Jennifer D.

I have an unresponsive client who sponsors a 401(k) plan with prevailing wage. They have not deposited the owed prevailing wage into the plan for months, and are now potentially shuttering their doors and just walking away. What do I give them to impress upon them how they need to fund the contributions? I haven't been able to find anything concrete here, on the IRS website, DOL website, or ASPPA book, but maybe I am just searching incorrectly?

That was the only thing that was coming to mind as well, and we may do that in this case. If it was a situation where the client had shut its doors just as fast as it gave us notice of the termination, do you think looking back at the census and comparing it to the vesting percentage might allow for an educated guess? Of course that wouldn't work if the plan had anything less than a 5 year graded vesting schedule.

Because it came from one of those payroll companies that doesn't send over everything a TPA requests, and the client had been under the impression the payroll company was doing everything it was supposed to. Then they shut off access as soon as they find out the client is leaving so the client couldn't go get the report. 🤦‍♀️

We took over a retirement plan last year and never received the Roth basis information to calculate if a distribution was qualified or not. The plan is now terminating. I know that a termination does not make the roth distribution qualified, but what do any of you do if you do not have the 5-year information from a prior TPA or client?

Hi all: I have a client who we are taking over from a prior TPA. They have a retirement plan as well as a SUB (supplemental unemployment benefit) plan. The client is a prevailing wage client (long story short the fringe is what funds the SUB plan). Because it is a SUB plan they file a 5500 for it, but they have not been able to get a copy of their plan document or SPD - instead their prior TPA keeps giving them a copy of their 125 plan. My understanding was that a SUB plan needs to have a separate document. Even if I was going to correct that for them with the IRS, I have no idea where to start in getting a SUB plan document - aka I have no idea which companies provide this specialized plan document that isn't a TPA. So, my questions are, does a SUB Plan Document need to be separate from a traditional cafeteria plan document, and does anyone know of a document provider I could use to draft a SUB plan document?

A client brought us a one participant plan that filed 4 years worth of 5500s electronically late (they received bad advice that they could transmit them electronically and then do DFVCP instead of properly mailing them in). When I looked at the asset amounts, the plan never had over $250,000 in assets. This money was all cashed out this year and a final 5500 is due for 2021 regardless of the mistaken "late" filings. My question is, to try to help this client, do we electronically file the final 5500 and then send the IRS a letter that they never should have filed in the first place until now, and here is the final, or should I just mail the final 5500 to the IRS with an explaining letter? The closest I found to answer was this very old post:

Can you go from a 3% non-elective Safe Harbor contribution to a flexible (maybe) 3% safe harbor contribution mid year? Would you need to provide a seperate notice for this under SECURE, or can you just make the change when writing the Cycle 3 document?

I have a prospective client who has a non-Erisa 403(b) for the NHCEs to defer, and an ERISA 403(b) for the charter founders to defer and get a PS contribution. We've been called in because while the non-ERISA document excludes charter founders and the ERISA document excludes everyone else, a founder had been deferring to the non-Erisa plan and got a profit sharing contribution in the Erisa plan (she did not defer to the Erisa plan). My questions are - can you set the plans up this way - ie can you aggregate the non-Erisa and Erisa plans to make sure the NHCEs aren't discriminated against for coverage, and if so, does it all get messed up with having the 1 founder deferring into the non-Erisa plan (I know it violates the document but it only happened this year so we should be able to amend the doc to permit it). Thoughts?

The problem is that the participant did actually cite a poorly worded link on a Q&A from the IRS webpage, so we are trying to explain to her why the IRS said that and why our client can have this loan requirement. https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-loans Tom is right that it isn't in the document per se, but it is in the loan policy. We use Relius documents and the loan policy that generates with the doc and hardships are a permitted restriction, but that only shows up in the loan policy. She just doesn't believe that's permissible by law because of what she found on the IRS website. Frustratingly enough, our TPA business takes participant calls directly, so I can't just hand this over to the employer as we're expected to deal with these issues. The employer doesn't know why they can do it, just that they wanted loans to be restrictive and we told them their loan policy can have these restrictions. Now it's a "put our money where our mouth is" sort of situation. Thanks for the cite Kevin! That's exactly what I'm going to use in my e-mail to her!

I have a terribly persistent participant who is convinced that you cannot put criteria on obtaining a loan from your retirement plan. Specifically, her plan requires hardship proof. Does anyone have the IRS reg that states you can put these types of criteria on your loan program?

Does anyone have the code citation that states a government non-erisa 403(b) plan can have a matching contribution?

I have 4 companies - A, B, C, and D. A, B, and C are a controlled group, and C and D are a controlled group. A and C are not a controlled group and they do not qualify to be an affiliated service group. Who do I test together? My thinking was I test A, B, and C together, AND then test C and D together, but that could be redundant for C, so maybe I'm missing something?

We believe he will still have enough to fund at least some after he pays back the missed interest, so assume that's the moot point. I'm more worried about the prohibited transaction. The policy permits a loan for any reason, but he's a previously defaulted trustee who wants to fund the plan with his account....

