Dougsbpc

Does anyone know of a sample good faith CARES amendment? It sure would be much easier if we could document something. Then the plan sponsor could choose the language that would apply to the CARES provisions they wish to offer.

Sure out document allows for some flexibility with the age but not on salary deferrals. Are there any documents that allow for in-service withdrawals of salary deferrals prior to age 59 1/2?

We took over the administration of a 20 participant 401(k) plan about 6 months ago. The plan uses one of the popular investment platforms. It works very well for the 401(k) plan. Apparently, over the past 3 years up to 10 participants (all under age 59 1/2) have taken in-service distributions of all sources (including salary deferrals). They claim they all wanted to move the accounts to their IRAs that are invested only in no load funds and have no fees. We did notice two participants took lump sums and did not directly transfer to IRAs. Could this be corrected under VCP? If all just transferred to IRAs perhaps the fix would have been moving the amounts back to the plan (with earnings/losses). However, the lump sums pose a problem. Any thoughts? Thanks.

Suppose you have a 100% shareholder of a corporation with 20 employees. The business sold as an asset sale. In other words the buyer did not purchase the corporation but instead paid $ xxxxxxxx for the business. The seller, who will maintain the corporation wishes to establish a defined benefit plan that would only cover him. I seem to remember reading something about how this type of thing may require covering former employees. I could see how this may be considered an affiliated service group if the buyer were purchasing stock of the corporation over time, but would that be the case with an asset sale? I know this is a legal question. Just wondering if anyone ran into the article I read about this a number of years ago that I cannot seem to find?

A small non-PBGC traditional defined benefit plan terminated 3 1/2 years ago without applying for a DL. I know, all assets need to be distributed within one year. However, they did have significant problems with one private investment in the plan. All is recovered now and they are ready to distribute. Question: Can they make a deductible contribution now (so very late in the game) to make plan whole? Otherwise the owner employee will need to take a reduction in his benefit. Thanks.

Can a business owner maintain a solo 401(k) plan if the business would be considered an affiliated service group with another company? The other company only has greater than 5% owners. What if the other company had employees with no ownership who would be eligible for the solo 401(k) plan? Thanks.

Is there ever a disadvantage in having a safe harbor match pan based on compensation from the date of entry? Thanks.

$19,000. Knowing he was over the limit, the plan refunded $500 to him. Question: Does he get a safe harbor match for the $500 contributed in the 7/1/18-6/30/19 year?

Correction: I meant that he funded $18,500 from 7/1/17-6/30/18 but then also funded an additional $500 on 7/15/18 (he forgot to tell the payroll company to stop on 6/30/18.

Suppose you have a 401(k) plan with a safe harbor match. The plan had a 6/30/18 plan year end. An HCE made salary deferrals of $18,000 from 7/1/17 through 6/30/18 ($18,500 for 2018). However he mistakenly funded an additional $500 on the next pay period on 7/15/2018 (now $19,000 for 2018). To correct this, the plan refunded the $500 plus earnings to him shortly after the extra $500 was funded. That extra $500 was technically funded during the 7/1/2018 - 6/30/2019 year. He funded no salary deferrals for the year ended 6/30/2019 (other than the mistaken $500). Should he get the match on that $500 even though it was refunded to him? Thanks.

Suppose you have a safe harbor 401(k) plan (safe harbor match). In addition, the same employer has a cross-tested profit sharing plan. Both plans cover the same employees although the 401(k) plan has an earlier entry date. My understanding is that the Safe Harbor 401(k) plan can stand on its own and the profit sharing plan can stand on its own as long as it (the profit sharing plan) passes 410b and 401(a)4 on its own. In other words, aggregation is not required for the average benefits percentage test in this case. Or, is it required that both plans be aggregated for the average benefits percentage test? Thank you.

We took over a traditional DB plan and 401(k) plan with 5 participants. Both plans are sponsored by the same employer and have whole life insurance. It appears each plan meets the incidental benefit rule. DB benefits are under 100 x expected monthly benefits and 401(k) plan premiums are less than 50% of aggregate contributions. In addition, it appears that all participants in both plans have comparable coverage. Is there a problem with participants having this much life insurance across two plans? Thanks.

A one participant plan is late in filing 2016 and 2017. The prior TPA always filed a Form 5500-SF for one participant. In reading the instructions on the DOL website, they make it clear that non-ERISA plans cannot file under its DFVC program. Under the Non-ERISA delinquent filer program, they only accept forms 5500-EZ. I suppose we could file 2016 and 2017 as 5500-EZs even though SF's have been filed through the life of the plan. Anyone see problems with that?

Have a 3 participant DB that terminated and has excess assets (about $40k). Our document indicates that the excess can be allocated in any non-discriminatory manner. In this case it is a husband and wife plan with one younger employee. The husband and wife are each 70. The wife has participated for over 10 years but has had very small accruals (I think 1% of pay for the past 10 years). The business owner would like to be able to allocate most of the excess to his wife. Would there be any problem with attempting to do that and using accrued to date for 401(a)4? I would think accrued to date would have the effect of spreading out the excess as though it were additional accrued benefits over all the past years. Perhaps making it so it would have the effect of her earning 2% of pay rather than 1%. Thanks.

