justanotheradmin

Does anyone have any great suggestions for code books? I'm not looking for the ERISA outline book, the Grey books or anything else, but rather books of the actual internal revenue code, including ERISA, and the treas. regs. In this digital age, I know everything is available online, but I like have a printed book to highlight, mark-up , flag etc. For quite awhile I've used "Selected Sections Pension and Employee Benefit Statutes and Regulations" by Bruce A. Wolk http://www.gettextbooks.com/isbn/9781599415154/ The last version I have is from 2009, so other than for the basic 401(k) rules that I know i haven't changed, these days I usually use it just to figure out what code sections or regs might be relevant and then look up updates or the most recent versions online. But it doesn't have things like §4971 excise tax section, §412, etc. And the treasury reg portion of the book is a bit small for my liking. Does anyone have a great print version of the retirement plan code / Treas. regs that they would recommend?

A couple of thoughts: 1. I'm going with any changes that touch the SH aren't allowed, unless they are to INCREASE that specific type of SH. i.e. going from 3% NEC to 4% NEC 2. So the reduction in considered compensation, would NOT be allowed since it affects the SH Match 3. You could do the reduction, make sure to comply with the mid-year discontinuance of SH rules, but the plan would no long be SH for this year. Secondary Issues - to consider for making the compensation change effective NEXT YEAR A. What definition of compensation are you hoping to use? Is §414(s) compensation testing required? B. Would the §414(s) Test Pass? C. Who would be affected by the change? If only NHCE there likely is a discrimination issue

This is straight from the final regs. It actually says the plan fails to satisfy 1.401(k)-1(b). SH plans are not allowed to contain language that provides for ADP testing if there is a problem with the SH. So, an improper amendment means you fail to satisfy a qualification requirement. I've heard a number of speakers say an improper amendment ruins your SH status, but all along, the regs have said the consequence is plan disqualification. Other applicable law also may affect the permissibility of mid-year changes, including, for example, § 411(d)(6) (anti-cutback restrictions), § 401(a)(4) (nondiscrimination restrictions), and § 1.401(k)-1(b)(3) (anti-abuse provisions). I wasn't thinking of an improper amendment that pre-planned for a SH failure. Though that is a good reminder that they aren't allowed. I was curious about failure to comply with some other part of 1.401(k)-3(g). Say the notice requirement, or the original notice didn't have the supplemental language and the employer isn't operating at a loss. I guess I'm playing devil's advocate. I would hate to think disqualification would be on the table for something like imperfect notice. But I don't know.

I like the notice. I do have two things that I would want clarified, maybe the great minds here can shed some light. First Item "Example 2: The employer sponsoring Plan N, a traditional §401(k) safe harbor plan, makes a mid- year plan amendment to decrease safe harbor nonelective contributions from 4% to 3% for all eligible employees. If the reduction meets the requirements of §1.401(k)- 3(g), the plan is no longer a safe harbor plan and is required to satisfy ADP testing or other nondiscrimination standards. If the reduction does not meet the requirements of § 1.401(k)- 3(g), the plan as amended does not satisfy §401(k)(3)." The last two sentences seem oddly worded to me. So if the decrease complies with the regs, its subject to ADP etc. If the decrease doesn't comply with the regs, well the plan doesn't pass ADP? At all? I think it should have been more specific, and said §401(k)(3)©, Otherwise, if the entire section of §401(k)(3) isn't satisfied, it sounds like it is deeming the plan to fail ADP, regardless of deferral percentages. I think I am reading too much into that example, and being too technical. This is only guidance after all. It is not a new rule or regulation. Second Item I wish one of the examples had addressed a profit sharing method allocation change. One of the most regular requests I see is to change from pro-rata to individual groups (new comp / Xtest). For a non-safe harbor plan, if participant haven't met the allocation conditions, (last day employ, 1,000 hours etc) sure, we draft the amendment. For safe harbor plans, the conservative position was to make it apply only on a future plan year. All of the examples where the change was allowed seemed to involve minor changes, and clearly benefit the NHCE. an allocation change to New Comp (in the small plans I work with) is almost always done to benefit the HCE. It is not done to benefit the NHCE. The notice does not create (nor could it) a new requirement that mid-year changes benefit NHCE. Given that the profit sharing allocation method would be a significant change, I wonder if there might still be some practitioners hesitate to allow such a change mid-year. I think moving forward I will treat such a request similar to the same way I would treat it from a non-SH plan. check if participants will have met allocation conditions, if not, give 30 days notice, do the amendment. Thoughts?

