Dougsbpc

Have a 1 participant traditional DB with approximately the following: Rollover account: $500k assets Funding Account: $950k assets PVAB $500k The one participant business owner is 68 and has participated 10 years. The AFTAP was not done timely so benefits are frozen. He would like to take an in-service distribution of $100k. We know he cannot do that with his pension benefit. Is there any chance he can take this from his rollover account inside the DB plan? Thanks.

We administer a 60 participant 401(k) plan where one of the owners of the plan sponsor never wants to see one dime of traditional money in his account. I explained to him that the profit sharing contribution must be traditional, but once deposited he can convert to Roth. In this case, the plan sponsor decides each year if they want to make a profit sharing contribution. If so, they contribute it March 15 for a December year end. For example, for the 12/31/15 valuation, we showed the $35,000 profit sharing contribution as traditional receivable. Then when contributed on March 15, 2016, we gave him a Roth conversion form. He signed the form March 16, 2016. We will provide him a 1099-R in January 2017 showing the conversion taxable for 2016. He now wants to get as close as possible to never having any traditional money in his account. He wants his 2017 profit sharing contribution funded to his directed account January 1, 2017 and convert it to Roth the first week of January. Meanwhile everyone else (referred to him as traditional losers), will need to wait for their allocation until March 15, 2018. Other than potential discrimination in operation for the timing of deposits, does anyone see a problem funding before year end and immediately converting to Roth? Thanks.

I don't believe a contribution to a pension plan can be in any form other than cash correct?

Have a small defined benefit plan and 401(k) plan covering only the owner. He started as a sole proprietor and adopted both plans as such effective 1/1/2014. Without any communication, he incorporated effective 1/1/2015. We just found out about it now. Would it be possible to have the corporation adopt both plans as a successor employer and plan sponsor effective for the 2015 year now in late February 2016? I wonder what happens as he would have no sole proprietor income in 2015 but has W-2 salary.

Have a plan sponsored by one employer with a September year end with a participating employer with a December year end. They are related employers. Plan assets are pooled. We have suggested they spin off and create two separate plans. They mentioned that it will be a disadvantage from a plan investment standpoint to do this. We are thinking they could have two plans and a combined trust. The document is silent on the subject. We have certainly seen combined trusts before but all had the same plan year. Does anyone see problems with having two plans sharing a combined trust with different year ends? Thanks.

I am not certain, but I think maybe the first year of a plan is considered the determination year for top heavy purposes. But believe catch-up contributions are not subject to top-heavy.

We have a client who has moved to this from the recordkeeper direct platform. I agree. I laughed when I read your comment about wondering if this was not ready for prime time as I was thinking the exact same thing. For the first two months I gave them the benefit of the doubt and just chalked it up to maybe just not being accustom to the system. When processing the first participant loan I ask their technical support person where their promissory note was. She responded by telling me that the promissory note is considered executed by the participant signing the check. No promissory note document? No. Then I thought, ok we are just way behind the curve somehow. They are driving the new Google driverless car and we are at the roadside next to our broken down 1970s model not even aware of what is possible. Then I received a copy of a promissory note from the plan sponsor that was produced by American Funds. At least receiving that was a relief. It was completely incorrect and did not follow how the American Funds data form was completed. We have run into a number of other problems. This is unfortunate because their Recordkeeper Direct is an excellent platform. Has anyone had a different experience?

An employer sponsors a 50 participant 401(k) plan. They recently leased an employee for the first time. She has now been working with them for 6 months and now the plan sponsor wants to hire her. Even if she would have stayed with the leasing organization, she worked 35 hours a week and after one year would be considered "substantially full time" and would have had to be included in the plan. The leasing organization does not maintain a plan of any kind. Would the 6 months of service with the leasing organization count toward hours for eligibility and vesting once they hire her as an employee? Thanks.

They do also live in a community property state.

Thanks all for the helpful responses. It turns out that she owns 1% of the stock of his corporation. Under the spouse exceptions of 1563, A indicates that the individual does not , at any time own directly any stock in such corporation. So it would appear they do not meet the exception and have a controlled group. This will work out fine in their scenario. Does anyone disagree?

Husband and wife each own 100% of their own companies. His company has 10 employees and hers has about 20. Since they are married each is deemed to own 100% of the others stock. So we have a controlled group. If each sponsors its own cross-tested 401(k) plan, I would think both plans must be aggregated for the following: 401(a)4 410(b) ADP / ACP tests If any of the above do not require aggregation can they be permissively aggregated? In this case, 401(a)4 and the ADP test will be helped by aggregation. Thanks.

Is it possible for a participant to take a new loan 8 months after he defaulted on a previous loan? Suppose he had a vested balance of $80,000, took a $10,000 loan and promptly defaulted. The $10,000 loan is deemed and he receives a 1099-R. But suppose he then repays the loan. My understanding is the repaid loan becomes basis and then he can take a new loan. I think the requirement is that the loan on the books must be repaid before the participant qualifies for a new loan? Agree? Disagree? Thanks.

Have a covered DB plan that will terminate with insufficient assets. The plan sponsor has two 50% shareholders (both deemed majority owners) who will forgo a portion of their accrued benefits rather than fund the difference to have a standard termination. Since the two owners are Key and HCEs, does it matter that they do not want to reduce their benefits proportionately? For example, is there any problem with shareholder A absorbing almost all of the shortfall and shareholder B absorbing almost none of the shortfall. Both shareholders are ok with this. Is a disproportionate reduction possible? What about a non-covered DB plan with insufficient assets that only has 10 key employee participants. Must there be an ERISA 4044 allocation? I would think any allocation would be fine as any allocation would be nondiscriminatory. Does anyone agree or disagree? Thanks.

