Belgarath

I'd say no. See 1.401(k)-1(a)(3)(iii)(C).

But it wasn't "due" until 4/1/2017. So you report it on the 2017 form, if you are going to report it at all.

The instructions on the SF appear to be different than for the 5500 See the following from the instructions for the Schedule I: Line 4l. You must check “Yes” if any benefits due under the plan were not timely paid or not paid in full. This would include required minimum distributions to 5% owners who have attained 70½ whether or not retired and/or non-5% owners who have attained 70½ and have retired or separated from service, see section 401(a)(9) of the Code. Include in this amount the total of any outstanding amounts that were not paid e continued to remain unpaid. Pardon the incomplete copy/past above - it didn't completely work, but there's enough to get the gist.

What Mike said. One other issue I'd possibly be concerned about (and admittedly this may be a stretch) is a possible breach of fiduciary duty. PARTICIPANTS are being allowed to direct investment of plan funds to which they are not yet entitled. To me, this is different than someone who just isn't 100% vested in their account. Again, as Mike said, the whole thing is a very bad idea.

I don't believe there is any advance notice requirement, even if ERISA applies, correct? Yes, any eligible expense incurred prior to the amendment date would need to be covered, but still no legal/regulatory requirement for advance notice, similar to a 204(h) notice in the qualified plan world? Thanks.

Just off the cuff without really thinking about it... You may not need any documentation - a partial plan termination means that every affected participant becomes 100% vested. No documentation needed for that. Does the employer intend to contribute to everyone, or only those who MUST receive a contribution? Reason I ask is that obviously you will fail coverage with a last day requirement. So, the plan may have "fail-safe" language which mandates the specific process of who gets a profit sharing allocation, up to the point that coverage passes. If so, then in order to give an allocation to everyone, the plan will need to be amended. Plans typically contain language allowing for valuations, other than on specified dates, for any date deemed necessary or appropriate, etc. by the Administrator, so you are probably fine there. These are just terminated participants - it isn't yet a PLAN termination, so unless there is a big rush, why not just wait and do a normal 12/31 valuation? Why do two? Just a thought. There are likely other issues - as I said, this is just a quick bunch of random thoughts.

I know the language may say that, but good luck getting an auditor to agree. I don't think it stands up based upon official guidance. If you ask Relius, I expect they might agree. This language is nice to hopefully prod a participant to pay attention, but I would not want to try to hang my hat on it if trying to defend the employer's failure. (Yes, if audited, you'd use that 'cause it's all you have got, but I'm not confident the auditor would agree. But hey, I've seen some fairly lenient audits, so you never know. I just wouldn't decide NOT to correct based upon this language.)

Isn't the 401(b)(6)(C) dispensation for coverage only, and not for nondiscrimination? Although a design-based safe harbor under 401(a)(4) can often be deemed to pass, but these days, such plans are becoming fewer and fewer, at least in our small plan market.

First, are you doing an "in-plan" Roth rollover of your after-tax contributions? If not, I don't see that it is necessarily such a big benefit, particularly for just two payrolls. I can't speak for your employer, but if correcting an error, I think there is latitude to temporarily exceed the 50%, until the error is corrected. But that's up to them. One of the principles of self-correction is to put the plan and participant in the same situation they "would have been" absent the error. As long as no IRS limits are being exceeded, shouldn't be a problem IMHO. How much, in actual dollars, was "missed?" And I don't know how much you are contributing, but although the deferral limitation doesn't apply, the IRC 415 maximum does - presumably your employer is tracking this. Good luck.

p.s. as 401noob suggests above, the correction in Appendix A.05(5)(b) for missing after-tax contributions is 40% of the "missed" contributions. Personally, I think this is crap, as it gives the employee an undeserved windfall, which is one of the things the changed Revenue Procedure was supposed to prevent. If an employer self-corrected using the "new" procedure (no QNEC) I wonder if an auditor would object? Or, if you submitted it through VCP, if the amounts were high enough to be worth it, if the IRS would approve the filing? I can't answer those questions, as I've never had any direct experience with this situation. Any thoughts out there?

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.