Belgarath

Good point, but this is a Profit Sharing plan, so nothing to worry about from this angle, right? I'm not entirely certain what you are saying.

Not from my viewpoint. I've seen plans like this before. Everyone is 100% vested, and it just goes merrily along. Sometimes they actually intend to start contributing again if business improves, sometimes they want the added shield from a lawsuit judgment, etc., etc. These are sometimes small/family plan situations, so if it goes on a long time, might be worth consideration of having a successor trustee in place, (if there isn't already) depending upon age and/or health of the owner.

Yes. 6 month suspension isn't required for non-safe harbor definition of hardship.

Rarely. But once in a while, after someone has chewed your tail and basically told you don't know what you are talking about, because "they read an article" or "their (insert relative) works in the business and told them we don't know what we are talking about" there's a certain satisfaction to be able to point to the e-mail and mention that you DID advise them of this.

Presumably separate 5500 forms if separate plans. By any chance, did the drug plan have fewer than 100 participants?

Thanks - actually, it isn't a 403(b) - I just used the term "vendor" generically. Could have said custodian, fund, etc...

The things you find out long after they have already happened months ago! Employer apparently, in mid-2016, simply wrote a check to a participant - did not run it through payroll. This was apparently treated as a "bonus" for no discernible reason. The employee held the check, then deposited it in DECEMBER. It was deposited (endorsed directly by the participant to the vendor) to the employee's deferral account at the vendor. This is wrong on several levels. First, as an aside, the plan does not allow a separate deferral election on bonuses, so even if this had been done directly and otherwise correctly through payroll, it wouldn't have been allowable. Aside from that, this isn't a "deferral" because the participant already received the check directly. So really, this is an employee after-tax contribution. Also not allowable under the terms of the plan. Only correction I see is distributing the amount, plus earnings. Seems like this would be reported in Box 1 and Box 5 on the 1099-R, since it is a return of after-tax employee contribution, (and a Code E in Box 7?) and the earnings would be reported in Box 2? Earnings, of course, would be taxable. As to whether the employer correctly reported this on W-2 and did appropriate SS tax, etc., etc., it is their problem. We'll mention it to them, and they can work with their CPA... Any thoughts would be appreciated.

Trying to dream up a scenario where the participant is "damaged." What about the 6-month suspension of deferrals (if applicable) where employer does a hefty match, that the participant now "loses" - I leave it to you lawyers as to whether this might legitimately be a claim that would be upheld.

Thanks!

There's been some discussion on this topic over the years, and as far as I know, there's no concrete guidance from the IRS. Situation is where a participant legitimately requests hardship withdrawal, has all proper paperwork, etc., check is issued, cashed and deposited and deal falls through at closing. (And closing go sour quite often...) Participant wants to know if funds can be deposited back into plan. I've seen various solutions. QDROphile has sensibly suggested in the past that funds be delivered to escrow, then if closing falls through, redeposit to the plan. Seems defensible. My question on this is do you have problems with the investment provider and reporting, particularly due to withholding if it crosses calendar years? Someone else (I think it was KevinC) suggested it could be corrected under EPCRS as an overpayment. While probably true, this should theoretically work only once, because part of SCP correction is changing procedures so it doesn't happen again. You could just allow it to be re-deposited, under a "common sense" approach. Again, I'm not sure how different vendors/platforms might view or allow/disallow this. You could take the approach that "too bad - it was a legitimate hardship when made, and you can't undo it." This actually seems like probably the most appropriate answer, although perhaps an unjustifiably harsh result for the participant. All of this of course tempered by some of the incredibly asinine requirements by many mortgage LENDERS and what/how/when they require things to be done. It's conceivable that they might not allow the closing if the funds are in escrow? Seems ridiculous, but I've heard some strange scenarios. Really just wondering if anyone has any other brilliant ideas/insights, or has heard of any pending guidance, discussion from the podium at conferences, etc... Thanks!!

Mine is sort of a ramble as well. I was focusing more on the theoretical possibility of an amendment being allowable for a pretty narrow set of circumstances, rather than the practical testing implications. And I agree, at best, a potential mess for dubious gain, if any. I suppose it really means that you'd blow your design-based safe harbor allocation, and have to general test the whole shebang? Agree that there's no way to cut back on the integrated formula benefit for those who satisfy those allocation requirements. I think the whole purpose of this was to give "Joe" nothing, or less than what would be given under the integrated formula. But maybe it isn't possible - too many end-of-July brush fires to ponder this at greater length. Mind you, I'd just tell 'em NO, and amend it for the following year anyway.

