justanotheradmin

It depends specifically on what you hired the attorney for. If you hired the attorney to process paperwork only, then pro se makes sense. If you hired the attorney to represent you in court for this matter, then pro se doesn't make sense. Did your attorney review the order and give you advice? or just file it for you? If your agreement with them is that they are to review the order and answer any questions from the other party, and represent you, then typically their name would be listed. Who drafted the order? If the other party doesn't know you have an attorney representing you then they would not know to include their information.

One thought, I would suggest asking an attorney if creates a CODA- type arrangement. An employee in theory is choosing between $1,200 going towards their student loans (which is taxable income to them), OR being eligible for a plan match (that may or may not be equal to the $1,200). It has been a long time since I reviewed those rules, but one factor was definitely the employees ability to choose how to receive the money. I don't know if the fact that actual cash is off the table changes the analysis. Maybe someone else (Luke?) can chime in.

Is the K-1 earned income? I would confirm with the partner (or their CPA) that it is not passive (such as from real estate or an investment etc) If so, then check the document. Ours would say yes, earned income from all entities counts towards plan compensation. The self-employment tax calculation may need to be adjusted as a portion of the social security that would typically be accounted for when using the K-1, would have already been paid as part of the W-2 withholding. If you use software to help calculate the SE-Tax adjustment for self-employment earnings to plan compensation, it may do it for you if input correctly. You should check with your help file or provider. Many allow you to input both W-2 wages and SE income into the calculation.

What you are suggesting, a class exclusion from the match, is materially different than the PLR. In that instance the plan wanted to GIVE a match to people who did not defer, but were making student loan payments. I'm not aware of anything that would make the fact that the exclusion is tied to a non-retirement plan benefit impermissable, assuming, as you point out, that testing passes.

C.B. Zeller - clever on the rounding! :-) thepensionmaven - Rollover versus Contributions, those are two very different things. that needs to be figured out and squared away before anything else ( ADP, 415 etc). As C.B. Zeller said - if they can show where the money came from it should be easier to determine if it was a rollover or an after-tax voluntary contribution.

Hmm 10(A) In general - An event described in this subparagaph is the termination of the plan without establishment or maintenance of another defined contribution plan (other than an employee stock ownership plan as defined in section 4975(e)(7))." How curious. So if a 401(k) plan terminates and then a PSP is started, the PSP could be a successor plan, but if a PSP terminates, and a 401(k) plan is started, it wouldn't be?

There is always confusion about the successor plan rule - the prohibition isn't that a business can't have another plan within 12 months. It's that if there is a successor plan the participants in the first plan did not have a distributable event due to plan termination, and unless they had another event (employment termination, age etc) they should have NOT been allowed to take the money, and it must go to the successor plan. Maybe this isn't a big deal if the money in the PSP hasn't yet been paid out. Now, as to the question if there is a successor plan - my gut says yes, as both are plans under 401(a), and a 401(k) plan is actually a PSP with a COPA provision, but for short is just called a 401(k) plan. It's a profit sharing plan with a 401(k) provision. Is the new plan going to be deferral only and not allow for employer contributions? If so , then yes, I would think for sure it would be a successor plan. Also, did it know it wanted the 401(k) plan when it terminated the PSP? Seems odd to want a new plan so quickly. Would it have been simpler to update the PSP to add a 401(k) feature?

Gilmore - might be the 1.25% that Ack suggests. My math says 0% times 125% is still zero, but perhaps the regulations accounted for that and clarified it somewhere. I haven't actually looked into it. If you find the reg or publication that says, please share. I'm sure it's covered in the ERISA outline book, or on ERISApedia.

Gilmore - I don't think there is one. thepensionmaven - after-tax voluntary contributions only have their basis post-tax. The earnings on it are subject to taxation when distributed. Usually if I have someone who has take the time to do an after-tax contribution, they know they immediately have to convert it to Roth (which results in zero additional income since the after-tax voluntary was already taxed), and then the money is considered Roth, and the earnings occur post-tax as well. If part of a 401(k) plan - they are not Roth IRA conversions, they are Roth conversions within the retirement plan. The participant makes an election (usually similar to filling out and signing a distribution form) requesting the conversion of plan money from non-Roth to Roth. Yes, there still might 415 excess, and an ACP failure. Those are completely separate from the conversion request. I'm still curious to know how the ACP passed with O% for NHCE, and X% for the HCE.

What was the HCE ACP average %? How do you have a NHCE ACP of 0% pass?

Yes. But the loan has nothing to do with earnings or not. It actually happens frequently that the loan wipes out half the account, then the hardship wipes out the other half. Especially in the not-so-distant days of plans requiring participants to exhaust the plan loans first before hardship distributions.

