) or § 1.403(b)-3(c) (in the case of a section 403(b) plan).

A very difficult question to answer. A lot might depend upon the structure/options/restrictions in the State plan. In addition, many private employers have an innate distrust when it comes to having a State-run plan. Ultimately, it would likely come down to a "what's in it for me" decision - if the State plan proves to be "better" - whatever that may mean to the person making the decision - then they might opt for the State plan. I'm with RBG - I think that very few of our clients would opt for it even if available.

Not enough information. How many participants? Is this 1 out of 100? Or 50 out of 75? Dollar amount involved? Etc., etc.? Likely to be insignificant, but really no way to tell without full data. Take a look at the Revenue Procedure (2016-51 is the number I remember, off the top of my head don't remember the number of the updated Rev. Proc. - maybe 2018-52?) Section 8, which will give you some parameters. But it will often come down to a judgment call anyway.

Usually, (but not always) where I've seen this situation in the past is where there is an asset that the Hog expects to appreciate greatly in the future, so they want to take it at current value and make a killing when it is liquidated later. A piece of land, for example, where if the new interstate exit gets approved, it'll be worth a gazillion dollars. Thankfully, in my present life, we have no such plans!

"A person cannot become a trustee unless he/she/it accepts that appointment, usually as evidenced by a writing." And just fyi - the document I mentioned above DID require signatures of Employer and the Successor Trustee. (Dated as well, of course.)

The lawyers may disagree with this approach, but we had a similar request a while back. I didn't amend the document, but just did a resolution and appointment of Successor Trustee, pursuant to Article (whatever) of the plan, with such appointment to become effective only upon the death, resignation, removal, or incapacity of the Trustee, and an acceptance of appointment as Successor Trustee by the Successor Trustee, only in the event of the death, resignation, removal, or incapacity of the Trustee. Don't frankly know if this is legal, or if it is only "good" for a certain amount of time, etc., etc. - told them to check with their attorney, and never heard back.

Thanks.

P.S. - W-2 instructions. See page 8. The payment would not be included in Box 1. I'm not understanding why the payment would be on a W-2 issued to the estate - that doesn't make sense to me. It appears the estate should receive a 1099-MISC, and the payment on the W-2 to the employee, while wages for SS purposes, would NOT count as eligible plan compensation? https://www.irs.gov/pub/irs-pdf/iw2w3.pdf

Hard to believe this has never come up, but... Participant died mid-year. S-corp owner. Rightly or wrongly (and I have no opinion) "he" is receiving no W-2 income for 2018, but his ESTATE received a check for his accumulated wages or whatever that is being classified as W-2 income, paid to the estate. Is this compensation considered as W-2 paid to "him" for plan purposes?

Although it still doesn't "feel" right, darned if I can find anything prohibiting it. And since no HCE's, coverage/nondiscrimination testing isn't an issue.

What if the contribution in question is an employer discretionary contribution? For example, the plan has each participant in their own classification for purposes of employer discretionary contributions. These contributions have NOTHING to do with whether the employee DEFERS in the 403(b) or not. However, they are based on whether the employee takes the employer-offered health insurance. So if you take the health insurance, no employer contribution to the 403(b). If you don't take the health insurance, you get an employer contribution of "x." While this seems to satisfy the letter of the "contingent benefit" rule in 1.403(b)-5(b)(2), it doesn't seem right somehow. It almost seems like a "sideways" impermissible CODA, although there is no option to take the funds in "cash" - any thoughts on this?

Yes. If you are using a pre-approved document, check the service crediting portion - the document usually will provide for such an option.

Thanks - yes, plan doc defines compensation and limitation year as the plan year (calendar). The whole situation does present some logistical difficulties, as the deduction is being taken for the fiscal year ending in the plan year, yet the extended tax filing deadline falls December 15th, which is before the 2018 compensation is even finalized. They should probably amend their plan year to track with the fiscal year...

I remember looking into this once upon a time. Perhaps what they are talking about (and I didn't open the link to read it, so I am just speculating based on the "post retirement contributions" comment - 1.403(b)-4(d) deals with contributions for former employees. Under this section, the employer can make NONELECTIVE contributions based upon the “deemed monthly compensation” that the employee would be deemed to receive for up to 5 years after the end of the tax year in which the employee terminates employment. This would NOT permit elective deferrals – only an employer contribution – which could well be part of a severance package – the employer offers, for example, to contribute (x% or x$) to the employee’s 403(b) account for the next (x) years as part of the severance package.

I'm having difficulty wrapping my head around a screwy situation. Plan year is calendar year 2018. Limitation year is 2018. Fiscal year is 4/1/2017 - 3/31/2018. Extended tax filing deadline is 12/15/2018. Plan excludes pre-participation compensation. Eligibility is 3 months/250 hours, monthly entry. Participant is hired in 2018 - let's say on June 14th, enters plan October 1, 2018. Compensation form Date of Participation is, say, $30,000. Prior TPA has been allocating contributions made for a given fiscal year for the prior plan year, based upon prior plan year compensation. Example - for 2017 plan year, allocations were made based on 2016 calendar year compensation. I don't see how this can work. While you can theoretically allocate a contribution made in a current plan year, with the fiscal year ending in the current plan year, for a prior plan year, how can you allocate for 2017 (in the circumstances above) based on 2018 participating compensation, when the only participating compensation is during plan year 2018? There is no 2017 plan year compensation. Am I missing something?

Thanks!

The end of the calendar year is completely safe. But I expect that the "general" deadline will apply. The "general" - I think - rule is that plans have until the end of the second calendar year beginning after the issuance of an IRS-issued “Required Amendments List” reflecting the new rules.

Thou shalt not get any argument from me on that point.

I've always understood that you can add an EACA mid year AS LONG AS it is limited to only those employees who become eligible on or after the date the EACA provision is effective. But then, as you note, the 6 month correction period wouldn't apply. The plan could then be amended for, say, the following plan year to expand it to everyone, and then the 6-month correction period could apply. As I recall, Sal has a write-up on this - you may want to check it out. I think it was one of those things where the IRS confirmed this interpretation at an ASPPA meeting, so I don't know that everyone would necessarily agree with this interpretation.

I agree with EsopGuy. If the amount is trivial, the Employer/Plan Administrator isn't going to pay the money to consult an attorney. If the amount isn't trivial (a subjective determination) then regardless of the state's limit - the Employer is going to at least check with counsel to make the determination. Or to perhaps be more accurate, we are going to RECOMMEND that they check with counsel. Whether they do or not is up to them, as always.

I think I understand this, but I'd love any input, 'cause maybe I've got it wrong. Plan has premium conversion account, and an FSA. Plan document, and plan forms/administration appear to be at odds. My understanding is this: No premiums can be paid through the FSA. Premiums for group health insurance offered by the employer, or individual policy premiums for "excepted benefits" such as dental or vision, can be paid through the premium conversion account. However, premiums for individual "health" insurance may NOT be paid pre-tax through the cafeteria plan. First, is that right? The document appears to support this interpretation, yet the forms/administration have been allowing pre-tax treatment through the cafeteria plan for individually purchased HEALTH insurance, as long as it isn't purchased through a federal or state exchange. I believe this is incorrect? Thanks!

Thank you both.