justanotheradmin

You will need to consult with an attorney. There are lots of questions - is this your personal advisor? An advisor for the whole plan? An advisor the school hired? Not all plan advisors have the authority from the plan to actually move money. Some will help participants pick investments, fill out investment change forms etc, but in those cases it's the participant actually making the change, or instructing the financial institution to move the money from one fund to another. Also, there were 6 years from 2009 - 2015, and 4 years from 2015 to 2019, one of the first questions asked will be why didn't you notice the issue sooner?

Why does the turnover affect it? There is no one eligible for it? If a participant receives an allocation, but then quits a short time later, and not vested, so the money is forfeited, you have a new forfeiture, and a new year. It's not the old money again. Sounds like you will have newly forfeited money each year to allocate, for quite a few years, until everyone is either 100% vested, or paid out / forfeited. That scenario is pretty common in small plans that discontinue regular employer contributions. The forfeiture money usually takes 6 years of being allocated and forfeited each year to be used up.

I think you will have to be a bit more specific. Are you looking for a sample service agreement? Between a TPA and Plan / Plan Sponsor? Is there a specific issue with a TPA and you are writing a legal opinion to address the issue? There are quite a few well known law firms that provide legal services to TPA, and I think at one time or another most TPAs have either encountered their work product (when onboarding an existing plan they might have access to existing contracts), or used them directly. I can think of Hall Benefits Group, Ferenczy Law, Trucker Huss, etc there are lots more those are just three off the top of my head.

I think most non-producing, non-fiduciary TPAs are similar to yours. For that type of TPA, often the TPA service agreement will often address the client's responsibilities, including who communicates what to the participants, who determines eligibility etc. I do these types of corrections regularly - but usually it is because someone other than me has spotted it. A new advisor, or CPA, etc might notice that the plan is out of compliance, and this will often be one of several things that need fixing, so they find a TPA that can help. Internally, we occasionally notice it when an employer turns in a census and only the HCE or principals are making deferrals. In which case we try to confirm that really is accurate. The converse can also raise the question. If everyone on the census is deferring, that might be unusual, so we would try to confirm that the employer actually reported ALL employees to us. If they didn't, sometimes it is because they don't think certain people are eligible, and they don't have to be included. If that's the case and the employees were eligible, you would have a missed opportunity to defer. I would say a TPA that is providing additional services (enrollment meetings, 3(16), etc) would have a different process for catching these kinds of failures.

I suggest starting by reviewing the parent - subsidiary control group rules. If the U.S. entities are wholly owned by a parent entity, there seems a high likelyhood some sort of control group exists (absent something like a QSLOB).

What is the plan's definition of compensation in the document? If compensation is on a W-2 basis, it should be easy to explain since compensation for W-2 purposes is based on when PAID, not when earned. So partial year compensation would similarly be based on the period in which it was paid, not when the hours were actually worked.

The control group issue is separate from the MEP structure they are choosing to use. Just because they are both adopting employers of the MEP doesn't mean they aren't a control group. If they are a control group, combined testing might be required, and someone needs to be looking at that and performing it each year. I'm not aware of any exceptions to the related employer (control group, affiliated service group, etc) rules just because one of the owners happens to be a foreign entity.

I agree with RatherBeGolfing - there really shouldn't be any true-up. There might be a few things that create a true-up (such as health insurance premiums for 2% s-Corp shareholders, but those are not super common). The SH nonelective can be calculated and deposited each pay period, but the final calculation should be on an annual basis. The deposit frequency can be more often than the actual annual calculation / accrual.

Thank you Peter for laying it out so nicely. It has been a number of years since I've had a request like this but all of that is line with my understanding. I'm not convinced the purported restorative payment is appropriate, (there are other relevant details not posted here) but that's for them to decide, not me.

Thank you!

Yes, that is one that I recall seeing. I just can't put my finger on where I saw it... hmm. I didn't think it was a Revenue Ruling, but maybe. Any ideas as to which one? or even about which year? Or a decent way to search them?

