Tom Poje

when in doubt, look at the 1099r instructions, and well, decide for yourself what they mean! Losses. If a corrective distribution of an excess deferral is made in a year after the year of deferral and a net loss has been allocated to the excess deferral, report the corrective distribution amount in boxes 1 and 2a of Form 1099-R for the year of the distribution with the appropriate distribution code in box 7. If the excess deferrals consist of designated Roth contributions, report the corrective distribution amount in box 1, 0 (zero) in box 2a, and the appropriate distribution code in box 7. However, taxpayers must include the total amount of the excess deferral (unadjusted for loss) in income in the year of deferral (I think that statement must only apply to non-Roth) , and they may (apparently you have an option? which year to report this?) )report a loss on the tax return for the year the corrective distribution is made. Publication 525 (2015) adds the following Excess distributed to you. If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. Any income on the excess deferral taken out is taxable in the tax year in which you take it out. If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. Use the following rules to report a corrective distribution shown on Form 1099-R for 2015. If the distribution was for a 2015 excess deferral, your Form 1099-R should have the code “8” in box 7. Add the excess deferral amount to your wages on your 2015 tax return. If the distribution was for a 2015 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. Do not add this amount to your wages on your 2015 return Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution.” edited to add comments from publication 525

which is why the Q and As carry the note that statements may not reflect an actual Treasury position which is one of the reasons given for the discontinuance of the Gray Book as people were relying on that as 'fact' which is the reason why I asked - so they will at least put something in writing even if it is in the preamble to the final regs on this issue.

I think the IRS answer "It is a document interpretation issue certainly leaves things open. there is nothing, as far as I know, that says "I must run the ADP test before making a profit sharing contribution" the language in EPCRS section 6.06 says.... If an Excess Allocation resulting from a violation of § 415 consists of annual additions attributable to both employer contributions and elective deferrals or after-tax employee contributions, then the correction of the Excess Allocation is completed by first distributing the unmatched employee’s after-tax contributions (adjusted for Earnings) and then the unmatched employee’s elective deferrals (adjusted for Earnings) that seems to imply I could play 'games'. I know my ADP failure is going to be 510.37 so I will 'over contribute' 510.37 in violation of the 415 limit... a bit aggressive for me but... of course, that example might only work for when you have 1 HCE as the amount refunded doesn't necessarily tie into the person causing the plan to fail ADP. now if the document language is such (as the IRS hints it could be) that it says deferrals (and match) are counted first then you figure what profit sharing can be made up to the 415 limit, then no I would say you can't play games. but, if for instance I was giving everyone 12.75% of pay and that caused a 415 violation I wouldn't have so much a problem with it. but those are my ramblings, and as someone once said in response to a post by someone named 'blink the three eyed fish', "Yes but can I do it and will it be ok if I tell the IRS Blinky said so" I'm not sure my name carries much more weight. aside from trying to include the cite for any comments I may make!

I'd much rather have IRS confirmation one way or the other. In her comments Ilene Ferenczy makes no mention of 'it is reasonable if everyone receives something' rule you speak of, so maybe it is not as clear to everyone as you http://www.ferenczylaw.com/Documents/FlashPoint/2_2_16_FlashPoint_The_IRS_Giveth_Yay_and_the_IRS_Taketh_Away_Boo.pdf

At the 2012 Q and A #23 ASPPA conference the following was asked (with the usual cautionary, such IRS responses do not necessarily reflect an actual treasury position.) Q plan states that, if any contribution would cause the participant to exceed §415, the contribution should be reduced so that it equals the maximum permissible amount. The plan also states any excess should be corrected under EPCRS. The participant defers $17,000, and is given a matching contribution under the plan equal to 50% of deferrals, or $8,500. The plan allocates a profit sharing contribution, which under the allocation method would yield an allocation of $24,750 to Participant A. If the allocation is credited to A's account, his total annual additions exceed the §415© limit by $250. What is the correct administrative procedure? (1) The $250 should be reallocated to other participants, because the sponsor failed to operate the plan within its terms (i.e., the plan says total allocations may not exceed the §415© limit), or (2) now that there is an excess consisting of deferral and employer contributions, $166.67 in deferrals is refunded while $83.33 in match is forfeited, pursuant to the suggested correction method under EPCRS. Would the answer change if the plan did not contain language reducing any contribution that would cause a §415 excess? Proposed answer The plan may rely on the EPCRS procedure. All plans are required to limit annual additions to the §415© limit so that alone does not preclude using the EPCRS correction method. With the elimination of specific correction methods from the §415 regulations, the IRS intended that the EPCRS procedure would be the primary reference point for correcting §415 violations. This also would enable the participant to be entitled to a greater portion of employer contributions, and minimize the amount of the total annual addition that represents an out-of pocket contribution for the employee. Alternatively, the administrator may apply the plan language to treat the $250 of the profit sharing contribution allocated to this participant's account as an improper allocation, and reallocate that amount to the other plan participants who have not reached the §415 limit. IRS Response The IRS agrees with the proposed answer. This is a plan document interpretation issue.

yes, agree on the discretionary match, but my understanding it is optional to include the initial safe harbor match if you want to. ERISA Outline book 11 section XIV part E 8a.2 would seem to agree - you can disregard amounts only if those matching contributions satisfy the basic or enhanced formula. and 8a2)b adds Why? - only excess amounts in excess of 4% might be refunded. The only example provided is an enhanced match that would fail ACP, but I don't see why the same rules wouldn't apply for combining with a discretionary match.