We do not touch any money for clients. We will point them to EFTPS and help them figure out how to register a checking account in the name of the plan, but we do not process withholding or remit holding in any way for clients.

The affected plans have their assets in brokerage accounts (don't get me started there) and either remit directly from the brokerage account, or from a checking account registered to the plan that is used specifically for this purpose. They also tend to be ones that do payroll in house, so they are used to using EFTPS for their 941 withholding, so they are already familiar with the system for their 945 withholding.

Thanks everyone for listening. I think I'm done being indignant now. I thought it was random until I saw the ASPPA article, then I figured others must have received the notices too. I guess nothing more than a typical year. We do encourage plans to use Penchecks, though not many do until plan termination. The notices are more than a reminder, they are clearly asking for the missing form.

We try to include the TIN on the optional part of the Form 5500 along with the trust name, and this seems to help with the "terminated TIN" issue, though I'm sure it's not foolproof. Just an unnecessary pain and waste of time.

The thing is, these are not finals. The plans have participants with balances, who presumably will need distributions in the future, often with reportable withholding. They are active, ongoing plans, albeit ones that are small (2 to 30 participants). I do like the suggestion that it would be good practice to file a final showing Zero for the final year of a paid out/ terminated plans. Its just not what I have here.

I saw the recent ASPPA article about the optional questions on the Form 5500, it also had a few paragraphs about the recent flurry of Form 945 notices that the IRS has sent out. Sorry I don't have the link handy. I actually had a conference call with a client and an IRS person this morning who claimed that for years where there is Zero withholding, the Form 945 was still required. In lieu of filing showing a Zero, the IRS would accept a statement saying no filing was being submitted because there was zero withholding. We have been inundated with client questions regarding these stupid notices. In every instance it is related to a year where there was no filing because there was no withholding (usually a very small plan that didn't even had a distribution that year). the 2015 Form 945 Instructions: https://www.irs.gov/pub/irs-pdf/i945.pdf Page 2, "Who Must File" "You don't have to file Form 945 for thoses years in which you don't have a nonpayroll tax liability" There is no reference to notifying the plans in lieu of non-filing. Is there something I'm missing or is the IRS just being stupid? The IRS person insisted that either a filing showing Zero, or a statement was required. For what its worth, this particular call was regarding as 2013 form, but we have had clients received the notices for multiple/variety of years. I don't recall the rules changing.

Successor Plan Question Related question http://benefitslink.com/boards/index.php/topic/56926-401k-plan-termination-and-startup/?hl=successor#entry249499 First Question: 401(k) with Safe harbor: Plan terminated end of 2014, no distributions have been made while awaiting final deposits / admin/ testing for 2014. Less than a dozen participants. Employer has decided they want to keep having a plan. Don't care if it is a new plan or the old plan reopened. Since no distributions have been made, I don't see doing either 1. establishing a new plan, or 2. reopening the old, would violate the distirbution rules. Am I missing something in that regard? Second Question: Is there a cut-back issue for the right to distirbution for the participants? They would have an expectation/right to a distribution due to the plan termination. The fact that none have been taken seems immaterial. Under either option, I don't see how it can preserve that distribution right for the deferral/safe harbor money sources, given the standard - not before age 59.5 rule. Any ideas?

I think you are confusing what I would call plan termination and plan closure. I explain to clients that the Termination Date is the date that typically benefits stop accruing. Its not uncommon for me to see the final payroll, or safe harbor deposit go in after the termination date. Particularly the employer contributions, which may still need calculations and testing. I use plan closure to explain that is what happens when all the balances are brought to zero. this would be after deposits are made, distributions are completed. I also find it helpful when explaining the Form 5500 requirements. Namely that it must continued to be filed until the plan balance is shown as zero. I realize that plan closure is not a technical term and the above usage does not quite reflect the regs, but for the average client, it seems to help them make sense of it all.

See Appendix A in Rev Proc 2013-12. If using EPCRS - SCP Missed Opportunity to Defer is usually deemed to be the NHCE ADP. Since the missed time period appears to be greater than 3 months, but less than the SCP correction time period (usually two year) then the corrective QNEC is 25% of the MOD plus earnings. See Rev Proc 2015-28. Assuming calendar year: Keep in mind the ADP test does not include the QNEC or the employee for 2014. Per Appendix A of 2013-12 "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 an receive an allocation of employer matching contributions, in accordance with the terms of the plan, and may disregard the employees who were improperly excluded."

