WCC

Based on the information provided in the post, the current TPA is correct, the plan is deemed not top heavy because of the safe harbor contribution. CHAPTER 11 401(k) AND 401(m) TESTING Part H of the EOB is quite long but a portion is as follows. Safe harbor 401(k) plans generally are subject to the top heavy rules like any other plan. However, for plan years beginning on or after January 1, 2002, a 401(k)(12) safe harbor plan is deemed to be a non-top-heavy plan if the conditions of IRC §416(g)(4)(H) are satisfied 2. Certain safe harbor 401(k) plans are deemed not to be top heavy. A safe harbor plan is deemed not to be a top heavy plan (even if the top heavy ratio, if calculated, would exceed 60%) if: (1) the plan consists solely of a safe harbor 401(k) arrangement, either under the 401(k)(12) safe harbor or, in post-2007 plan years, the QACA safe harbor, and, (2) to the extent there are matching contributions made to the plan, all of the matching contributions satisfy the ACP safe harbor prescribed by IRC §401(m)(11) or, in the case of a QACA safe harbor plan, the ACP safe harbor prescribed by IRC §401(m)(12) (which cross-references the requirements of IRC §401(m)(11)(B)). See IRC §416(g)(4)(H), as added by EGTRRA §613.

From the EOB: (3) payments for tuition, related educational fees, and room and board expenses, for the next 12 months of post-secondary education36 for the employee, the employee's spouse, the employee's children, or the employee's dependents (see 4.b.1)a) below), footnote 36 says: There is no definition in the regulations of "post-secondary" education. In the absence of guidance, it should be reasonable to interpret this term to mean that a high school degree (or its equivalent) is required for such education.

Also review Rev Proc 2015-28 for correction guidance.

Update - I spoke with the DOL at the number listed on the DFVC FAQ page for the EBSA's Office of the Chief Accountant. I was told DFVC is not available in this scenario and any DFVC filing fee would be returned with an explanation that the sponsor is not delinquent but deficient. The agent told me that as long as the sponsor amends and files with the audit before receipt of a letter from the DOL then no penalties will be applied (I hope he is correct). Thanks for the responses.

That was my thought as well, but their legal counsel and auditor are recommending DFVCP. I just wanted to make sure I was not missing something. They are worried with how late their audit is and are thinking they can somehow hedge the penalties if they can file under DFVCP. No, they have not received any correspondence from the DOL.

Large plan filer files the 2013 Form 5500 on October 15, 2014 without the audit. Filing is "filing error" but still considered a filing. The auditor now has the 2013 audit ready (many problems which I won't discuss). The auditor is recommending they file an amended return under DFVCP? Can you file under DFVCP if you have already filed a return (even though the return is incomplete)? They have not received any correspondence from the DOL so that part is not eliminating them yet. I don't believe they can, but cannot find an answer on the DOL website. Thank you

Is that benchmark report from your recordkeeper or your advisory/consulting firm? If you are using a specialized qualified plan advisor, he/she should have access to benchmark tools that would compare your plan data and demographics to other plans similar in size. For example, there are reporting tools that would show what quartile your fees sit in for the costs you listed above. I think it will be hard to get a good comparison unless a data reporting tool is used. Do any of your funds pay revenue sharing? That will also impact the fee comparison.

Sponsor provides an annual Christmas bonus to all employees. The plan document includes bonus pay in the definition of compensation. The plan sponsor has never withheld deferrals (and therefore never matched) on bonus compensation. This has been going on for more than 10 years. What is the correction method? If I remember correctly a statute of limitations does not apply to benefit calculations. Is filing a VCP submission asking for relief by retroactive/corrective amendment to exclude bonuses reasonable or even possible? The error applied to all employees HCE and NHCE alike. There was no separate communication given to employees that said bonuses would be excluded. Employees were only given the SPD which said bonuses were included. Thank you

An employer currently is part of a PEO. Employer has made the decision to exit the PEO for all benefit purposes. The employer currently participates in the PEO 401k plan. As part of the exiting documents, the TPA and PEO state that all employees of client/employer organization will incur a distributable event. The employer will maintain their own 401k plan. I am having a hard time finding an answer to the following in the EOB Question: Is it accurate that all participants of the client organization/employer will incur a distributable event when a 401k plan will be sponsored by the employer? As an adopting employer of the PEO plan, wouldn't you have successor plan issues if the assets are distributed? My thought was to have the assets transferred directly to new plan without the option for participants to elect a distribution. Thank you

As to the investment performance, let's assume that the new broker is very comfortable in the 401k market. Therefore, they would have selected the new fund prudently with the involvement of the investment committee according to the investment policy statement. If the decision to add the new fund was a prudent choice, then in my opinion you have no claim (ignoring the dissimilar question for just a moment). Funds are not placed in 401k plans using one months worth of return data. Have you compared the returns for 3, 5 and 10 yrs? The prudence standard refers to long term performance, suitability for the entire group, fund structure, etc. The committee should have documentation as to why the fund line up was chosen along with historical data to show it was a prudent decision. If the fund under performs the benchmarks by 25% for the next year or so and the committee does not at least investigate the reasons for the under performance then you may possibly have a complaint. Was the dissimilar fund a target date fund with a year attached (i.e. Example Fund 2040)?