So for example, if a notice were provided today, the employer would still need to provide the safe harbor contribution on just over 11 months of compensation correct?

Have a Dr. Client with 5 eligible participants and a calendar year safe harbor 401(k) plan. They have maintained the plan for about 8 years. They make a Safe Harbor NEC. Question: could they terminate the plan now (before year end) and not make the Safe Harbor 3% contribution? In this case, no salary deferrals or other allocations were made to any HCE or Key employee this year. I would think there will not be an ADP test problem or a top heavy minimum problem. Thanks.

There is a social club that wants a 401(k) plan for its employees. Since it is a non-profit corporation it appears there would be no key employees participating in the plan. In addition, it turns out there would be no highly compensated employees participating either. I would think there would be no non-discrimination testing since there would only be non-key and nonhighly compensated employees. They have about 20 eligible employees but may want to more heavily benefit two employees who have worked there for many years. They will probably want to have salary deferrals and a good match for all eligibles. In addition, maybe they could provide an additional profit sharing allocation just to the long term employees. Have I missed something? We have worked so extensively with plans that need to be general tested that I wonder if I am missing anything. Thanks

Thanks for all the replies. Yes that is exactly right. In this case, the document allows key HCEs not to receive the safe harbor match. It also appears the document allows for a discretionary match where we can just provide the discretionary match to the key HCEs who are not getting a safe harbor match. If/when a discretionary match is provided, it would not exceed what would have otherwise been a safe harbor match. Bottom line - the employer would just like to have the flexibility for owners/key employees to not receive a match during a bad economic year (if that ever even happens for them).

We know it is easy to have a safe harbor 401(k) plan with SHNEC only to non-keys. Then in a good year a 3% NEC can be given just to the keys resulting in all participants getting a 3% contribution. Does a safe harbor match work the same way? In other words can just non-keys get a safe harbor match and then in a good year keys only get a discretionary match? Our document seems to allow this. Thanks.

have a client that initially wanted to adopt a profit sharing plan effective 1/1/15 for the entire year of 2015. They now want to adopt the plan as a 401(k) with a safe harbor match. They will also make a 10% profit sharing contribution for 2015. I believe as long as the plan is adopted by October 1, we can provide the safe harbor notice on that day as well as salary deferral elections etc. Question: clearly when we calculate the profit sharing contribution we can use full year salary. When we calculate the safe harbor match for 2015 can we also use full year compensation or are we limited to only the compensation between 10/1/15 and 12/31/15? Thanks a million.

We had an almost identical scenario as Hojo states. The PBGC ruled that the spouse was not a substantial owner. In our initial response, we brought up the community property issue. Next we received a letter from the PBGC indicating a fine of $21,000 for failure to file 6 years of back premium filings. The PBGC indicated that we need to complete the filings and pay the premiums and penalties first. Then in the event their ruling is in agreement, a refund would be forthcoming. Their ruling was received, we filed the 6 years and are still working with them regarding the $21,000.

We just started a 401(k) plan for a small employer. They did have a DB plan that recently terminated. The 100% owner rolled over her benefits to the 401(k) plan including a Life Insurance policy. Would the 401(k) plan need to provide Life Insurance policies simply because the business owner rolled over her benefits that included a Life Insurance policy? Thanks.

Mike The separate plan is good idea. The 3% would not be a problem. I think we can aggregate for 410b. BG5150 - why would a 100% bond be required if one plan covers only the owner and has all the private investments and the other plan covers only the employees?

Have a 1 participant plan with $6 M of private investments. For the first time the one employee will be eligible for the plan. However, it is a profit sharing plan and no contributions are intended. We are thinking about changing it to a 401(k) plan. Suppose the 1 eligible employee never makes salary deferrals and never receives a profit sharing contribution. Would the small plan audit be required if the employee never has an account balance? An audit would probably run $4k to $5k. We are thinking the bond premium would also be about $4k to $5k.

Small defined benefit plan covering a business owner and 3 employees. The business owner has a higher benefit than employees in the DB and the employees get a 15% of salary contribution in the DC plan. We don't have any other plans with life insurance but this one does have a policy on the business owner. The employees will need to have comparable policies (for example if the business owner has a policy of 50 times monthly benefit, employees need the same). The problem is the employees have smaller benefits in the DB. I think the employees will then need comparable coverage in the DC plan. The insurance agent is telling me his home office legal department claims that employees can waive insurance in the DC plan. I know this is probably the case for a DC plan by itself but don't think it is possible in this case. Any thoughts? Thanks.

Have a small 401(k) plan sponsored by an accounting firm. They were bought by another firm and decided to terminate the plan. We explained that we would obtain benefit elections then prepare an instruction letter for distribution all at one time after all elections were received and verified as properly executed. One of the two partners of the firm (and also a plan trustee) received her benefit elections, signed them and then immediately called the brokerage firm to transfer her benefits to an IRA. This plan has self-directed brokerage accounts. Is it a problem that the key employee and HCE was paid her benefits weeks before any other employees received their distribution? Thanks.