Towanda

Thank you for your thoughtful response. It was genuinely helpful.

Thanks TG, but it wasn't our call. Mass Mutual did the refinance, and we had to follow their rules.

The Plan Sponsor failed to start loan payments timely because they did not understand the process at their new financial institution. The financial institution said they would refinance the loans if the client filed the loan failures under VCP. The VCP filing is 99% complete, but I have one question. Plan loan interest rate is Prime + 2%. When the original loans were issued, the loans were amortized with a 6.5% interest rate. Under refinance, the interest rate is 7.5%. In addition to covering the cost of unpaid accrued interest during the non-payment period, should the employer also be responsible for covering the difference in the dollar value of the loan interest had the loans been paid timely vs. the higher interest rate?

Thank you!

I am finishing up a VCP packet for a loan failure. Along with everything else, I have prepared both the Form 14568 and Form 14568-E. When I look at the two forms, it seems we have some redundancy, and I'm wondering if I can toss the Form 14568 and just submit everything with the 14568-E. Does anyone have any experience taking such a bold move? ?

Along these lines, I have a question about what is meant by the term "business partnership." Does this include two people who share ownership in an S-Corp, or are we speaking purely of a partnership that files a 1065 and provides each partner with a K-1?

Thank you!

So, are you also saying that essentially these are not related rollovers . . . ?

An employer who has both a DB Plan and a 401(k) Plan is terminating the DB plan. Under the terms of the DB plan, a participant isn't eligible for an in-service distribution until attaining age 62. Some participants are electing to roll their DB proceeds into the 401(k) Plan. We know that some features of the DB assets will be retained when rolled into the 401(k) Plan. Does that also include the in-service provision if the 401(k) plan otherwise permits employees to take in-service distributions at age 59 1/2? Thank you!

Thank you all for your detailed responses. This has been a helpful exchange.

I'm going to throw out one last argument. I accept defeat, but in my scenario I I don't really buy the argument that, oh my goodness, we've encountered a statutory limit: The business owner chose not to defer $24,000 The Profit Sharing amount is discretionary, not mandatory It is the business owner, not a higher power, who determines the Profit Sharing amount Therefore, he's not a victim of circumstances So, we've bumped into 415(c) on purpose If I were an IRS auditor I wouldn't buy it. I think it's playing fast and loose with Catch-up. Again, I accept defeat, but I'm not comfortable in this particular scenario.

Thank you!

It's not like "oops, we are making a $42,000 Profit Sharing contribution and we've bumped into the 415 limit" . . . It's a choice. The guy owns the business. If they had an example of this chicken and egg logic in 414(v) I would feel more comfortable about it. But it seems this interpretation is widely accepted, so I guess I just need to stop stewing about it. Thanks for your input!

An owner-participant who has W-2 income defers $18,000 in 2017. He wants to max his contributions for the year. Is it permissible to recharacterize $6,000 of the $18,000 as catch-up so the owner-employee can receive $60,000 in aggregate, or is he limited to $54,000 because he failed to make an additional $6,000 in catch-up? I read through 414(v) and I don't see anything that discusses recharacterization except in the event of ADP test failure. I don't see anything that says you can recharacterize a portion of your deferrals as catch-up so that you can get more Profit Sharing. Any thoughts?

You're right . . . I think we either get them to commit to bringing their document into compliance or send them on their way.

There's another issue . . . It may very well be that we would have to restate their existing document onto a pre-approved document for that era. I would have to contact the IRS about that. We're not talking about a small problem here.

We have the document. When I say it's questionable, I mean I have never seen a document with some of the language I see in this one.

We are taking on a new client that adopted an individually designed plan in 2009. It was never updated beyond that date. Furthermore, the existing document is questionable, and there is no determination letter. The client is not interested in going through VCP because the new fee structure along with the fees we would be charging to correct are too costly. I am not comfortable taking on a client whose document is out of compliance. At the very least, I feel we should go through all of the steps you would go through if you were going to submit the document through VCP. Then leave it up to them to file the submission. What is our culpability if they fail to submit? What have others done in this situation? Thanks!

Thank you!

Plan has 401(k), Safe Harbor Match, and Class Based Allocation for Profit Sharing. 1,000 hours and last day required to receive the Profit Sharing. When I run rate group testing, two employees who terminated before the end of the year show up. They both worked 1,000 hours, but they are not benefiting because they terminated their employment. I am having a brain freeze. If these employees are not benefiting and are receiving no employer contribution, why would they be included in the rate group testing? Is it because they do not meet a statutory exclusion? Thanks!

A law office has two partners, and a new associate who is in his late 30s. 3 NHCE staff are in their 20s and 60s. The new associate, who is a go-getter, got a lousy Profit Sharing contribution for 201, and was unable to benefit in the Cash Balance Plan. He is unhappy with this outcome. The partners want to keep him happy. In terms of plan design, could we: Exclude the new associate from the CB plan (he isn't benefiting anyway). Amend the DC plan to exclude the partners, and change from a cross tested allocation to a design based safe harbor, such as an integrated allocation, so that the young associate can get a larger allocation in the DC plan. If we were to do this, must we still combine the plans for 401(a)(4), or is the DC free from that requirement because it isn't subject to 401(a)(4), and the other HCEs aren't benefiting in that plan? In other words, there is no crossover between the two plans where HCEs are concerned, so does this give us some wiggle room for the young associate? By the way, the associate is not Key. Thanks!

ADP test failed, and the HCE does not have enough in his 401(k) account to cover the required distribution (plus earnings) because he recently took a sizable loan, all from 401(k). I can't find anything that references a distribution hierarchy if a portion of the proceeds needs to be pulled from another source, but it seems to me that he must remove the required amount from his account, even if it means pulling from Rollover or another source. Help!

Thank you!

I have a Top Heavy Safe Harbor/Cross Tested Plan. Compensation for plan purposes is participation compensation. Obviously, the Top Heavy Minimum must use the entire year's compensation. Must the Gateway therefore be based on the entire year's compensation?

Thank you so much! It worked.