Mr Bagwell

I'm struggling a bit with who receives the QNEC. And maybe the compensation used. Plan is prior year tested, so a little different wording is substituted in Epcrs. It appears that the QNEC is going to be for eligible employees "the year prior to the year of the failure" who were nonhighly compensated..... and correction stipulates that the QNEC is for only the employees who are still employees on the date of correction. I don't think I have to worry about the employees that terminated prior to correction except those that terminated in correction year. If that makes sense. I don't get nuance difference between current year correction vs. prior year correction method. I think I use the compensation from the 2015 census. Thanks for the help and clarification.

Way to go, Mike!

Lol, Austin. I'm sitting here thinking that daily valuation is about the only service I've done. I had a few quarterly's back in the day, but we moved them to daily asap.

Man, this IS looking for the Holy Grail! *****I'm not doing this, but I hypothesize.***** I suppose that if wanted to do micro plans as a record keeper only, I probably want $250 setup and $500 for the service. Weekly contributions might bump the price up a little. Electronic statements a must. You do the plan, plan notices, investment choices, and relationship work. I'm sure I'm missing something... but just thinking out loud. .40 basis points after 125,000 in assets.(in lieu of $500, but $500 minimum) Institutional funds, I'm not messing with 12b-1 or ssf.... Your fee on top. This scenario still might be light for some and expensive for others..... Tough market to be in as there is so little money to make. But, if the record keeper were to get 50 plans under their belt, it would be a nice little pad to the bottom line. Just my thoughts....

I have work experience for two types of setups. Both would be categorized as small firms with the second firm being especially small, 3 employees. Both would be considered a bundled plan approach. Firm one was based on separate roles. The administrator was more relationship and handled the plan issues with the clients. The recordkeeper then handled the contributions, distributions, and testing, etc for any and all clients. Recordkeeper did not call the clients. There was a dedicated 5500 preparer. 1099's were handled in house via a trust system. Dedicated employee for onloading and off loading. Firm two was "all hands on deck" but still split roles. The head of the firm handled the high level relationships, plan design, plan documents, and 5500 preparation and some of the ongoing Relius upkeep. I then handled the detail work of contributions, distributions, some of the Relius work like making sure files traded, pricing uploaded and compliance testing. We handled all plans together. I also had the flexibility to call the clients for census inquiries and the like. A third person was eventually hired to do contributions, some of the distributions and help with valuations. We split the plan list into you handle these easier plans and I'll take the more intricate plans. There was a dedicated staff to sell, but that was done by the brokers and RIA's, not by us. Although we would occasionally get the cold call asking about our retirement services. Here is my philosophy. I don't care what approach is taken because both can be successful. I see and have seen that communication(s) between all the parties is the key to client happiness and efficiency. Of course, a solid staff of people make this happen. I like the approach of employee A does all or most of the work for his set of plans. I think it helps the plan and provider with efficiency because ideally knowing the plan and who is eligible makes for a smoother plan. Conversely, I like the idea of employees that do contributions and distributions exclusively because some employees like the repetition and they will sit there and do good work after good work. Depending on the staff at the time, you may find switching between plans approach and specific work approach will be the magic ticket. Other times, maybe not. My soap box issue is this: if you can't do contributions, distributions and testing. Don't bother, get out of the business. Everything else just gets more complicated. Hope this helps.

The 10% still applies. Scare the employer by whatever means necessary. I'd charge an extra fee for all the extra work that has to be done. Earnings calc to date and then calculation of the QNEC.... Good Luck getting the census.

That was my initial thought too, Tom. Distribute within timing standards or suffer the gap income calculation. Thanks again.

Is a new payroll check going to be issued? If so, no harm, no foul, providing the employer does not send in the 9.75 again when the new check is issued. If no new payroll check, the $100 seems a little egregious. But who knows how the service agreement reads for corrections.....

I'm trying to work up the earnings amount to come up with the one to one grand total. I have the refund earnings for 2015 from the 2015 testing. (Actual losses at that point) Does the earnings workup start from 1/1/2016 because of the failure to distribute in 2016? Thanks

Thanks Tom!

We brought in a new plan in April 2016 and found out in March 2017 that the 2015 ADP refunds were not distributed. In lieu of QNEC, I think the one-to-one correction method (refunding excess contributions too) is going to be the cheapest route for fixing. I cannot find the in the EPCRS language or in the EOB books that this is also a QNEC deposit. The EOB just says "corrected with a contribution". This correcting contribution is a QNEC, right? Thanks

The PS was 2% per employee, not specific amount/total, so I'm good there. From my conversation with the employer, fringe was excluded from compensation. Which is good because plan document has it excluded too. As I hash this over and over in my mind. I think the employer calculated the contribution correctly. The auditor is thinking that the PS was calculated with a different compensation than deferrals. I don't think that is the case. I appreciate your comments.