I agree with MoJo.

Is the employer contributing both a safe harbor contribution AND an additional discretionary employer contribution? Will the plan be top heavy? if yes to both then I agree with Pam S. If the plan IS top heavy, and the ONLY employer contribution is the Safe Harbor, then I would suggest reading your plan document (including the underlying document if necessary). Many pre-approved documents these days mirror the allowance in the IRS rules that say Top Heavy minimum is met with the Safe Harbor contribution alone (yes, even with only partial year comp) if no other employer contribution is made. If the plan is not top heavy, well then, I'm not sure what you are reading in the EOB. Maybe the question isn't about Top Heavy at all? Something else?

It might be possible, if the HCE average is very low, low enough that compared to a 0% NHCE average the test passes. But that is rare, and in my opinion, unlikely. I would probably plan on the test failing and advising the client accordingly. Edit to clarify - this only works on first year where the NCHE rate was elected / deemed to be 3%.

Its okay that the other NCHEs aren't allowed into the plan. The question is of ratios, if ZERO HCE are allowed into the plan, then the coverage test will pass even if the plan only covers 1 NHCE. We have a plan that wanted a specific match for a specific NHCE. They did not want the match for any other employee. It passes coverage.

So if I understand this correctly, the only affect group is someone who deferred more than 24%? Instead of a match of 25% of the deferral amount, the match is capped at 6% of pay. As other have mentioned its no longer a compensation issue. Someone who deferred the maximum $24,500 in 2018 at most would have a match of 25% of that, which is $6,125. 6% of $275,000 is $16,500. Their match ends up being limited because of their deferral, NOT because of their compensation. If the plan document was silent (and ACP passes)- then no retroactive corrective amendment is needed. I would say they should do a quick write up perhaps in a format geared toward what a SCP memo would contain, document it for their records, call it good and move forward. And I agree, simplifying the formula to be 25% of deferrals period would be easier. If my math is correct it would only affect participants who make less than $104,166 (6,250 /.06)AND who deferred more than 24%, so if it is just the 3 people you've found, that's a pretty small group.

There is a decent chance there will be correspondence from the IRS. You would have a reasonable explanation, but that doesn't mean the IRS isn't going to send a form letter in a year or two asking where the Form 5500-EZ is.

Not quite. In this scenario there are no NHCE in the test at all. The HCE ratio doesn't matter, it is deemed to pass if there are zero NHCE in the test. If there were NHCE in the test, but their % were 0, then yes, the HCE % would be limited.

You mention it's a fully discretionary formula in the plan document - does that mean there is no cap at 6% for deferrals considered? And that the employer was just desiring to cap the matched deferrals at 6%, but the requirement is not actually in the document? If there is no cap in the document - the first error doesn't exist. If I as the employer meant to contribute 10%, but later on forgot and contributed 12%, well guess what, the 12% sticks.

I agree with duckthing. The match not being capped at 6% (if that's the cap in the document) is easily fixable, I would have a hard time seeing the IRS not approving a retroactive corrective amendment, especially in light of the update to retroactive amendments in Rev Proc 2019-19. The second error, the failure to limit considered compensation, is a bit trickier. I would probably suggest in the VCP submission asking if it can be left alone for earlier year (such as 2017 and earlier), and just corrected according to EPCRS principals for 2018 and future years. Unless there is a top-paid group election that limits the HCE count, anyone over the comp limit affected by this failure is likely HCE, so it is hard to justify leaving the match as is for those earlier years when only HCE's benefit from it. If you have ERISA counsel available, at least this error should be run by them to see what they say. I would also want to know what the auditor will say. Some auditors will not provide an unqualified opinion if errors are fixed in certain ways. It doesn't provide protection while under review, but if the employer is reticent to go through VCP anonymous submission is an option. Also, if I was a new employee, I might start with the auditor, and see what version of the plan document they are working from. Is it possible they have a different version with a more flexible match formula in it? Sometimes the document the client has and the one the auditor has has diverged because the auditor hasn't been provided copies of amendments or updates.

I don't think it's been reviewed in the past. There is a difference between having a very undetailed report, and having a report where the transactions are not coded correctly. For the forfeitures, a number of participants had distributions during the year, and the forfeiture account had a decent balance at year end. The trust report has a forfeiture column on it. But there isn't much shown in that column. After asking for more detailed information, it turns out that the forfeitures were shown as any of the following: forfeitures, transfers, realized gain / loss. So a participant (or trustee) looking at a statement or trust report would have no way of knowing how much was actually forfeited without asking for additional transaction information. I expect that lack of detail from brokerage statements, where there is no recordkeeping at all. I don't expect it from a company specifically hired to do recordkeeping, but just seems to do it really poorly.