Thank you Mike and Belgarath for the feedback. You both affirmed what I already knew. The most we can help the owner is with a plan term amendment, prospectively, the same as what we would do for any other plan. We are informing them they still have a plan and that we won't be able to service them any further.

One-person, owner only DB plan document was signed and set up for 2014. Owner has had a change of heart and no longer wants the plan. Would like something written to terminate / undo / close the plan. No deposits were made, nothing exists other than the plan document and I believe a TIN that was applied for the plan. I found this thread: http://benefitslink.com/boards/index.php?/topic/45372-er-changed-mind-no-contributions/ Are there others I should looking at? A colleague seemed to think there was a form that could be filed with the IRS but I'm not familiar with any. Does anyone know or have additional suggestions?

This might be better on another board, if so, I apologize. Companies A and B are a classic controlled group. My question is related to the 50 employee requirement for QSLOB. in all other respected the two companies seem to meet the QSLOB requirements. They want to be able to provide substantially different benefits to each company, and presently, combined testing would fail, hence the QSLOB analysis. Company A has 75 employees, company B only has 25. What happens to Company B when Company A is a QSLOB? Is B treated as a stand-along QSLOB by default since company A is no longer treated as part of the ER group? Does company B need to do anything in particular? Or do they have to do testing on the basis of the full control group, while company A can just do their own testing, ignoring Company B? I apologize if these are really basic questions, I haven't needed to look at QSLOBs in the real world until now.

I know this is an older thread, but I have a question. Is there a PT if the one guy purchases the stock? I'm trying to follow the PT rules in ERISA 406, 407 and 408. Looks like there is an exemption in ERISA §414 if needed to comply with §407, but just trying to get rid of the plan wouldn't be a §407 reason. Or do folks just recommend the assets be rolled over in kind to an IRA provider that can handle it?

Yes. We requested a coverage determination and the PBGC confirmed the plan is no longer covered and noted that 2014 is the last year that the premium is due.

Bear with me folks, my post is a bit lengthy, but I would really appreciate any feedback or insight. Neither the IRS nor PBGC had an answer, so I'm hoping someone here will. I didn't know if should post this on the 401(k) board instead. THE QUESTION: When the employer has both a DB and DC plan and the DB plan goes from being PBGC covered to not PBGC covered , what is the deduction limit for the DC plan? If it helps, keep in mind that the employer had to pay full year PBGC premiums per the PBGC instructions, even though coverage was for only part of the year. My analysis so far: When an employer sponsors both a DC and DB plan, the deduction limit as provided in IRC §404(a)(7)(A) generally applies. This provides in part: 404(a)(7)(A) If amounts are deductible under the foregoing paragraphs of this subsection (other than paragraph (5)) in connection with 1 or more defined contribution plans and 1 or more defined benefit plans or in connection with trusts or plans described in 2 or more of such paragraphs, the total amount deductible in a taxable year under such plans shall not exceed the greater of— (i) 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans, or (ii) the amount of contributions made to or under the defined benefit plans to the extent such contributions do not exceed the amount of employer contributions necessary to satisfy the minimum funding standard provided by section 412 with respect to any such defined benefit plans for the plan year which ends with or within such taxable year (or for any prior plan year).” A defined contribution plan which is a pension plan shall not be treated as failing to provide definitely determinable benefits merely by limiting employer contributions to amounts deductible under this section. In the case of a defined benefit plan which is a single employer plan, the amount necessary to satisfy the minimum funding standard provided by section 412 shall not be less than the excess (if any) of the plan’s funding target (as defined in section 430 (d)(1)) over the value of the plan’s assets (as determined under section 430 (g)(3)). There are exceptions to 404(a)(7)(A) outlined in 404(a)(7)©. Paragraph not to apply in certain cases One notable exception is : 404(a)(7)©(iv). Guaranteed plans In applying this paragraph, any single-employer plan covered under section 4021 of the Employee Retirement Income Security Act of 1974 shall not be taken into account. Well, §4021 of ERISA happens to be the part that explains which plans are subject to coverage under PBGC. It is is also known as 29 U.S.C $1321 if someone is having a hard time finding the code reference. This means that the employer doesn’t have to take into account any PBGC covered DB plan when looking at the deduction limit. Per 404(a)(7)(A)(i) the limit for the remaining DC plan would just be the typical 25%. But what is the deduction limit for the DC plan when the DB plan status changes during the year?

