justanotheradmin

Plan sponsor would like to use PPP loan proceeds to pay a portion of the administration expense. Expenses are billed quarterly, so there would be an amount due during the 8 week period. They would like to know if it would qualify for forgiveness if they use the money that way. I haven't looked into it much, but I'm leaning towards it wouldn't qualify since it seems to be limited to retirement plan contributions, not expenses. But i'm hoping one of you that has done all the reading and paid attention to the SBA information can confirm, or tell me if I'm mistaken.

Does the plan actually require you to take the money out of the plan? Can you roll it over? Or does the plan just require periodic divesture of the ESOP stock into something else? Mutual funds, cash etc.

Thanks @Larry Starr. I agree with all the problems you point out, unfortunately firing the client isn't my decision.

In my experience the vesting of PW (or any money source for that matter) is completely separate from any offset provisions. On line with what @Larry Starr mentions, many states don't allow a vesting schedule to be applied to PW at all, or if one is allowed, it's fairly nominal (I've seen a 1 year cliff for example, but only once). The participant should be able to determine their vested status without regard to whether or not the plan sponsor will give a profit sharing contribution each year.

Are you asking if the PW can be subject to the profit sharing vesting schedule? If that's the question - the answer is no, the PW is 100% (I'm assuming this based on your statement and hopefully your plan document says the same). The fact that portions may or may not be used to offset profit sharing is irrelevant.

Owner wants to allow all legal investments under the 401(k) plan, for all participants. The plan is fairly plan vanilla uses a popular custodian / recordkeeper. The owner wants to invest in some small startup LLCs and wants to use his plan money. Plan has about 40 participants. For a whole host of reasons I can think of why this is a bad idea, but I'm not great at articulating them, and don't want to look up citations if I don't have to. Does anyone have suggestions for articles, threads, publications that explain why this is such a bad idea? There are practical ones - like I don't know if the existing advisor will want to deal with outside accounts. Nor do I know if the pricing at the custodian will change if a large chunk of the assets are moved out. But I'm more interested in things that articulate the risk from a fiduciary and prudence standpoint.

Thanks @C. B. Zeller I understand the contributions get applied to the FD first. Do they really have until 1/1/2021 for the full amount? They don't know when they will be able to come up with the money, and it might not be until after 9/15. But they don't want to incur additional excise taxes.

My apologies if I'm not asking this correctly, I'm not an actuary, and don't do a ton with DB plans. If this has been answered elsewhere, please feel free to point me to that thread. Calendar year, small PBGC covered plan (maybe 30 people) has a $300,000 FD from 2018. Minimum required contribution for 2019 (including prior year FD) total $400,000. What is the funding deadline? I understand that interest is due for any minimum amounts not deposited by 9/15, but can the full minimum be extended? Or just the additional amount, the $100,000? And the $300,000 has to be deposited by 9/15 to avoid another year of excise taxes?

Point of clarification - when you use the word "suspends" I'm assuming you are asking about ending the QACA SH outright - not merely delaying the deposits. If they want to, they can. The plan amendment would need to specify. The plan is not required to end the autoenrollment. In my experience, the plan often keeps the autoenrollment provision when terminating the safe harbor contribution. This helps the ADP testing at year end.

Even with SECURE?

I think the most basic way of looking at it is - you cannot make deferrals from pay already received. Your 5% election will apply to future eligible pay, not any compensation previously paid. Plan accordingly.

Well, it's not a hardship distribution - so no, I don't agree. Yes, if they are an eligible person and the plan allows for CRD. The reason or date of their termination doesn't matter. And furthermore, I think for anyone who already took a distribution, or takes a distribution from a plan that doesn't specifically allow CRD, then the participant will have the option on their own personal return to classify the distribution as a CRD, without any plan involvement at all.

What kind of documentation are you finding acceptable?

So the the disaster hardship - 1. does it extend to spouse and dependents? such as loss of income from a spouse that was laid off? 2. Are folks reminding the sponsor that documentation of the loss is required? what are folks suggesting the participant provide? a copy of a lay off notice? Since the hardship distribution can't be more than necessary to satisfy the need.

Are you getting hardship requests that wouldn't qualify as a CRD? I know that a CRD and hardship are different - but some people will fall into both groups. I would think most people would fall into the eligible participant CRD group and then you have a more flexible distribution than a FEMA Hardship. I have a hard time picturing someone qualifying for a FEMA hardship but NOT a CRD. But I suppose it's possible. This is all so new.

But doesn't the Act specifically allows for it to be repaid - and treated as a rollover - in the three years subsequent? So maybe not a rollover eligible distribution in the traditional (or technical sense), but certainly a rollover (rollover contribution? not sure what the terminology should be) is allowed for the CRD amount. Thus, in effect, making it a rollover. I could see this being particularly useful for folks who try to get around the typical 60 day rollover issues - there is no withholding, and they can use the money for longer than 60 days with a CRD.