Payroll clerk accidentally input a deferral change for the last pay period in 2014 as 100% rather than 10%. The final payroll was run and paid in 2014. Employee is surprised and questions HR. The correction is in process with the record keeper who will send the excess to the sponsor. Plan sponsor will then make the employee whole via payroll in 2015. Question: is there any reason we need to correct the 2014 W2? Or does it fix itself with the 2015 correction? Thank you

Hello, Is the correction for failure to implement a deferral election in a 457b plan the same as the correction in a 401k or 403b? I am familiar with the correction within the 401k and 403b but not sure about the 457. I cannot find anything to answer that question. Thank you

The answer to the first question comes from the EOB: 5.a. Successor plan defined. A successor plan is any alternative defined contribution plan, other than an ESOP, that exists at any time during the period beginning on the date of the 401(k) plan's termination and ending 12 months after distribution of all the 401(k) plan's assets. See Treas. Reg. §1.401(k)-1(d)(4). The plan is not a successor plan unless it is maintained by the same employer that maintained the terminated 401(k) plan. "How else do you rectify it?" possibly an amendment to credit predecessor service with Co. B (for eligibility). However, I am not sure about the timing of a retroactive amendment if the employees of Co. B are already participating. Company B then does what it wants with their plan (i.e. termination or continuation), Co. B participants have a distributable event due to termination of employment with Co B. Assuming the sponsors are not related; therefore, no successor plan issues. Bullet point #2 is interesting I won't speak to that point because I am not sure how deferrals from pay with Co A go into Co B's plan.

No, EGTRRA was signed timely. They are taking the stance that if there were any discretionary amendments made during the 7/1 restatement, that those cannot take effect until the date the document was signed. Nothing was changed, the restatement was due to a provider change.

The new service provider that took over the plan in 2011? Or a new service provider that's getting the plan now in 2014? If the first one, why are they now saying it's an issue 3 years later? There is a new service provider now in 2014. This new provider is questioning the signature date.

new service provider says the provided document was not signed timely.

Plan changes service providers (bundled) on July 1, 2011. Plan was originally effective 1/1/2005. The plan documents were all up to date on July 1, 2011. New service provider restates the plan into their document. Effective date of the restatement was July 1, 2011. None of the plan provisions changed in the restatement. Question: The plan sponsor signs the restated document on July 15, 2011. Is that a a problem? I am being told it is and told to file under VCP as a doc failure. What if there was a change to the plan provisions (i.e. not a safe harbor plan and they add eligibility requirements)? Would a signature date two weeks later cause a problem? thank you

I agree with you, it does not satisfy the ACP safe harbor. I think that is clear in Treas. Reg. 1.401(m)-3(d). Do you want to attach a vesting schedule to the 2%? Is there concern that the sponsor can afford 4% each year but may not be comfortable fixing an additional 2%? Why not make the safe harbor 100% on 6%?

exactly what I needed. thank you all

Hello, Participant elects to defer 100% of pay (after payroll taxes, etc.) this leads to $0 in pay. Participant will not exceed 402g as this election will apply only to a few pay periods. Question: I always assumed that you can do this with no issues (plan doc does not have a restriction on deferral %). However, the argument is, can you "pay" someone $0 in a paycheck - I still say yes, as they chose to defer it. Under the Wage Act (of the state in question) section "Deductions from wages" says: "Deductions below the minimum wage applicable under FLSA are not authorized". Based on this, I am being told a participant must be paid the minimum wage in their check. I have never heard this before. Is this accurate? Or is this section of the wage act being taken out of context? Do 401k rules override any state wage act? Thank you

It sounds like they just prefunded a plan year match. Plan year match formula is still in place and the employer needs to decided what the discretionary formula will be for the year. Once that formula is determined, they need to make adjustments (at year end) to the each account in accordance with the formula.

I hypothetically make $400,000 and I complete a deferral election form stating that I want to defer 4.375% of pay with the intent to max out at $17,500 for 2013. 2013 ends and I defer $17,500. The auditor says no, your deferral can only be $11,156.25 (4.375%*255,000). Who is correct? I understand the match can only be calculated on the max comp limit, but does the salary deferral election only apply to the first $255,000 in comp? Thank you

I don't have much experience with 457b governmental plans and a recent discussion has me confused. What is the annual additions limit to a governmental 457b? For example, an employee defers $23,000 to the plan for 2013 (catch up eligible). The employer matches 100% on first 3% deferred. Based on his compensation the match would be $3,000. Total contribution would then be $26,000. However, for some reason I was thinking the annual additions limit was $23,000 (assuming catch eligible) including both employee and employer contributions. Therefore, I am confused on what is the annual additions limit in a 457b governmental plan? Thanks for the help.

Here is a link to a prior discussion that may help. Also see the link svatty provided. http://benefitslink.com/boards/index.php?/topic/29422-forfeiture-acct-use-to-pay-lost-earnings/

This is a good reference. Page 33 references your situation. EPCRS: Correcting 401(k) Plan Mistakes – Two Sessions - July 25, 2013 - (transcript) - Discussed correcting common 401(k) plan mistakes under EPCRS Revenue Procedure 2013-12, and how to find, fix and avoid them. Handout: EPCRS: Correcting 401(k) Plan Mistakes presentation