I am fairly certain there are threads on this topic already - could someone help me find some? I'm not having much luck with my searches. The plan transferred assets and there were significant surrender charges related to annuity investments. The sponsor is trying to reimburse the plan for those charges. Can they? I know there was some publication (maybe a PLR?) that addressed investment losses due to a possible fiduciary breach, where the sponsor was permitted to make up the loss to the plan even if the participant's hadn't brought a lawsuit. I know it's not quite the same fact pattern, but if someone knows what I am talking about, and has a cite on it, I'd appreciate it. I think there was a different publication that did directly address reimbursement of plan expenses, and how to treat them depending on the type (annual addition or not). If someone has that cite I'd appreciate it too. Thanks!

Making a few assumptions, but after fixing the 415 excess the plan would have: Edit to fix number of HCE, there are probably 8, not 7. Outcome is the same. Voluntary after-tax of $28,250 for the two HCE that made them , assuming max comp $275,000, each has a match rate for the ACP test of 28,250/275,000 = 10.27% 2 HCE/Owner = 10.27 x 2 = 20.545% 1 HCE/ Owner = 0% 5 HCE non- owner = 0% HCE average ACP = 2.57% and none of the NCHE have voluntary after-tax, so the NCHE ACP is 0% HCE 2.57%, compared to NCHE 0% = ACP test fails.

Still doesn't explain how ACP was met. So the owners have deferrals, SH NEC, and volunaty After-tax. Let's assume maximum comp, $275,000 Deferrals (excluding catch-up) $18,500 SH NEC (usually 3%) $8,250 After-tax voluntary greater than $28,250 since of of the issues was 415 was exceeded. If the excess above $28,250 is distributed due to the 415 limit being reached, I can understand. But that still leaves $28,250 subject to the ACP test. And the original post mentioned that the only people who had voluntary after-tax contributions were the owners, which would give the plan an HCE ACP of X%, and the NHCE ACP of 0%. It would fail. Is there something else that the plan is doing to make ACP pass? QNECs?

ACP test met, knowing the voluntary made in 2018 will be pulled out shortly. Why is the money being pulled out? ACP refunds? Or are they trying to say it was a mistake and correct it by undoing the deposits? If the latter, I would be very very careful. The IRS mistake of fact rules are fairly narrow, and if it doesn't meet them, you may have a prohibited transaction on your hands, or at the very least a reversion subject to excise tax.

Thanks XTitan and Lois !

Does anyone know where I can find old revenue rulings online? I am specifically looking for Revenue Ruling 80-155 which is the one that talks about money needing to be allocated if deposited by the end of the plan year. We are having a (hopefully brief) disagreement with an IQPA auditor, and I'd like to provide them with a copy, not just secondhand sources.

I'm going to assume you have already considered the impact/issue of not 2018 paying wages (reasonable W-2 compensation) to an employee in an LLC with an S-corp election. 1. Depends on the document - Many have entity type (LLC, S-Corp, C-Corp etc), but not TAX type. If the document differentiates between an LLC with or without an S-Corp election, then yes, an amendment might be needed. If it does not, no amendment would be needed. 2. Generally no. If there is anyone (other eligible employees) who has not reached their 415 limit, the money is allocated to those people as an employer contribution. This is a separate issue from the employer's ability to deduct the contribution assuming it exceeds the 25% deduction limit. Money that is in the trust as of the last day of the plan year must usually be allocated to the participants for that year. The exception is usually forfeitures, which can be allocated the follow year. I'm sure this particular issue has been discussed a number of times on the message boards, so there are probably some citations, and discussions of reversions to employer, and prohibited transaction issues that you'll want to read up on.

Upon further thought, how is the deemed necessary requirement met if it is not the employee's name on the sale agreement or mortgage? If it is the wife making the purchase, is there really an unmet need by the employee?

Well, the regulations say "for the employee" instead of BY the employee. So the answer might be yes, at least based on a the plain language reading of the regulation. Reg. § 1.401(k)-1(d)(3) https://www.ecfr.gov/cgi-bin/text-idx?SID=1a8961f77e559475c12f53d542617134&mc=true&node=se26.6.1_1401_2k_3_61&rgn=div8 https://www.irs.gov/retirement-plans/hardship-distributions-from-401k-plans "(2) Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments);" I can imagine a scenario where the participant is a minor or someone very young, who perhaps lives with parents, other family, or roommates and the home was not going to be in the employee's name, but they wanted to contribute towards its purchase. The "prevent eviction" language is similar with FOR instead of BY the employee. But I have not actually encountered this question in the wild, nor have I heard of any one else encountering it. I'm hoping someone else will be able to comment with more insight or perhaps share their experience .

