Belgarath

Agree. That correction is for elective deferrals. Under 1.402(g)-(b), elective deferrals are amounts contributed to the plan at the employee's election, and except to the extent that they are Roth contributions, are pre-tax. Since the voluntary after-tax contribution doesn't fall under this definition, then I'd say the "new" correction (no QNEC) doesn't apply. As an aside, since these are after-tax contributions, and you have already received the money in your paycheck on an after-tax basis, and it is only a couple of payrolls where this happened, how much are you really "missing?" You are getting your full match, presumably, when your employer fixes the pre-tax. Since you have the funds in hand, why can't you increase your contribution for the rest of the year, and "make it up" by using the cash you have already received? I'm just trying to get my head around how much, (if anything) you are realistically losing - and why you can't make it up out of the pay you received already. I'm not seeing this as any sort of a big issue.

Thanks!

But that's if you didn't make an election. Here, the participant did make an election - employer just didn't follow it. I'd say you refund it, plus earnings if there were any. Any match made, plus earnings if any, should be forfeited. I don't think that the employee failure to look at pay stubs is material here. I can easily see how this could happen - direct deposit of pay, one spouse keeps the checkbook up to date, other spouse doesn't even mention that elected no deferrals, etc., etc., etc.... - some people simply don't communicate. Maybe that's a good thing - I've heard that communication is one of the main causes of divorce.

Don't really know anything about this subject (457(f) plans). There were proposed regulations issued in 2016 - are updates to 457(f) documents required by a certain date, similar to qualified plans? A client mentioned in passing that they have one of these, and I don't know who did the document or if any updates have been made (if even required in the first place). Any thoughts appreciated.

Not certain what (or why) you are asking? How/why would anyone attempt to exempt an employer from required bonding by using an exemption that specifically applies to an "...insurance carrier or service or other similar organization..." I guess my answer to what I think you are asking is no, I've never heard of anyone attempting to apply this exemption to the employer.

It seems as though IF the new school district, which is a new legal entity with a new EIN, "merges" the plans of the prior separate school districts into a "new" plan established by the new school district, that there could perhaps be (at least) two valid ways of handling? One, have the new plan carry over the elections from the prior plans for each separate group of employees for the balance of 2018, and then have new elections for 2019? Rev. Ruling 2002-32 would appear to support this. Two - create a new plan, with a short year for 7/1/2018 - 12/31/2018, and allow new elections? It seems like somewhere in all this mess that a dose of common sense is needed - since the guidance, IMHO, is not specific enough, it seems like a reasonable compliance attempt ought to be sufficient? Thoughts? These are governmental non-profits, so I'd like to think the IRS would cut them a little slack upon audit.

Nope. Calendar year.

The IRS mentions the following. Did the suspension period, which started 2 months late, then last for 6 months? If so, seems like option 1 has probably been satisfied, barring some tweaking if there were changes, as mentioned below in option 1. 3. Failing to suspend participant salary deferrals If your plan terms require an employee to be suspended from contributing to the plan making the distribution and all other employer plans for at least six months after receiving a hardship distribution, then your plan must suspend salary deferrals. If your plan fails to do this, here are some correction options: Option 1 - Suspend the employee from making salary deferrals for a six month period going forward. However, this may not put the participant in the same position as they would’ve been if you suspended their contributions immediately after receiving the hardship distribution. For example, the plan’s matching contribution levels for the six month period going forward could be different than what they were during the correct suspension period. Option 2- Return the hardship distribution. The employee could return the hardship distribution (adjusted for earnings) to the plan. This could put the employee in the same position she would’ve been in had the failure not occurred. This approach may not be a viable solution because the affected employee may not have sufficient resources to repay a hardship distribution. Note, the plan sponsor can’t address a failure to suspend salary deferrals by simply revising administrative procedures going forward because this option wouldn't correct the failure to suspend elective deferrals in the past.

GROAN. Ok, so let's say you have school districts A and B. Both sponsor cafeteria plans, which are calendar year plans. The plans have different provisions. Let's further say that the school districts are legally merging on July 1, 2018, into one new unified school district. This merger date is a legal agreement and is set in stone. I don't know what they WANT to have happen - at this point, only trying to determine what options might be available. What happens to the plans once the merger takes place? Can the plans merge into one plan, but maintain the same provisions for the separate employee populations for the balance of 2018? Alternatively, possibly thinking outside the box, can the elections made for 2018 in Plan A and Plan B specifically state that they are for 6 months only? And then they make new elections, under a new plan sponsored by the new entity? Somewhere in the back of my head, for no reason I can discern, it seems like there is some prohibition against consecutive short plan years in cafeteria plans. But even if true, since as of 7/1/18 there is a new entity, then perhaps this wouldn't apply? Perhaps Revenue Ruling 2002-32 can be relied upon to prohibit any CHANGE in employee elections for the second half of 2018? Any thoughts are very welcome.

Nope. See 1.401(k)-2(b)(2)(vii)(C).

