WCC

New client discloses the following information during year end administration: 4 partners receive schedule c income and maintain their own individual SEP's. All 4 have contributed the max for the past several years. The SEP's are set up using the IRS model, not a prototype document. All compensation to the partners is paid via the plan sponsor of the 401k plan. The company maintains a 401k plan with a discretionary match for 50 employees, all of whom are eligible. The partners do not participate in the 401k. The 401k has been in existence for several years. The partners have been maxing out in the SEP while providing employees with just a match dating back at least 5 years. Question: How do they fix this? Do they go back and fund i.e. 25% contribution to all employees to the 401k or under the SEP? Are the SEP's disqualified? Thank you

RE: Rev Proc 2015-28 section .02 Plan sponsor uses an automatic enrollment feature. Plan has 5 participants who should have been enrolled at eligibility but were not. Three months later plan sponsor finds they were not enrolled and subsequently enrolls them. Plan sponsor does not provide notice to employees as noted in section .02(1)(b). Does failure to provide the notice automatically require the sponsor to use the 50% correction method for the missed enrollment periods? Thank you

Situation is as follows: Eligibility requirements are age 21, 6 months with quarterly entry dates. Plan year end is 12/31. Employee is age 20 when hired on February 1, 2015 and terminates August 1, 2015 (still age 20 at termination). Participant turns age 21 November 2015. Participant is rehired on February 1, 2016. What is his entry date? The document does not require employment on a quarterly entry date. Thank you

Sorry, I am using the terms interchangeably when I should not. Plan administrator signed termination amendments.

Plan sponsor is the administrator. Yes, the plan trustees signed all the termination amendments before the bankruptcy process started. Yes, they had authority to do so at the time.

I am the investment consultant/advisor DC plan. plan auditor has not been engaged. The auditor who has been involved in prior years knows they won't get paid so they have avoided the plan and are not interested in being involved. Their attorney (not an ERISA attorney) is taking the stance they have no money so let the DOL come investigate and fine them. We are not responsible for the 5500 but it will of course come back to me at some point in the future and someone will look to point fingers. The plan is with a large national provider and is bundled. Both us and the recorded keeper have sent CYA letters detailing the sponsors responsibilities.

Plan sponsor sells its business via an asset sale. All employees terminate and are hired by the purchasing company. Plan sponsor files bankruptcy. During this process trustees signed plan termination amendments and all benefits were paid to participants. The plan has $0 assets remaining. Plan is a large filer. The plan sponsor has no assets to pay for the audit nor do they have anyone left behind that will work with auditors. Therefore, the final 5500 will not be filed. When the DOL realizes this, they will send letters. When the DOL receives no response, what is going to happen? Do we go into the abandoned plan rules even with no assets in the plan? Thank you

we looked at merging the plans, but for other reasons we felt it was best to keep them separate. Thank you

I have never been asked this before and don't believe there is a way to do it, but I thought I would ask to see what you think. Companies A and B are not related. Owners of companies A and B are best friends and work together on many projects. Both have a 401k with a match and a 5 year graded vesting schedule. Employee works for Company A for 3 years. Both company A and B agree that this employee would be better off working for company B. Employee terminates from A and goes to work for B. Owners don't want employee to forfeit match from company A. Question: is there a way to credit service with an unrelated company after termination? I know how the predecessor service rules work prior to current employment, but what about in reverse order? I have never seen this and am guessing it is not possible. Our document does not have the option to write this in, but is it even possible using another document? Any other ideas? Could we fully vest one non HCE via amendment? (there are a handful of other non HCE's who would not be impacted) Thank you in advance

this information may be helpful. I think you have a choice to use NRA or life expectancy or another prudent method. § 2550.404c-5 Fiduciary relief for investments in qualified default investment alternatives. (4) Constitutes one of the following: (i) An investment fund product or model portfolio that applies generally accepted investment theories, is diversified so as to minimize the risk of large losses and that is designed to provide varying degrees of long-term appreciation and capital preservation through a mix of equity and fixed income exposures based on the participant's age, target retirement date (such as normal retirement age under the plan) or life expectancy. Such products and portfolios change their asset allocations and associated risk levels over time with the objective of becoming more conservative (i.e., decreasing risk of losses) with increasing age. For purposes of this paragraph (e)(4)(i), asset allocation decisions for such products and portfolios are not required to take into account risk tolerances, investments or other preferences of an individual participant. An example of such a fund or portfolio may be a “life-cycle” or “targeted-retirement-date” fund or account.