Thanks David and ESOP Guy. I suspect the account balances might be okay, but unless someone takes the time to request a complete detailed transaction history (which I doubt is available) and go through it line by line, I doubt there is any way to verify. I agree it seems like a contract issue. The recordkeeper does (or rather did) send participant statements out, so in the case of the incorrectly recorded deposits, it could easily look like someone did not receive all the money they were due. The plan is not audited. It has too few participants. The trustees are just trying to keep accurate records, and that is hard to do when the reports don't show things correctly. I'm concerned about the errors we haven't identified. The only ones that have come up so far are the super obvious ones. If they are willing to lump forfeiture transactions into earnings for participants, what else is being randomly lumped into earnings? More deposits?

A 401(k) plan sponsor used a daily recordkeeper for it's plan assets. It has become clear from the trust report (which is by participant and money source) provided by the recordkeeper, that the transactions are not recorded accurately. For example, several distributions were processed in 2018 with the non-vested account balances to be forfeited. The report has a column for forfeitures, but in many instances, it isn't used. The forfeited amounts are variously lumped into Transfers, or Gain/ Loss, etc. Similarly, several items which I would expect to show up as Contributions, are instead listed under transfers. The known errors have been pointed out to the recordkeeper and several requests for an updated trust report have been made. The recordkeeper will not provide an updated report unless someone agrees to their hourly fees for the time it would take to fix the transaction history and trust report. I suspect there are a number of other mis-coded transactions that haven't even come to light yet. At what point should the plan sponsor and trustees contact the DOL? Would that be futile? For what it's worth, due to other issues with the recordkeeper the money and recordkeeping was moved away to another provider, so future errors should be limited. I usually only see DOL involvement when it looks like fiduciaries might mis-handling plan money. I don't usually see the plan fiduciaries go to the DOL (or IRS) over an issue with a service provider. So i'd love some suggestions, or to hear of people's similar experiences and how they were resolved.

You'll want to look up "transition rule" or "transition period". There are several threads here on BenefitsLink about it, as well as articles from other places that can go into detail. Assuming the plans can utilize the transition period, yes, you can test them separately for the year of acquisition. Ilene has some great columns on it, here is one to get started. http://ferenczylaw.com/article-the-elusive-irc-section-410b6-transition-rule/ https://www.erisapedia.com/static/CommonProblemsinMergersAcquisitions.pdf

You'd have a 415 excess. Either the excess is moved to suspense and used toward something else, or if due to the EE contributions, a distribution would be processed. The question I would have is typically the employer contribution is reduced first, but if they were allocated SH, which they are guaranteed to receive, is the SH reduced? That seems counter-intuative. I don't know the answer, but I'm sure someone does. The Rev proc is clear that if the 415 excess is due to employee contributions ( including after-tax) then a distribution is processed. There are several examples in the revenue procedure, but here is basic part. From Rev Proc 2019-19 "beginning before January 1, 2009, the permitted correction for failure to limit annual additions (other than elective deferrals and after-tax employee contributions) allocated to participants in a defined contribution plan as required in § 415 (even if the excess did not result from the allocation of forfeitures or from a reasonable error in estimating compensation) is to place the excess annual additions into an unallocated account, similar to the suspense account described in §1.415-6(b)(6)(iii) (as it appeared in the April 1, 2007 edition of 26 CFR part 1) prior to amendments made by the final regulations under § 415, to be used as an employer contribution, other than elective deferrals, in the succeeding year(s). While such amounts remain in the unallocated account, the Plan Sponsor is not permitted to make additional contributions to the plan. The permitted correction for failure to limit annual additions that are elective deferrals or after-tax employee contributions (even if the excess did not result from a reasonable error in determining compensation, the amount of elective deferrals or after-tax employee contributions that could be made with respect to an individual under the § 415 limits) is to distribute the elective deferrals or after-tax employee contributions using a method similar to that described under §1.415-6(b)(6)(iv) (as it appeared in the April 1, 2007 edition of 26 CFR part 1) prior to amendments made by the final regulations under § 415. Elective deferrals and after-tax employee contributions that are matched may be returned to the employee, provided that the matching contributions relating to such contributions are forfeited (which will also reduce excess annual additions for the affected individuals). The forfeited matching contributions are to be placed into an unallocated account to be used as an employer contribution, other than elective deferrals, in succeeding periods. For limitation years beginning on or after January 1, 2009, the failure to limit annual additions allocated to participants in a defined contribution plan as required in § 415 is corrected in accordance with section 6.06(2) and (4)."