401QUE
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Everything posted by 401QUE
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Thank you so much!!!! Now comes the fun part of having the giant record keeper properly implement it, by way of creating a new Match source for the terms. Have yet to see how the SPD lays this all out... The responses are much appreciated!
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Can an employer amend their tiered-vesting match to give immediate 100% vesting to only actively employed participants' balances? Put another way, can an employer make all match balances for only active employees 100% vested, while keeping termed participants on the existing tiered vesting schedule? Note this full vesting would be on existing balances as well as future match contributions for active employees. I'm a bit rusty on protected benefits but don't immediately see where any accrued non-forfeitable benefits are being reduced in any way. Any insights and guidance are most appreciated, as always!! Thanks!
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Austin, thanks for the (delayed, but) good laugh!
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Maybe this: https://www.irs.gov/Retirement-Plans/401k-Plans-Deferrals-and-matching-when-compensation-exceeds-the-annual-limit
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Might this be what you're looking for: https://www.irs.gov/Retirement-Plans/401k-Plans-Deferrals-and-matching-when-compensation-exceeds-the-annual-limit I'm actually searching for answers to whether the per-pay-period match accrual must stop when Year-to-date pay hits $265,000. The IRS addresses that deferrals may continue after 401a17 is reached (absent the "first" 265k reference in your document), but the above link does not address the stoppage of match upon reaching the 265k mark during the year. Any thoughts?
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Thanks, Lou S!
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Greetings 401k Board, I am hoping for feedback and guidance regarding an unusual situation. Employer A is about to acquire Employer B. Both parties agree that Employer B will terminate their Safe Harbor plan prior to acquisition (closing in less than 30 days). Is there an exception to the testing requirement for the current year (because of elimination of the SH) due to plan termination? They will have made 11/12 months worth of SH accruals, and there will no longer be a plan for the final month. They will be able to timely issue a "NO 2016 SH" notice, for what it's worth. As an added complexity... If the deal falls through after after 11/30, can Employer B re-issue an updated SH notice to re-institue the 2016 SH contribution? It will certainly be an employee-friendly change, and be done with some time to allow employees to consider the elections for 2016. That's what the 30 day period is intended for if I'm not mistaken. Any observations, questions, input are appreciated! Thanks!
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Auto Enrollment and Immediate Entry Date and Administrative Lag
401QUE replied to CO Bank's topic in 401(k) Plans
The reason for the "Administrative Lag" would be the required 30-day Auto Enrollment notification. Common is auto enroll plans that have immediate (or rapid) entry to participate. Probably often takes up to 45 days due to the TPA's online system (guessing here). -
I am assuming that non-profit organizations have no individual owners. I have a possible new client the founder (HCE) of which has a daughter also working in the organization. The daughter does not and has not earned over $115,000 in any years, yet they are both treated as HCEs on the TPA's discrimination testing. Is the TPA somehow viewing the founder as an owner and then attributing that "ownership" to the daughter incorrectly? Thank you!
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Sorry, DC 401k plan. Not trying to argue, nor take sides, just sort of feeling sorry for the acquiror. I always believed the party responsible for adopting the plan is the one responsible for terminating, hence my "trustee/officer' reference earlier. Can he/she/they be made to deal with the old plan, if specified in the agreement? Even still, these are people that often remain in the new subsidiary so there's all kinds of other external, political, organizational factors to consider.
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So... even though the acquired company (Subsidiary) did properly terminate their plan prior to the deal, [disillusionment setting in] there is really nothing to be gained by the Parent Co either way. The Parent Co either faces the hassle factor of having to do a formal plan merger for the hassle factor of back-stopping the acquired company's plan termination and administrative shutdown responsibilities.
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A plan sponsor was acquired via stock sale. They were told that terminating their plan before the deal closed was advisable to provide more freedom of choice to their plan participants (a distributable event allowing more distribution choices, rather than face a plan merger under the successor plan rules). The acquiring entity also did not want to take on the liabilities present in an active qualified plan with operational defects. I don't have any details on the purchase agreement between the 2 parties, unfortunately, but will guess that not much was stated regarding the retirement plan. So now we have a terminated plan that still has a number of steps to fully shut down, including current and future compliance testing, tax form filings, potential refunds, distributions, etc.. Question 1: Am I correct is thinking the acquiror has every right to insist that those tasks (and costs) be handled by the acquiree? Question 2: Does the acquiror somehow inherently own the liability for the acquired company's plan anyway, absent anything in the purchase agreement specifying that the plan trustees/officers of the acquired co. are personally responsible until the plan is shut down and beyond? Thanks for any comments and observations!
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On the IRS website, I spotted a "Rev.December 2013" Form 5330 today, FYI.. (we were previously using Rev. April 2009). It doesn't look like much has changed upon first glance.
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Here are the basic facts: Start up Plan effective 10/1/2012 One employee that owns >5%, was hired 8/2/2012 (deferring 10%) - the only HCE for 2013 No other employee owners No Employees had comp over $115,000 in 2012 If the 2013 ADP test is run using Otherwise Excludable method (using statutory entry date of 7/1/2012), are all employees excluded - even the HCE? I cannot seem to find anything in Tripodi, or from the TPA (yet). Thank you!
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Unfortunately, the VS document they are on does not allow for anything more than Pro Rata and Integrated allocation methods. I believe the SH NEC upper limit is 25% - at least that's the range given in the plan doc.. I appreciate your comments and suggestions, JMH!