This may be helpful - https://www.notarize.com/blog/washington-adopts-remote-online-notarization There are several states that already recognize and have remote notary rules.

My apologies if my observations are not useful - as they don't go to answering your question - As a practical matter - I would think the plan administrator has a right to all plan records. Surely the paperwork for the rollover request is a plan record - and the plan administrator has a right to receive a copy. If the rollover request was made on paper - has the plan administrator demanded a copy from the TPA? If the request was made online - such as through a participant portal on a recordkeeping platform - the Plan Administrator may need to contact the recordkeeper(hopefully different from the TPA) to request a copy of the records. Or usually they can simply log on and download the information. And then the request can be evaluated / approved/ processed/ denied etc. hopefully without the TPA's involvement.

Is this a calendar year plan? Option 1 - that you seem to be proposing? I'm not sure I think there is a missed opportunity to defer - but let's assume there is - Rev Proc 2019-19 provides that no QNEC for a MOD is required for the deferral portion if the missed period is less than 3 months. So as long as folks are notified of the update and have the opportunity to change their deferral election for any paydates on or after 4/1, I think that is fine. There may be some SH match due if they participants don't max out the match on their own, but I don't think that's the case either. Mainly because I don't see this as a missed opportunity to defer. Option 2 - which I think is more likely, and how I would approach it The IRS has provided explanations about mid-year changes to safe harbor provisions. And they are generally allowed for match if there are at least 3 months left in the year (check), is retroactive to the beginning of the year (check), and increases the benefit (I would say an increase in who is eligible / decrease in eligibility conditions is an increase in benefit), and have an opportunity to change their deferral election. There is no mention in the IRS guidance about making sure participants are made whole because of some missed opportunity to defer. Likely because if there are several months left in the year they (in theory at least) have the ability to adjust their deferrals and receive the increased match. I'm sure others can delve into this more deeply or maybe chime in if there is some nuanced rule that applies to change the analysis, but Option 2 is how I would analyze it and treat it.

What data would you use for the 2nd ADP/ACP tests? You would add the missed people in? At what rate? 0%? What rate are you using as their missed rate? The NCHE and HCE averages for those that were given the opportunity to defer? Then wouldn't the second run be materially the same as the first? Though even after correcting routine failed ADP/ACP test - the test don't always pass. If doing HCE refunds, the refund calculations aren't designed to result in a passing test. Do you have a failure to implement a deferral election? (in which case that is different - and I can understand your quote from the IRS website) Or do you have a failure to be offered the ability to defer? Perhaps I misunderstood your original post - I thought it was the later - that people weren't offered deferrals at all. I guess what I am saying is I have never re-run the ADP/ACP test after doing a missed deferral correction after an ADP / ACP test fails. Nor am I aware of anything in the Rev Proc that requires it. Which is what I cite to in SCP and VCP documentation. Not the IRS website.

Is this what you are citing from? https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-correcting-a-failure-to-effect-employee-deferral-elections Or something else?

See Rev Proc 2019-19, Appendix A.05(2)(g). The excluded employees with the missed opportunity to defer are not included in the ADP/ACP tests. "(g) The methods for correcting the failures described in this section .05(2) do not apply until after the correction of other qualification failures. Thus, for example, if, in addition to the failure of excluding an eligible employee, the plan also failed the ADP or ACP test, the correction methods described in section .05(2)(b) through (f) cannot be Page 79 of 125 used until after correction of the ADP or ACP test failures. For purposes of this section .05(2), in order to determine whether the plan passed the ADP or ACP test, the plan may rely on a test performed with respect to those eligible employees who were provided with the opportunity to make elective deferrals or after-tax employee contributions and receive an allocation of employer matching contributions, in accordance with the terms of the plan, and may disregard the employees who were improperly excluded."

Why is it dumb? Because you think the IRS interpreted the rule incorrectly? Or because you think the rule itself is dumb? Or hard to efficiently / effectively manage? Especially when there are mid-year distributions? Just trying to understand. I think allowing folks to keep more of the money isn't really a bad thing in these uncertain times....

Last week I had several clients ask about discontinuing their safe harbor match. My conference call yesterday was to discuss the technical details / options of a SH discontinuance with a sponsor. We serve plans all over the country and I was the only one on the call not under a shelter in place order. The two plan contacts, plus the advisor, called in from their homes. Our staff is prepared to have a number of similar conversations with plan sponsors during the coming weeks and months. I hope everyone is able to stay safe and healthy wherever you are!

The plan will need to file an 8822-B to update the information with the IRS. This will tell the IRS that the new employer is responsible for the plan (and it's EIN).