WCC

missed deferral is funded as a QNEC. match is funded as a match. See IRS notice 2015-28.

Plan uses a discretionary match formula based on the plan year. Plan fails ADP test and refunds have been processed. TPA calculated the match excluding the ADP refund amounts, therefore reducing the HCE's rate of match on their entire deferral. This seems odd to me so I questioned the TPA as to why the match is being calculated after reducing the total deferral by the refunded amount. They told me the match can be calculate either way (before refunds or after refunds). Is that accurate? The plan document does not specify before or after. Thanks

Participant dies with no beneficiary form on file. The document establishes payment of benefit to: 1. Spouse (no spouse in this case) 2. per stirpes (4 children) 3. surviving parents 4. estate An attorney for the estate is trying to tell the plan sponsor they must distribute benefits directly to the estate due to the estate documents. My response is "no" we must follow the plan document. Is there an instance where the attorney could do something to override the form of payment in the plan document? One thought is all four children and parents disclaim their benefits under IRC 2518. The funds then are paid to the estate. Thank you

See point #6 from IRS publication 560. Our document allows to write in an increase beyond year 5. Qualified automatic contribution arrangement. A qualified automatic contribution arrangement (QACA) is a type of safe harbor plan. It contains an automatic enrollment feature, and mandatory employer contributions are required. If your plan includes a QACA, it won't be subject to the ADP test (discussed later) nor the top-heavy requirements (discussed earlier). Additionally, your plan won't be subject to the actual contribution percentage test if certain additional requirements are met. Under a QACA, each employee who is eligible to participate in the plan will be treated as having elected to make elective deferral contributions equal to a certain default percentage of compensation. In order to not have default elective deferrals made, an employee must make an affirmative election specifying a deferral percentage (including zero, if desired). If an employee doesn't make an affirmative election, the default deferral percentage must meet the following conditions. It must be applied uniformly. It must not exceed 10%. It must be at least 3% in the first plan year it applies to an employee and through the end of the following year. It must increase to at least 4% in the following plan year. It must increase to at least 5% in the following plan year. It must increase to at least 6% in subsequent plan years. We see this often with the record keepers we use. One of the pricing variables is cash flow. Higher the cash flow the better some vendors price (i.e. lower asset charge). The down side to pricing is the number of small balances auto enrollment creates. Some vendors weigh average account balance more than cash flow when they look at pricing.

From the EOB: All service with the employer must be credited, even service before the plan is established, unless disregarded under the break in service rules See IRC §410(a)(5)(A) service for eligibility purposes cannot be excluded unless under the above referenced break in service rules

No, unless one of the exceptions listed below applies. Notice 2016-16 states this in section II B (copied below). Section 1.401(k)-3(e)(1) provides that a plan will fail to satisfy the requirements of §§ 401(k)(12) and 401(k)(13) and § 1.401(k)-3 unless plan provisions that satisfy the safe harbor plan rules of § 1.401(k)-3 are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year. It also provides that a safe harbor plan that includes provisions that satisfy the safe harbor plan rules of § 1.401(k)-3 will not satisfy the nondiscrimination requirements for § 401(k) plans for a plan year if the safe harbor plan is amended to change those provisions during the plan year. Section 1.401(m)-3(f) includes similar provisions for matching safe harbor plans. The safe harbor plan regulations set out several exceptions to the requirement that plan provisions satisfying the rules of §§ 1.401(k)-3 and 1.401(m)-3 be adopted before the first day of the plan year and continue for an entire 12-month plan year. These include exceptions for (i) a short first plan year, (ii) a change in the plan year, (iii) a short final plan year, (iv) a delayed adoption of safe harbor plan nonelective contributions (if notice of this possibility is provided before the beginning of the plan year), and (v) a mid-year reduction or suspension of safe harbor contributions (which results in loss of safe harbor plan status). See §§ 1.401(k)-3(e), (f), and (g) and 1.401(m)-3(f), (g), and (h).1 In addition, exceptions to the prohibition against mid-year amendments may be provided in guidance of general applicability published in the Internal Revenue Bulletin. See §§ 1.401(k)-3(e) and 1.401(m)-3(f).

Participant provides a valid and timely deferral change form to HR. Deferral form says "I want to defer 100% of eligible income on the December 31, 2016 payroll" HR does not process the request. Participant is upset and plan sponsor wants to fix the problem. We can follow Rev Proc 2015-28, but are there any other possibilities? The payroll funds are sitting in the employee's checking account. What would happen from a compliance point of view if the plan sponsor retrieves the funds and corrects the December 31, 2016 payroll and withholds 100%? Thank you

Below is a quote from an IRS phone forum from September 7, 2012. My thought is you now have to follow Rev Proc 2015-28 to correct a failure to implement a deferral election. Note: A Plan Sponsor cannot avoid liability to make corrective contributions for the missed deferral opportunity by making its employees responsible for checking pay records to ensure deferral election has been implemented.

I have read all the threads on this board that I can find regarding change in vesting as well as the EOB, 411(a)(10). My confusion is regarding comments that state future accurals are subject to the prior vesting schedule. Plan sponsor decides to be generous and make everyone 100% immediately vested in a discretionary match. This has been the case for a few years. New CEO questions why this was done and wants to change vesting to a 4 year graded schedule. Can the plan sponsor amend the vesting schedule to keep all current match 100% vested and have future discretionary match accruals subject to a 4 year graded schedule? (regardless of the record keeping struggles). Thank you

I am preparing for a conversation with a DOL investigator and am looking for thoughts. Plan receives the DOL late deposit letter discussed in a thread a few weeks ago. The letter states we noticed you have late deposits..... you can file via VFCP..... go this class in your area..... The contributions in question were all deposited within 7 business days. The company who prepared the 5500 shows them as late. The plan is a small plan filer with a beginning participant count of 115. Here is the question. Federal Register Vol. 75, published January 14, 2010 says the 7 day rule can only be used for plans with less than 100 participants. I could not find any reference to the 80/120 rule in that register. The EOB also says the rule can only be used for plans with less than 100 participants. I assume the 80/120 rule cannot be used or the F.R. would have said so. I always thought of this as a small plan rule, but I think I am wrong?? Thoughts? Thank you

Yes, they were similar to what you described. Relatively small dollars compared to annual contributions.

I have received 3 within the last month. I work in the western part of the country within the San Francisco DOL region. We have responded each time that we self corrected and provided them with dates. Each time the DOL has sent a response saying the "case has now been closed".

Their accountant told them this plan design was perfectly fine. Not sure on the K-1's, but I will find out. I appreciate the comments.

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