Have a 1 participant traditional DB plan that has existed for 4 years. The employer (and participant) never had or never will have any employees. The participant is age 55 and the plan currently has NRA of 62. If the participant's accrued benefit is grandfathered, is there any problem increasing the NRA to 65? Thanks.

Thank you Carol We worked with an ERISA attorney on an 80 participant 403(b) many years ago (under the old rules). It was mainly straightening out 5 years of accounting on the plan. Under the old rules I seem to remember something about the highest paid with officer authority being the HCE if there were no others that exceeded the compensation threshold but that must have changed back in 2001.

I see a 403(b) plan document that allows for cross testing. The definition of Highly compensated employee just refers to any employee who earned in excess of $120k in the lookback year. Question: what if no employee earned in excess of $120k in the lookback year? Thanks.

Running the ADP test for a traditional 401(k) plan based on compensation net of salary deferrals. A participant has compensation of $300,000 so she is being limited to $275,000. When we reduce her compensation for $18,500 of salary deferrals, is it subtracted from $300,000 or the $275,000 of limited compensation? Thanks.

My understanding is that when cross-testing, any nonhighly compensated employee must receive the minimum gateway when he/she receives any employer provided benefit or non-elective contribution. Suppose a company sponsors a cash balance plan and a 401(k) plan which are cross-tested together. If an NHCE receives no employer contribution in the 401(k) plan (last day requirement) but does get a CB plan pay credit that equates to a 2.5% allocation rate, must he be provided the additional contribution to bring him to the (in this case) minimum gateway of 7.5% ? Thanks.

It appears only current year compensation can be used in determining the contribution credit each year. If that is the case, are we forbidden from general testing based on average compensation with a cash balance plan? Thanks.

Suppose an employer sponsors a 401(k) plan with a 25% match (non-safe harbor). This plan will fail the ADP and ACP tests for 2018. They will refund to HCEs. They want to adopt a Cash Balance Plan and a Profit Sharing Plan for 2018. The 401(k) plan, Cash Balance Plan and Profit Sharing Plan all pass 410(b) on their own using the ratio percentage test. All of the same employees will benefit in each plan. For 401(a)4 and Top Heavy, can the 401(k) plan be tested on its own and the Cash Balance Plan and Profit Sharing Plan be tested together? Or must all 3 be tested together? Thank you.

I see there was a question somewhat like this recently posted. However, it is not completely the same. Suppose you have an employer who sponsors a cash balance plan and a safe harbor 401(k) Plan. The plans are top heavy and the 401(k) plan provides a safe harbor match. Both plans would pass 401(a)4 and 410(b) combined testing. The top heavy minimum is 5% and provided in the 401(k) plan. The non-elective employer contribution in the 401(k) plan requires 1,000 hours and last day. The CB plan only requires 100 hours to accrue a benefit. There is a non-key NHCE who terminated employment in 2018 with 400 hours of service. She is covered under both the 401(k) plan and Cash balance plan. Must she receive a 5% top heavy minimum in the 401(k) plan since she did accrue a benefit in the CB plan? Then must she receive the 7.5% gateway as well? Thanks.

Suppose a greater than 5% owner has been taking annual payments of his RMD on 4/1 of each year. His most recent "RMD annuity payment" from the plan was 4/1/2018. Suppose the plan terminated 8/1/2018 and his benefit is distributed 9/15/2018. Is he required to take another RMD upon distribution even though his next installment is not until 4/1/2019? Thanks.

Other than a management function scenario, I believe there must be some cross-ownership for an affiliated service group to exist correct? In other words, suppose you have an employee of an accounting firm (no ownership) start his own firm. Then 100% of his work is done for the accounting firm. He owns 100% of his corporation but has 0% and has never had any ownership in the accounting firm. No affiliated service group? Thanks.

A small DB plan covers husband and wife. They also have 3 long term employees that are covered under a profit sharing plan. They always pass 401(a)4 because they always make a 12% profit sharing contribution and there is adequate age difference. The DB plan now has excess assets of about $100k over 415 maximums. The document is a volume submitter with one of the actuarial equivalent selections as 417(e) assumptions. The plan has operated under more conservative assumptions. If the actuarial equivalent is amended to the 417(e) assumptions and then terminated and distributed next year, it is likely they will not have excess assets, especially if they take an in-service distribution of the bulk of the assets now. I know this would likely be seen as discriminatory. However, they would be willing to make a 25% profit sharing contribution to employees this year. If the 401(a)4 test were then run on an accrued-to-date method they would easily pass. In running the test, we would convert the monthly benefits to the actuarial equivalent based on prior assumptions. Any thoughts? Thanks.