Plan compensation is W-2 plus deferrals and excludes fringe. The Employer decided to do a profit sharing for 2016 and calculated the profit sharing on the gross compensation. Out of 300 employees, only maybe 60 "could" be affected as they had some other pretax items come from their pay. I would say most of the employees still received the correct profit sharing because the w-2 pay plus deferrals was the gross compensation. If anything the 60 get a little more than they should have.(Got* not get.) edited Auditor is bringing this scenario up as a topic of interest. The employer is looking to me to help ease the audit question. I don't find this to be that objectionable. Should I? Let me know your thoughts on this.

All good Austin. I knew it was all hypothetical. Thanks for clarification. I just couldn't see a logical answer. I have owner's of a plan that would love to profit share more dollars without busting the books..... I have exhausted the possibilities. Thanks

Austin's theory of a Plan for the Dr and a Plan for the hygienists has been pestering me for weeks. How would you ever get the two Plan design to pass coverage? Suppose that the Dr Plan has one HCE and the Hygienists Plan has 2 NHCEs. The Dr Plan wouldn't pass coverage because you can't exclude the hygienists in the coverage test because of the employment classification. (I assumed they met the age and service requirements) The H Plan would pass coverage based on the two hygienists receiving some sort of allocation and the HCE did not. Help me out. How would you ever get the Dr Plan to pass coverage? I am missing something. :)

Would a market alternative investment like a illiquid REIT be in the same context as the original question? Most rank and file would never meet the requirements to be able to purchase. What about a HCE wanting to purchase a strip mall under the 401k SDB? I have seen SDB fees greater than $200......

We are going with the 100% vested. I enjoyed the dialogue and knowledge gained. I must be strange!! Or proves it even more..... Thanks all!

Potentially 3 year of service for vesting. I say potentially because the plan document prior to 2-25% vesting did not define year of service....everything was 100% vested.

I agree the restatement should have been more clear on the rehires. I'm at the bottom of the food chain..... sometimes I get asked for an opinion, sometimes I don't.

BIS rules.... the plan has much to say about break in service and vesting. And clearly the participant had a five year break in service. The dollars were 100% vested so forfeiting nonvested funds is not an issue. We don't find anything that would allow for a cut back on the participants vesting schedule. We use Relius. The recordkeeping of old money and new money is always a challenge. I don't think a new source was created. I think the method we chose was put everyone prior to the change on the secondary vesting schedule for match witch is 100%. The new schedule for match became the primary schedule at 2-25%.

Austin, You are jumping in deep..... I don't think there is an issue with gateway because both plan pass coverage independently. The scenario gets ugly if you have to test Nondiscrimination for all plans together. The gateway would come up because both plans are not getting the same safe harbor definition of profit sharing. I was afraid with my scenario above that the plans would have to be tested together and the employers would have different PS %'s and then rate group testing comes into play. I was being selfish and did not want to go down that path. Then you bring up cross tested on one plan and pro rata on another......lol.

A participant was hired at a time when the Plan was immediate vesting. The participant was gone for 20 years and rehired after a vesting change to a 2-25. Participant left money in the plan and is the funds are 100% vested. The question and debate is whether the employee is subjected to the new schedule of 2-25, OR, because she was originally hired under the Immediate, she is subjected to the immediate schedule. We know her existing funds are 100% vested. No issue there. I lean that she is under the old Immediate schedule.... What say you?

Thanks ETA!

Company A just bought a bankrupt company's assets. A new company is created out of the bankrupt assets: Company B. Company B is a single member LLC owned by Company A. The employer is wanting to keep Company A 401(k) separate from Company B 401(k) plan. Easy enough to set up the new Company B 401(k) and move forward. Both plans are going to be setup with same plan year ends and the same plan provisions. The potential difference is profit sharing contributions per plan. Plan A might be 5%, Plan B might be 0 or 2%, or whatever based on their own profitability. If I understand this correctly, as long as each plan satisfies coverage (410b), each plan can do whatever they want for profit sharing. Here are some numbers.... Company A: Non excludeables NHCE 468, Benefiting NHC 426, Non excludable HCE 27 Benefiting HCE 25 Company B: Non excludeables NHCE 90, Benefiting NHC 80, Non excludable HCE 2 Benefiting HCE 2 Company A coverage: NHCE 426 of 558 equals 76.34, HCE 25 of 29 equals 86.21, 88.56% Passes Company B coverage: NHCE 80 of 558 equals 14.34, HCE 2 of 29 equals 6.90. 207.89% Passes 1. Is my math correct? 2. If so, test separately, profit share each company separately. Am I missing anything obvious?

JT, It sounds like the plan was going for a 1/1/2016 to 12/31/2016 Limitation Year with a short plan year of 8/1/2016 to 12/31/2016. With this set up you can use the full year compensation for those that entered 8/1/2016. But, for some odd reason, the plan effective date was set for 1/1/2016.