So here's a new one for me: We have a client who has not funded the employer contributions to the plan since 2013. He would like to take a loan from his account under the plan and use that money to fund the plan. The kicker is that he has already defaulted on a prior loan. The loan policy could be amended to permit him to take a loan even after a default and we could include the prior loan and missed interest when calculating how much he can take out to fund the plan. BUT, this isn't passing my smell test. I fear this would be considered a prohibited transaction because it's the employer who already defaulted, and while he may use the money to fund the plan, he might not pay it back again. Thoughts?

I am not sure if I have an open MEP or a closed MEP. We have an employer owned 100% by the wife, and her company A sponsors the plan. The husband has a completely different company B where he owns 100%, but to save costs, he has adopted Company A's plan as a participating employer. There is no crossing of employees, separate payrolls, and no direct ownership of the other's company. The companies also do completely different things from each other and have no commonality in business dealings. Is the family attribution between husband and wife enough to make this a closed MEP, or is it an open MEP? (it doesn't actually matter, we just want to report it correctly for this first year)

The plan document is silent as to what happens with other distributions mid year, so I can't invalidate the QDRO based on that. I'm thinking I need to request a quarterly statement from the client that they received from the financial institution to find out the rate of return for the year, and if I can't get it, to do what Bird suggests. Thanks so much Bird and David!

We have a QDRO for a plan that is only valued annually. In this case the QDRO is silent as to the payout date for the alternate payee except for "as soon as administratively feasible." It does require us to calculate gains/losses on the amount for the alternate payee from the determination date (last year's valuation date thank goodness) until the date of segregation (note this is not the date the alternate payee gets their money as they have the option to leave it in the plan). So the question is... how do we calculate the interest when we don't get a financial statement until the end of the year? This plan is not invested with a custodian or in mutual funds where I can simply work with units instead of dollar amount either. We are debating between estimating the gains based on last year, vs. waiting until next year when the valuation is complete.

We have a participant who terminated from a plan who is under age 59.5. At the time of termination the participant did not take out heir money. The participant is now disabled and would like to make a withdrawal. Would we waive the 10% penalty for this person even though they were disabled after termination?

I'm sure this question has come up before but I can't find it. We have a participant who was unmarried pass away and name her mother as beneficiary, and her sister as contingent beneficiary. The mother died after the participant, but not before the deathh benefit of the participant was distributed. Does the benefit go to the mother or the sister as contingent beneficary. My thought is this passes like any other inherritence. The mother was the rightful beneficiary and at the date of her death, the participant's account was among her assets even though it hadn't been distributed. Therefore, it should pass to the mother's estate and no longer be beholden to the beneficiary form. Any thoughts or cites?

What are others doing in the situation where you have a client who would like to amend their plan to add or remove a feature that will change the fees the participants pay? I know a participant change notice should be disclosed. The issue is timing. If the disclosure of the change has to be provided 30 days before the participant could be affected, but the employer wants to, for example, add loans to the plan immediately, are you postponing the effective date of when loans can be effective? Are you just telling participants they will be charged in 30 days? Is anyone doing anything else?

If they don't want an "open MEP" then 1) take that into consideration BEFORE the change in ownership occurs (due dilligence on benefit plans? - Yea, I know I'm smoking something), and 2) TERMINATE the "plan" (the separate plan sponsored by the company that is being "expelled" from the MEP AT THE TIME of hte change in ownership. Otherwise, you have an ongoing plan, and it must be compliant. I wish my clients would smoke what you're smoking. If we "terminate" the plan of the person getting kicked out, then we would still need to refund any deferrals made past the date of termination which would be 5/1/12, correct?

Our thought was that because the sponsor wants this other owner out, the other owner is technically deferring into a plan he no longer qualifies to be in - that would be the reason for the refund back to 5/1/12 - the date the franchises stopped. I see what you are saying about the Open MEP. That sort of thinking would lead me to believe that everytime you have a situation where ownership has changed and you have 2 now unrelated employers in a plan you have an Open MEP. But there has to be a way of stopping that participation in the Open MEP if they don't want to create a spin-off plan, right?

We have a client who was part of a franchise and owned 3 companies in that franchise. First, the client sold one of the companies. As they were still a franchise, this plan became a closed MEP. Now, the client and the other owner have left the franchise which means we have an Open MEP. The problem is the client who owns 2 out of the 3 companies, does not wish to sponsor and Open MEP and is kicking the other owner out of the plan. This is effective 5/1/12. The client didn't tell us until now, so the company being kicked out of the plan is still deferring (only the owner makes deferrals). We have spoken with him, and he does not want to create a spin-off plan. We need to go back to him wit instructions on what his options are, but everything we have looked at only talks about ceating a spin-off, creating a MEP, etc. Nothing talks about when the client DOESN'T want to do any of those things. My thought is that he needs to have his deferrals refunded to him as of 5/1/12, sign a resolution ceasing participation in the plan, and that's it. Does anyone have an opinion and/or a source for that opinion I could use with this client? He isn't going to be happy when we tell him he has to get all of his money back.