I have found a few old threads on this topic but want to clarify the termination of a SIMPLE IRA. Company A maintains a SIMPLE IRA. Company B acquires Company A in a stock purchase effective February 1, 2016. Company B maintains a 401k plan. Question: Can the SIMPLE IRA be terminated mid-year? Based on what I have read I don't believe it can be terminated until December 31, 2016. Does anyone disagree? Is there anything that I may be missing that would allow us to terminate it? Thank you

Company A is acquired in a stock purchase July 2015. Company A sponsored a safe harbor 401k plan. Company X is the acquiring company and maintains a non safe harbor 401k plan. After the purchase, Company X discovers historical compliance concerns with Company A's plan. Company X wants nothing to do with the assets of Company A's plan and does not want to merge the plans at a future date. Company X wants to terminate Company A's plan immediately under the premise of terminating a safe harbor mid year based on a business acquisition/change in ownership. I have searched the EOB, but my question is this: since the termination is happening after the acquisition is final, are there any concerns with terminating this plan and allowing a distributable event to all employees under Company A's plan? Thank you

Please see the below link. Is this the law you are referring to? If so, it does not apply to employer sponsored plans as noted in the link. https://www.irs.gov/uac/Newsroom/Tax-Free-Transfers-to-Charity-Renewed-For-IRA-Owners-70-and-One-Half-or-Older-Rollovers-This-Month-Can-Still-Count-For-2014

Will a TPA be involved or is it going bundled? If it is going bundled, the new recordkeeper may have issues with reporting if they don't have all the assets. Just something to be aware of.

I did not see John's response before I posted this but I agree with him: Below is from Relius: http://www.relius.net/news/TechnicalUpdates.aspx?ID=1004 See the comment from 2012 national conference, as well as the disclaimer. Announcement 2007-59. The IRS announced that a plan sponsor could amend a safe harbor 401(k) plan to: · Add a Roth deferral feature · Change the hardship provision to add an option to make a hardship distribution on account of medical expenses, college expenses and funeral expenses for a plan beneficiary. Notice 2010-84. The IRS announced that a plan sponsor could amend a safe harbor 401(k) plan to add an in-plan Roth rollover mid-year as long as the amendment was adopted by December 31, 2011 (the In-plan Roth rollover was effective September 27, 2010). ASPPA National Conference. In the 2012 National Conference, the IRS verbally confirmed some additional mid-year amendments with which they would feel comfortable: · Change of plan year, so long as the following plan year the plan followed the safe harbor rules · Expand coverage to include employees previously not included (so long as existing participants are not affected) · Change of investment vendor · A retroactive corrective amendment to address a coverage failure · Change of trustee Although a practitioner may not rely on the IRS statements, some practitioners have used the statements to justify at least some mid-year amendments.

Please help I posted the OP a year ago and am now having the same issue again with a different auditor. I have provided the auditor with the 415 regs preamble as stated above byTom Poje. I have given an example from EOB and the auditor does not agree. The question is: I make $300,000 per year ($25,000 per month). I elect to defer 5% of pay (for the example $ amount elections are not allowed). I say the participant's deferral is $15,000 (300000*5%) The auditor says no, it can only be $13,000 (260000*5%). Regardless of when compensation is paid the total cannot exceed the % based on the annual limit. I provided the 415 preamble again and the auditor says that is not why he disagrees. He is claiming that the 401a17 limit clearly states that when a % election is choosen, it can only apply to the annual compensation limit. Is there any other documentation that can be provided? Thank you

I believe this is your answer from the Rev Proc: (3) Availability of safe harbor correction method. The safe harbor correction method under section 3.02(1) of this revenue procedure is available only for plans with respect to failures that begin on or before December 31, 2020. At a later date, the Service will consider whether to extend the safe harbor correction method for failures that begin in later years. In deciding whether to extend the safe harbor correction method, the Service will take into account, among other relevant factors, the extent to which there is an increase in the number of plans implemented with automatic contribution features. (d)Sunset of safe harbor correction method. The safe harbor correction method described in this section .05(8) of this Appendix A is available for plans only with respect to failures that begin on or before December 31, 2020.

They just think this is the way things should be done since that is the way it has always been done. I have not approached them on this yet, but just wanted to bounce this around here to make sure I don't over look anything. I just find it troubling that participants have to take the time to do something that is not required. Thanks for all the fast responses.

yes, they do. Only because the recordkeeper says it is "standard" to do so.

Record keeper requires spousal consent for all distributions. However the plan is not subject to J&S, there is no old money subject to J&S and this has been confirmed. Plan document does not require spousal consent, this has been confirmed. The record keeper has agreed that spousal consent is not required but it is "industry standard" to ask for spousal consent. Questions: By requiring spousal consent, isn't the sponsor not following the terms of the plan document by requiring a participant to do something that is not necessary? Would a DOL or IRS auditor take issue with this in a similar manner as any other operational failure (maybe not as severe)? thank you

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.