I don't quite get what you are saying. As per original post, "Participants employed at the end of the year have a 0 hours service requirement. Participants that are not employed at the end of the year have a 500 hours of service requirement." So suppose that, as of this moment, someone does not have 501 hours. It isn't the end of the plan year, so as of this moment they haven't accrued a right to anything. But, between now and when they terminate prior to the end of the plan year, they MIGHT reach 501 hours. So if you amend now to individual classes, these people who attain 501 hours between now and when they terminate could be given zero allocation (assuming you pass testing). I guess what I'm trying to say is that what I mentioned should negate the underlined sentence below. I don't agree that the first participant attaining 500 hours should then negate the possibility of amending to change for participants that have NOT yet earned the right for an allocation, nor will they because they terminate employment prior to end of plan year. Of course, if the IRS chooses to follow the flawed logic, I don't know how successful it would be to fight it, and it probably applies to so few people that it wouldn't be worth it... A plan that requires participants to either be employed on the last day of the year or complete at least 501 hours of service can only change the allocation method up until the date on which the first participant works his/her 501st hour for the year. At that point, changing the method would eliminate a right the participant has already earned.

So why can't the amendment specify that it applies ONLY to participants who have not worked at least 501 hours as of the amendment date, and who terminate employment prior to the last day of the plan year?

Thanks Peter. They also never filed 5500 forms at all, so those were recently submitted under DFVCP. There's an IRS VCP filing being submitted shortly, so only the PT issues left to be cleared up. So it sounds like I was understanding it correctly. I'm just always surprised if anything is easier than I expect - it makes me nervous!

So, 403(b) plan sponsor withholds deferrals way back when, and never submits them. So multiple years involved. I'm trying to determine how this works for both calculating the penalty, and submitting it/requesting a waiver. When you start with the 5330, you quickly realize that even if the 403(b) plan is subject to Title I of ERISA, it is not a "plan" subject to IRC 4975(e)(1). But it IS (in this case) subject to Title I of ERISA, and the prohibited transaction penalties. So, is it really just as simple as submitting a VFC filing (in this case, it is worth it) and calculating the interest amounts using the VFC calculator, and requesting a waiver of any PT penalties? And if so, what has your experience been about a waiver being granted? I feel like I must be missing something.

Yes, let's just say that at Fenway Park, before restrooms were upgraded somewhat, those longer lines and inebriated fans resulted in a situation where after 1 trip to the restrooms, you threw away your shoes! The good old days ain't so great as they never were...

Although I wasn't a huge fan of theirs, I always like the cover for Kansas' "Point of Know Return." The ship tipping over the edge of the world was just a great image.

25% is correct. No 5330. Earnings must be included. And IF there is any match that was missed due to the error, the additional match, plus earnings, must be contributed. Plus proper notice, etc. - see RP 2016-51, Appendix A, .05 (9).

Did they really, truly, have a Tonya Harding bat night? Somehow, I either never heard that one, or in my dotage had forgotten. I thought you had to be President to get away with any such uncivilized behavior...

Well, then at least there was SOME positive to the event!

Perhaps, with luck, this might be accomplished without a custom document? Don't know if such provisions would perhaps be allowed in a pre-approved document under an "other" election, or in an Appendix, etc...? Just a thought.

I also love stats, although the current spate of ESPN "stats" are becoming absurd. "He's the first player ever to hit triples in two consecutive road games in the 8th inning or later when his team was losing by more than three runs, while wearing white cleats and chewing bubble gum rather than tobacco..." - you get the idea. You probably already know this, but if not, look up Smead Jolley. A stat no one wants to be remembered for.

Fortunately for me, I'm not on Facebook, nor do I ever intend to be. Way too narcissistic for my taste. Nor do I Twitter, or Tweeter, or whatever. I don't even own a cellphone! I'm not quite a Luddite, but a lot of this stuff just leaves me cold.

Perhaps the plan should have some "severance from apron strings" language.

Ah, but did you get to know Ned Ryerson? And I haven't heard the word "baud" for at least 25 years!