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I have a plan sponsor client that wishes to make their Safe Harbor Non-Elective Contribution using the following formula: 4.5% of regular comp, plus 2.25% of bonus compensation. The plan document vendor has them on a volume submitter plan - not sure if relevant - and they are reluctant to provide their "blessing" of the formula, which would be in the addendum as a write-in fixed formula, rather than a modification to the plan's definition of comp for the SH NEC. A rough calculation of the 414(s) Compensation Test results in the HCEs with a lower average compensation percentage than Non-HCEs, however I am not so sure it passes the prerequisite "Reasonableness Test." If it was okay, does this formula need to be cross-tested? Unfortunately, I can't quite get anyone to give me a straightforward answer on this. I am leaning towards suggesting to the client that they simply exclude or include 100% of bonus and be done with it, rather than trying to thread the needle. Thanks!
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Force-outs concurrent with (sudden M&A) Plan Termination
401QUE replied to 401QUE's topic in Mergers and Acquisitions
We're only talking about terminated participants - sorry, I shouldn't have assumed it went without saying. The Doc states "as soon as is practical following severance if partially vested" and the administrative process has been to do so toward the end of each plan year in batches. They wanted to accelerate this year's mandatory distribution process. The terminated group (particularly large balance, many of which are extremely pleased with the performance of the plan) have been the only group not aware of what was going on at the company, so I don't think it was discriminatory at all. By "early" I meant relative to upcoming events, rather than earlier than other participants. Making the one recipient whole would cost the ER nothing, it would just be a matter of reversing the forfeiture and paying it out per their IRA rollover election. It just happened a few days ago, but any earnings would be included. I agree with you, 401kbee, about making whole, and the client will no doubt agree as well. Thanks for the very thoughtful comments, questions and concerns so far! -
Initially, our client indicated they were about to be acquired (transaction date TBD in the near future). The client had asked my firm to conduct a "force-out" distribution mailing to thin out the plan before merging it to the Acquirer, and also to give some large-balance terminees an early head's up changes were brewing and to consider moving their retirement assets more directly under their individual control. Thus far into the force-out process, one partially-vested participant voluntarily took a rollover distribution of her net account balance. Now, the decision has been made to Terminate the plan prior to the corporate merger taking place. In my mind, this sort of nullifies the force-out process, and I'm sure the client would be okay, in effect, not forcing anyone out under the original force-out time frame (3/15/2013), and allowing the full vesting and plan termination distributions to occur somewhat later. My question is: Do we make whole the one participant that received a partiallly-vested distribution by reversing the forfeiture and distributing it to her IRA? That seems like the conservative thing to do, given 1. it coincides with the plan termination and would give the appearance of an ill-intended maneuvering of the plan sponsor (not their intent) and 2. people talk and so many other terminees that chose not to do anything will become fully vested it may lead to a complaint. Or, in general, what is the guidance or regulation regarding forcing out partially-vested terminated participants with a pending plan termination? Thanks!
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Can current participants be amended out of the plan
401QUE replied to jkharvey's topic in 401(k) Plans
I have a client that made such an amendment (to exclude interns), effective 10/1/2012. Their intention was to only exclude newly hired interns, and allow existing interns to continue participating (NEC and SH Match being made each year). Should - or could - they have specified this in the amendment, or is it absolute in excluding future and existing interns? Or given the effective date, was it assumed it only applied from that date forward? Thanks! -
"Advanced" plan consulting (seminars / training resources?)
401QUE replied to 401QUE's topic in 401(k) Plans
Thanks, that's a great idea! I passed the first exam towards the QPA long ago, before they even came up with the QKA designation. It's been so long, the credit of the first exam doesn't even count anymore. I am currently an RPA, working towards a CEBS designation. After that I might consider QKA. Again, thanks! -
"Advanced" plan consulting (seminars / training resources?)
401QUE replied to 401QUE's topic in 401(k) Plans
David,thank you! -
After several years in TPA and Bundled plan administration, working year over year doing the same testing, and other recurring responsibilities, etc., I'm now looking to elevate my knowledge in the areas of 401k Plan Design and Consulting, particularly in areas of Controlled Groups, Plan Documents, Conversions (protected benefits), Prohibited Transactions, ERISA, and or NonQualified Plans - I know it's a real 'grab bag.' Can anyone make recommendations of any upcoming seminars, training resources, webinars, materials, etc. that cover the above areas, or what you might deem to be a "higher-level" area of retirement plan expertise? Can anyone identify areas that will be critical to be knowledgeable about in the near-term (e.g. fee disclosures, or??). Thanks in advance!
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So the deferral portion and earnings go into the QNEC Source, and the match portion goes into the Match Source - Thanks!
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When the employer funds a QNEC to correct a missed deferral situation, how is the deposit allocated? I am being told that the 50% (of missed deferral) portion is allocated to the participant's Deferral Source, the 100% match portion is allocated to the match source, and only the earnings portion is allocated into the QNEC source. If the whole correction is referred to as the QNEC, shouldn't it all be allocated into the QNEC source? Aren't there certain restrictions on QNECs that requires them to be separately recordkept? Any IRS guidance/citations would be most appreciated. Spent more time than I could afford to already in rev proc 2008-50 thanks!