pam@bbm

We have a 401(k) Plan that has safe harbor match. The employer acquired a second company in October 2022 and this company has a 401(k) Plan that does not have any safe harbor contribution. I'm not sure how to test the 2 plans. Can we test them separately or are they required to be aggregated?

Question about preparing the attachment Schedule H/I Line 4a Schedule of Delinquent Participant Contributions. Do you include the calculated lost earnings in the amount or is it just the late contribution amount. The 5500 instructions only discuss the contribution. I have someone telling me to include the earnings.

Several of our plans use the Empower platform and receive plan net credits. Empower reports this as negative fees. On the Form 5500-SF is it correct to report this as a negative expense under Administrative service providers?

I need to help understanding when to use a short plan year. Employer closed the business 01/31/2021. Plan amendment has been done terminating plan as of 01/31/2021. Is this a short plan year for just the one month, even though we'll be processing withdrawals in the coming months? Do we date the 5500 01/01-01/31/2021 or 01/01-12/31/2021?

One of our plans has a 3% safe harbor non-elective employer contribution. The employer has yet to make the 2019 contribution. Also the employer filed for bankruptcy in 2019. Is there a penalty or other problem with this? I know it's a failure to follow the plan document, but I'm not sure what the ramifications are. Any advice is appreciated.

I have a plan with a discretionary match that is calculated and deposited each payroll. At the beginning of the year the board of directors elected to cap the match at 15% of compensation. The payroll department didn't apply the 15% cap and 3 participants received excess match - 2 of them $4000 and $6000. Is the cure for this error to forfeit the excess?

Luke Bailey, I'm in the process of reading Rev. Proc. 2019-19. You are correct that you really have to read between the lines with this correction stuff. Thank you for the comments.

Our client has a 401k plan. We (the TPA) just discovered an error in the way the client has been calculating deferrals. Prior to the EGTRRA restatement, bonuses were excluded for deferral purposes. When restating for EGTRRA, we (the TPA) did not code the adoption agreement correctly to exclude the bonus. So both the EGTRRA and PPA restatements were written to have deferrals deducted from bonus. The client has never deducted deferrals from bonus, and that has been their intent for over 15 years. Do we have an operational failure or a document failure? Or is this a scrivener's error? What is the best way to correct? Do we have to go to VCP?

401(k) Plan has a discretionary match that is calculated after end of the plan year. The ACP test fails and there is a return of excess to process. However, the employer won't be depositing the match until probably May or June. Do we still process that distribution by March 15 even though the deposit hasn't been made? Doing so would take the withdrawal from the participant's current account balance. Or do we wait until the match has been deposited and pay the 10% excise tax penalty?

A 56 year old 401(k) plan participant terminated his employment in May after working with the company for over 30 years. He was rehired in July to a position that is not an eligible class for participating in the plan so he is considered an inactive participant. He did not request his distribution during the time he was gone, but of course now he wants it. The plan does not allow in-service withdrawals and is silent on the subject of a rehired participant taking a distribution due to the prior separation of service. I don't believe he is eligible for the distribution now. Other than amending the document to allow for in-service, can anyone give me some guidance on this or a regulation? Thanks for the help.

I have a 401(k) Plan that uses base compensation of "wages, tips, and other compensation as reported on W-2". Bonuses are included for deferral calculations. Bonuses are excluded for match contribution calculation. Plan document says to use 414(s) compensation for ADP/ACP testing, but doesn't define 414(s). Do I use the total base OR total base less bonus for ADP/ACP?

I have a participant that terminated employment in 2015. The employer allowed him to make personal payments on his 401k loan. The last payment he made was in January 2017 and according to the recordkeeper's amortization schedule that payment paid the loan up to April 2018. Now he wants to make another payment. Can he still do that since it's been over a year? I thought there had to be at least a quarterly payment.

Thank you for the responses. Mike, It was a cash distribution, not rollover to IRA or other qualified plan. I think I'm leaning toward option 3.

While preparing the 12/31/2016 accounting for a pooled profit sharing plan, I just found out today that the employer paid a terminated participant her vested balance of $684. Her account is all safe harbor non-elective funds, so she was 100% vested. The distribution was done a year ago in April 2016. The problem is that it was paid from the employer's checking account, not the plan's checking account. Since it wasn't paid from the plan, no taxes were withheld and no 1099R was issued. The employer did not include the amount in her W-2 either. I know the plan cannot reimburse the employer. I'm not sure how to fix this. Can the plan pay her the $684 and she then write a check back to the employer?

We have a client that changed their payroll dates. They processed a weekly payroll and then will revert to bi-weekly. For this one weekly payroll, the client made the decision to only deduct deferrals for participants that made a percentage deferral election. They did not deduct for those that elected flat amounts or loan payments. I believe this falls into the category of missed deferral opportunity. Am I correct?

We have a 401k plan with employer contributions of safe harbor non-elective and additional profit sharing. The plan has a November 30 year end. While completing the 11/30/2015 year end administration, it was discovered that the employer failed to provide census information for 2 employees for the prior year of 11/30/2014. Both employees had met eligibility to enter the plan during the 11/30/2014 plan year and should have received employer contributions. We are calculating a QNEC for the missed deferral opportunity. But for the missed employer contributions, should we amend the 11/30/2014 year's 5500 or compute a QNEC to be included in the 11/30/2015 5500?. Thank you for your thoughts.

Help me settle a disagreement. The payroll period is June 16 to June 30 with the employee receiving their paycheck on July 5 and July 21. The plan entry date is July 1. Should the first deferral deduction be made with the July 5 paycheck or the July 21?

When calculating a QNEC for missed deferrals, is the corresponding match also considered QNEC or is it categorized as employer match.

Looking for advice. A 401k plan uses prior year testing for ADP/ACP. The employer hasn't matched for 6 years. The ACP test failed and the correction method is to refund 100%to all HCEs. I believe this is because the prior year's ACP is 0%. Is it possible to use the 3% that can be used for a first year plan? Can I go back to the last ACP test from 6 years ago? Has anyone had this situation? I'm not sure where to look for the answer.

Just looking for a second opinion. Many of the plans we administer have trustees that earn less than the HCE limit. It happens. This particular plan is a non-profit in a small town.

Plan Sponsor wants to amend their plan to allow 1 newly hired employee to enter their 401(k) Plan immediately. The normal eligibility is 1000 hours and 12 months of service. This person will be an NHCE. He will also be made a plan trustee at the same time, replacing a retiring trustee. I am the TPA and we use Relius document. Should we do this?

The brother is not the beneficiary. My understanding is that hardship withdrawals can extend to spouse, children, or dependents, but only for the medical, funeral, and educational expenses.

A participant lives with his brother who is the property owner. The brother is facing foreclosure. Can the participant take a hardship withdrawal to help his brother under the reason "payments necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage of that residence". I think no because he is not the legal owner. Would like another opinion.

Not sure if the employee has proof, but the employer does have the enrollment form.

A participant elected a 5% deferral to begin January 1, 2012. She just notified her employer that the deduction was never started and she also missed out on the match. It's been 4 years and she never mentioned missing the deduction until now. Does anyone know of a time limit on the correction for the missed deferral?