A cautionary tale. https://www.laboremploymentperspectives.com/2017/09/11/401k403b-loan-borrowers-check-your-paystubs-2/

You have to wonder, hearing some of the horror stories about rot, mold, whatever, if in the long run it sometimes isn't better to have a complete loss and just rebuild. No fun either way. But in the long run, it's just things - if everyone came through it alive and safe, the rest really doesn't ultimately matter. Still very stressful at best. We had a partial loss due to a fire 20+ years ago, and cleanup-repair of water/smoke damage was not enjoyable, but everyone safe (no one home but me at the time, and fire started in an outbuilding) and I got the pets out, so that's all that mattered. Like you, we considered ourselves very lucky. Since then, I've never griped about paying my homeowner's insurance premiums!

See Revenue Procedure 2016-51, Appendix A, .05(8) through (10). If you meet the requirements, the QNEC is 25% of the missed deferral, plus the entire 4% match. So 5% (plus earnings, of course).

Hi Luke - not surprised you couldn't find it - it isn't easy typing with 10 thumbs - particularly when 7 of them are on one hand! Let me try again - 1.411(a)-5(b)(3)(iv)(B). Anyway, I've found that once people have formed an opinion on this subject, one way or the other, they rarely change. I also can't say that I've ever seen or heard of an auditor ever questioning this one way or the other...

I believe AO 2012-02A addressed this very question. And as I recall, the DOL said such an arrangement would violate the "completely voluntary" requirement. But don't take my word for it - you may want to check the AO. If you can't find it, I think I have a hard copy lurking in a file somewhere.

Thanks Tom, and I wouldn't "push it" by amending a plan after the 30-day advance deadline, but again, how is there any "decision" by the participant - reasonable or otherwise, with respect to getting employer money in a nonelective 3% safe harbor? You get it or you don't - ain't no choice. My point is not what the regulations say, and they seem pretty clear, but that they are unreasonable, and potentially detrimental to participants, so it seems like this would be a good item for the lobbying arm to target. Maybe I'm missing something. And on another note - delighted to hear you came through things ok! Sounds like a whole lot of folks in your area weren't so fortunate.

I seem to recall that in FAB 2007-02, consistent with Peter's point, the DOL opined that the employer could not "authorize" plan-to-plan transfers while remaining within the safe harbor. So an actual "Rollover" as ETA says, ought to be permissible as long as the 403(b) plan administrator isn't exercising any discretionary authority as to whether or not to accept the rollover.

Just curious - the requirement that the plan be amended by 30 days before the end of the plan year seems very strange. The IRS was very helpful in allowing mid-year amendments on SH plans - has any organization (ASPPA, etc.) also been advocating for a change to this 30 day requirement? Obviously, I can see requiring the amendment to be signed by the end of the plan year, but this is a nonelective 3% we are talking about. Absent the amendment, the participants get nothing. What is the sense in penalizing participants just because the employer misses the 30 day deadline? Seems like a no-brainer to allow an employer to "opt in" at any time up to the end of the plan year, with no notice requirement, either. Thoughts?

Thanks David - I was looking at 414(p) and ERISA 206(D) just a moment ago, and found he same thing. So it seems like the general answer is yes, a DRO issued by a state court CAN be recognized as a QDRO, if all the other requirements are satisfied.

That sort of circles back to the question of: CAN a QDRO be valid if the parties are still married - which in a "legal separation" they are.??? I don't know. Since a legal separation apparently provides for a division of property, it would seem reasonable that it can. But a legal separation is a creature of State law, as I understand it, so ERISA preemption might come into play? I really, really don't know the answer to this, but I'd love to hear from someone who does! Thanks.

First, I tend to agree with ESOP - this has VCP written all over it. SCP is available forever for "insignificant" errors, but this one covers everyone in the plan and occurs for many, many years, so it would be "significant" and therefore you are well beyond the SCP correction period for "significant" errors. However, first check your plan language carefully - it may permit, in the "boilerplate" language or language specific to deferrals, the Plan Administrator to (presumably on a uniform and nondiscriminatory basis) exclude certain compensation, etc. - certainly worth a look - documents sometimes have some very interesting provisions. What does the Summary Plan Description say? What do the deferral election forms say? If everything says, in essence, "W2" and doesn't leave any wiggle room, I think you are stuck with VCP, although as ESOP suggests, possible that you can get a VCP filing approved where retro amendment conforms to actual operations. Otherwise, I also don't think that just correcting for just the last three years will generally be acceptable to the IRS, but the great thing about VCP is you can ASK for anything. Just be prepared to have it rejected. You can also try a "John Doe" submission, but your attorney can advise you. Going to be a lot of work and expense, even under the best od circumstances, if you have to submit to the IRS. Good luck!

You may, however, possibly have trouble with vendor/recordkeeping platform - I don't know - haven't happened to run into this situation before. Some of them aren't too user-friendly with stuff that doesn't fit into a normal pigeonhole.

Great news - glad to hear it!

Let us know how y'all came through it, when you get a chance. I know you have bigger worries right now!

Very nice chart. Thanks!