Belgarath

Hopefully you are on a cruise and not stuck in an inner tube with only your laptop, with its failing batteries being utilized for this rather than calling for rescue. Enjoy!

Agree. However, it is remotely possible that he is actually still an EMPLOYEE of the accounting firm. Purported independent contractor status does not necessarily make it so. However, that's separate from your question.

Excerpt from the SAR-SEP form: Excess SEP contributions of a highly compensated employee who is 50 or older before the end of the calendar year do not have to be removed from the employee’s SEP-IRA to the extent the amount of the excess SEP contributions is less than the catch-up elective deferral contribution limit (see Section 402(g) Limit above) reduced by lective deferral contributions already made for the year.

I'll merely say this - I'm not judging anything without knowing all the facts, etc. - and one tiny detail can turn everything on its head. We work with a lot of recordkeeping platforms, and we find Hancock to be excellent, and far better than many others who shall remain nameless.

Assuming a couple of things, yes. 1. 401(k) Plans CAN, but rarely do any more, restrict payouts to being unavailable until Normal Retirement Date. Perfectly legal, but I haven't seen such a provision in YEARS. 2. The real question is always whether there has been a bona fide termination of employment, and the employer/employee relationship has been severed. Merely calling someone a "consultant" doesn't necessarily make them so. Odds are good that a distribution is allowable, but you will have to check with the Plan Administrator or Employer first. Also check the Summary Plan Description, which should answer # 1 above.

So in an "ordering" process, you would first distribute the 415 excess, THEN do your ADP test. And if ADP still fails, you refund the deferrals, BUT the refunded deferrals still count as annual additions for 415 purposes. That seems much more logical. Thanks for the comment.

Morning brain cramp. Say you have an ADP failure and a 415 failure for a participant. Not catch-up eligible. The ADP refund amount is still considered an "annual addition" for 415 purposes as per 1.415(c)-1(b)(1)(ii). So suppose there is an ADP refund of $5,000, and the 415 excess is determined to be $10,000. Do you have to reduce the participant's account by another $10,000, or only $5,000, since $5,000 has been distributed under the ADP refund? From memory, (always dangerous) it is the former, but I'm somehow missing the appropriate regulatory citation to support that, so I'm questioning my sanity. TGIF!

And even though that allows certain student employee exclusions, it then leads you off to IRC 3121, etc. - haven't looked at it for a while, but it is a delightful stroll through a garbage dump...

I'm not sure the answer above is applicable - as I read it on a quick skim, it says that the Federal share of the work study funds cannot be used to provide benefits. So it can't be used to fund employer contributions to the plan, or for FICA, etc., etc. However, I don't think it means that the employer is exempt from covering employees who must otherwise be covered. Just that any contributions must be employer contributions, and not utilizing the Federal funds provided to the work-study program. Just an off-the-cuff impression FWIW - I don't have time to look into this in greater detail.

I agree with CEW, but be aware that a notice saying they were NOT contributing is not required, even though many employers do it. In other words, the plan is NOT a safe harbor for a given year UNLESS the employer makes the election to make it a safe harbor for a given year. Ok, I see Kevin already mentioned this!

Hi Larry - so what does it say - for example, "This notice is for the Plan Year that begins following your receipt of this Notice" or something generic like that?

Bird - some documents (FIS/Relius, for example)allow you to exclude the HCE's from receiving the safe harbor, but also allow a "discretionary" safe harbor to be made to HCE's - as long as it is equal to or less than the safe harbor contribution given to the NHCE's. IRS pre-approved doc., doesn't blow your top heavy exemption.

I'd be very surprised if the plan document doesn't somehow address this, although it might be "sideways" and require some cross-checking, particularly if the document isn't in an Adoption Agreement format. It is clearly permissible for a 401(k) plan to allow rollover money to be used for loan purposes. If the document TRULY does not address this in some form, one way or the other, then it is the responsibility of the Plan Administrator to make the determination of what is and is not allowable under the written terms of the plan.

Well, perhaps another way to look at it is from a "risk factor." (I know, ERPA's can't advise clients based on audit risk.) Realistically, if it is corrected according to the attorney's interpretation, if the IRS does audit I'd have a hard time believing that they would consider disqualifying a plan based on this. So you negotiate, at worst pay a little extra and interest - in essence, same place you'd have been in otherwise, except for the interest, which is typically negligible. Not saying I'd do it that way myself, but it's another way of looking at it.

Revenue Procedure 2015-28 specifically mentions this "rolling" correction method. This language does not appear in Revenue Procedure 2016-51. Whether this was an intentional change, or an inadvertent omission by the IRS, I can't say. https://www.irs.gov/pub/irs-drop/rp-15-28.pdf P.S. - FWIW, I just took a look at Sal's EOB, and it mentions that the IRS informally opined at the 2015 ASPPA Conference that the applicable correction method is based upon when the operational error BEGAN.

Thanks. I actually knew that if I'd thought about it for just a minute. Sorry to have bothered you!

I don't know why COBRA is suddenly popping up all the time.... If an employer (A) has a new employee coming from another employer (B) who offered COBRA, can the new employee us the FSA from (A) to pay for the COBRA payments?

Bill, yes, good point. I assumed, and you know where that gets me...

Was this notification/call from the Plan Administrator, or some flunky at the investment house? You need the Plan Administrator to make the decision. Assuming that this beneficiary wasn't required under the terms of a prior QDRO or something like that, then your mother should be the default beneficiary under the plan. My guess is that in most situations, she will receive the funds, and may not necessarily need to hire an attorney. However, I'll let some of the attorneys chime in - they have seen the strange and unusual...

Regulation 1.402A-1, Q&A-12, seems reasonably clear to me - the loan default would/should be treated as a pro-rata distribution from the Roth account as a separate account, and not combined with all plan assets to determine the taxable distribution. So while the total taxable distribution might be minimal, assuming there are ANY earnings in the Roth account, there would be some level of taxable distribution, albeit possibly a small amount. And it would of course be reportable.

I got a copy of the plan document, and the document does permit it. Thanks again, I'm all set now.

"Are you asking if the taxable pay for some or all of the COBRA premium can be reduced and applied to the COBRA coverage? That would be a question for the employer's section 125 plan and negative if the employer does not have a section 125 plan or the plan does not expressly permit it." Yes, the above. Thanks for the response.

Luke - it is same day. Or at worst the next day. "Trustee deposited it into the EMPLOYER checking account and simultaneously wrote a check to the terminated participant for the appropriate amount, and submitted the 20% withholding to the IRS. "

Say an employee is terminating shortly, but will receive a last paycheck - possibly including severance pay. Can the employee elect to "prepay" the next 6 months of COBRA premiums out of the last paycheck?

What is the Plan's default beneficiary heirarchy? Typically it is something like spouse, children, surviving parents in equal shares, estate. But thsi should tell you who the appropriate bene is under theplan.