I'm sure this has already been addressed on the message boards somewhere, but I can't seem to find it. So please feel free to just post links of where I should look. Typically if a 401(k) plan wants eligibility to require service of less than 12 months, I offer to set up the document for elapsed time and continuous service, since it tends to simplify administration. A plan really wants to require a month of service, with a specific hours requirement for eligibility. of course the document always falls back on the IRS 1 YOS standard if the plan's eligibility requirements aren't met. Lets say its paired with quarterly entry. What (if any) is the maximum number of hours the plan can require in one month of service? 3 months of service? i.e. 80 hours in the first month of employment? if that isn't met that they don't enter until they satisfy the standard 1 YOS? Are there are regs somewhere that address this?

I understand the work level to mean equal. I don't see anything in the reg or IRC that requires the first payment to be within a certain time frame. What am I missing? Why would the first payment have to be 5/15? Is there something that says it has to be made within 3 months? They are not the same calendar (or plan) quarter. Starting the first payment on say 9/15 instead of 6/15 (or 5/15) would just result in higher, level (equal) payments. Bird, I understand your comment about the 5/15 start, but I just don't see support for it it in the IRC, regs, or other guidance. Maybe there is something more informal that clarified?

What is the latest date repayments can start? I thought there was something that required payments at least quarterly (due to the cure period rules). But I don't see anything that says when the first payment actually has to start by. I don't see anything in IRC §72(p) or Treas. Reg. §1.72(p) that actually address this. Plan document (VS) language mirrors the regs - Cure period is ends at the end of the calendar quarter in which the installment payment was due, after which the loan is in default. The loan policy/plan document do not provide any restrictions on how far out loan repayments can begin. If there is no installment payment due that quarter, then the cure period doesn't start? Example: Loan taken 2/15/2014 First payment due (according to level amortization schedule) 6/15/2014 According to the default/cure period rules, a plain reading would seem that the loan is in default as of 9/30/2014, not 6/30/2014 as I would have thought. Could the participant have put off the first payment even longer? As long as payments are level, and the loan is repaid in five years of the loan start date, I don't see any reason why the first payment can't be really far out. In the example, could the first scheduled payment have been 9/15/14? with quarterly level payments thereafter? Then if the first payment was missed, the loan would be default as of 12/31/2014? I feel like there is guidance I must be missing, that this is a loophole someone else figured out and the IRS would have address it either formally or informally. Can anyone clarify?

Thanks everyone for the feedback. I'll give them their options and as always, its up to them to decide what to do. As to how it got paid out so quickly, one of the other service providers frequently bypasses the step where distributions are supposed to go through us (TPA). I guess the alt payee really wanted to money quickly and the other provider got all the appropriate paperwork signed for the financial institution to make the distribution. We were not informed until well after the fact. The plan's QDRO procedures were not followed. After short conversations with the plan sponsor, and the other service provider, the other service provider and plan sponsor now are reminded that the plan must follow its procedures!

A 401(k) plan payed out a distribution to an Alternate payee (ex-spouse) based upon a draft DRO. Two weeks later the DRO was entered into the court. Assuming the DRO is reviewed and found to a QDRO, what corrective action is needed to make it so that the plan is in compliance? The DRO specifically provides for the amount awarded to be eligible for distribution to the alt. payee after the date of the Order (if the Alt. Payee so elects). Problems The plan paid out a substantial amount before there was a DRO If the DRO is followed today - the participant would get another substantial payment Normally, I would say the plan needs to try to recover distribution #1, Review the DRO, if it is a QDRO, then segregate and make pmt #2 (alt payee wants the $). I don't really see the point in putting the money back in just to take it out, so I think the only other option to avoid that is VCP asking the IRS if they will just call it good. The other alternative is to get the DRO amended so that that payment #1 counts, but then the plan is still out of compliance since it made the distribution prior to the QDROs existence. Any thoughts? Any options other than VCP? I think even if the plan goes through VCP the DRO needs to be amended to account for the earlier payment, probably by taking out the language that the distribution be made after the DRO date.

The employee portion of health insurance premiums is typically run through a §125 cafeteria plan so that it is on a pre-tax basis. This retirement plan, (like a lot of other small plans I know) specifically includes §125 amounts. Weather the participant is taxed on the amounts I think is irrelevant, I think it comes down to what amounts is the employer required to furnish a written statement for. But I'm hoping sharper minds can point out something I've overlooked, or a flaw in my reasoning. Surely someone else has encountered this by now.