In my experience - I occasionally get calls asking for the allowed hardship amount prior to receiving the actual distribution request. It's not super common, but not rare either. It would be totally justified IMO for a provider to charge to do that calculation. So regardless if a distribution request actually occurs, the provider still gets paid for that time and effort. I have never seen a plan require all of the documentation up front, though I can see why it might want it. I would expect the sponsor to at least be able to give the participant a ballpark figure of how much is available for hardship withdrawal, particularly if it is limited to deferral and rollover. Shouldn't that be enough for the participant to have an idea of how much supporting documentation they need to gather and provide? If the money is tracked by a recordkeeper in an individual account, someone should be able to log on and see the money by source. If the deferral is limited to basis then looking at the payroll reports or W-2 might be necessary, as well as seeing if there have been prior hardships that would reduce available basis.

No, I do not put it on the bottom of my e-mail. Ilene Ferenczy usually addresses it in her ethics webinars and explains it much better than I can. Usually it is explained that the Circular 230 update a few years ago changed the disclosure requirement because the e-mail disclosures weren't really effective disclaimers. The updated guidance says specifically to NOT put one in there. it isn't effective, and probably demonstrates a lack of keeping up with the guidance about Circular 230. Here is a quick article on the change. https://www.forbes.com/sites/kellyphillipserb/2015/01/11/a-reminder-to-ditch-the-disclaimer-this-tax-season/#4695c227210 My experience prior to the change: yes, I would receive paper correspondence from CPAs and attorneys with a disclosure.

If they really want a new plan, and want control of the new plan, it's worth considering a 401(k) plan, in addition to terminating the 403(b). Particularly if the existing 403(b) is already an ERISA plan. But there are different testing and compliance considerations of course for 401(k) plans, so it may not be the best fit for them.

It comes down to creditworthiness. I would check the fine print of your loan policy. The one that is part of the document we prepare for clients goes into detail about it, and even specifically mentions that a a Participant who has defaulted on a prior loan and has not repaid it with interest it NOT creditworthy.

Well - it was the wild west back in the '90s for §403(b) arrangements. Looks like that section applied for plan years 1988 and later, and clarification came out in 1989 - so I'm guessing the document provider didn't restrict it. This paper is from 1995 - but explains the earlier history pretty well I think. https://www.irs.gov/pub/irs-tege/eotopici95.pdf "Prior to 1986, there were no nondiscrimination rules applicable to 403(b) plans. TRA '86 added separate nondiscrimination rules for non-salary reduction and salary reduction contributions under clauses (i) and (ii), respectively, of IRC 403(b)(12)(A). These rules generally must be satisfied in operation for plan years beginning after December 31, 1988. Pending the issuance of regulations or other guidance, Notice 89-23, 1989-1 C.B. 654 (extended by Notice 92-36, 1992-2 C.B. 364), provides guidance for complying with the nondiscrimination rules. Specifically, Notice 89-23 deems a 403(b) plan to satisfy nondiscrimination if either the employer operates the plan in accordance with a good faith, reasonable interpretation of section 403(b)(12) of the Code, or in accordance with the safe harbors set forth in the Notice. A. Salary Reduction Contributions Salary reduction contributions are tested separately for nondiscrimination under clause (ii) of IRC 403(b)(12)(A). Nondiscrimination with respect to salary reduction contributions generally is satisfied only if each employee may elect to defer more than $200 annually. Thus, for salary reduction contributions to a 403(b) plan, there is no nondiscrimination analysis of the amounts contributed. The test focuses on eligibility and generally requires universal eligibility. There is no requirement to offer the opportunity to make salary reduction contributions. Once that opportunity is offered to any employee, it must be offered to all employees in order to satisfy this requirement."