1.401(m)-2(a)(5)(iv) ...you are permitted to exclude match to all eligible employees that do not exceed 4% of comp. so it is optional to include the 4% answer does not change on anything else

I did at least ask for confirmation as to whether everyone in their own group is reasonable or not reasonable under the new proposed regs, so maybe at least they will commit to something in writing in the preamble. but that of course won't be for another few months.

ah, but that is a non compliance question, in a separate section on the form. at least in the case of our office, there seems little reason for this question. we manually sign all the forms. at least with FT William, when e-filing, I have to enter preparer name (not of the form 5500 but simply the log in. and then enter the DOL code. so they already have all that info (and more than what is asked for the form) so maybe they will realize that and remove that question (at least for those manually signing)

FGC- I've actually file close to a dozen answering at least some of the questions (all before the IRS made their latest announcement) and they have all been 'accepted'. the term FT William uses, though probably 'received' might be a better term. to me accepted implies more, like the form was actually reviewed and met the smell test. It is not like the answers are going to change. the serial number of the restatement isn't going to change. and I love the question "Did plan pass coverage" what are you going to do if it failed? Answer NO? and still file, and not fix the problem before filing? I'm still not sure why everyone makes such a big deal of it. Every time we restated a plan I filled that info into a user field (we use Relius) and now with one touch of a button I generate a report that gives me all I need to fill out almost everyone of the compliance questions. certainly I can't say I'm spending that much extra time to fill out the question, which was, from all the 'griping' one of the main reason for being against all this.

currently FT William you can.

bully for you. I do like the fact you have a unique situation, no one really knows for sure how to handle, but it's the software that needs fixing to handle it. Though I'm surprised the client want the numbers this week usually they want the numbers 2 weeks ago, even though they didn't give you the info until this week!

Kevin - will plan pass if you use total comp in testing (even though gateway is based only on comp from DOP) in other words, give the person a minimal comp as date of participation just so it knows the gateway was satisfied, but test everyone on total comp.

haven't heard of something like that before if it was an HCE and 0 comp on the whole year the IRS leans on saying don't include in test even though 'active'. the person hasn't performed work for at least 6 months. I could see an argument the person, while yes, "on call", has terminated since hasn't worked for at least months and is not eligible for top heavy. what happens if they perform no service in 2016? would you still think they deserve a top heavy in 2015?

does this count? "Hello, Dolly!" won the Grammy Award for Song of the Year in 1965, and Armstrong received a Grammy for Best Vocal Performance, Male. Louis Armstrong also performed the song (together with Barbra Streisand) in the popular 1969 film Hello, Dolly!. ......................... Hello, DB well hello DB It’s so nice to benefit for working long. You’re looking swell DB, I can tell DB You’re still glowin’, you’re still growin’, you’re still goin’ strong I hear the plan saying, a benefit it’ll be paying For all those years of service from way back when So it’s a snap fellas, a DB ain’t no crap fellas DB’s will never go away again Interlude Hello, DB well hello DB It’s so nice to benefit for working long. You’re looking swell DB, I can tell DB You’re still glowin’, you’re still growin’, you’re still goin’ strong I hear the plan saying, a benefit it’ll be paying For all those years of service from way back when So PBGC fellas, a DB is guaranteed fellas DB’s will never go away again hellodolly-louisarmstrong.mid

probably could pass testing with component plans. pretend you have 2 'plans' not aggregated young HCE and one NHC on an allocation basis - the other 2 employees treated as includable and at 0. the other HCE with the nhce on an accrual basis and now the 2 ees from the allocation basis treated as 0.

a more realistic approach to the world of DBs and actuaries as presented by Sam Cooke in "What a Wonderful World" Don’t know much about this DB There’s a funding de-fi-cien-cy And I know that they are on the hook I-R-S wants to take a look And I do know that the dollars are few And the contribution’s overdue What a terrible plan this DB Don’t know much about ac-tu-ar-ies No sense of humor, no per-so-nal-i-ties Let us cut it quickly to the core Everyone knows they are a bore They will tell you one and one is three Or whatever you want it to be What a strange world this ac-tu-ar-y Now I know, I’m not an “A” student [“A” for actuary of course!] I’m not trying to be For maybe by being an ac-tu-ar-y No one would understand me Don’t know much about P-B-G-C Supposedly it’s a guar-an-tee Then the rules changed under P-P-A Even more confusion to this day So let’s eliminate them two by two For if actuaries were a few What a wonderful world it would be. Instrumental pause So let’s eliminate them two by two For if actuaries were a few What a wonderful world it would be. wwrld.mid

actually, the best I ever heard from a client was "I defer the max I can, anything that gets returned implies I have indeed put in the absolute max I could into the plan after the refund" - a great client who didn't grumble about refunds. of course, that works for the owner, but the other HCEs may suffer. also, this assumes testing was done timely and there is no 10% fee. agree with Belgarath's comment. in addition, by the time the prior year test is run, and you pass the info onto the client there could already be 3 months of deferral. at that point if you tell someone you can only defer 5% to pass and they have deferred 10% for 3 months it is hard to explain what really needs to be done.

the advantage of prior year testing is you can tell the HCEs their limit (assuming they all defer the same % or whatever) the advantage of current year testing is you can allocate a QNEC if you fail (ha, usually it is so much no one wants to do that) at least on the software we use current year has the advantage of easily running things like "What if I try comp less deferrals for testing. with prior year testing I'd have to go back and rerun last years report as well.

another Karaoke perhaps no one heard of this group D Beatles unfortunately they didn't copyright things and this song was stolen by another group that arguably stole their band name as well (it is so similar) and when asked if it was somewhat dishonest they simply said "Let it Be" Unlike a certain unnamed pension website master who was so impressed he changed his name so his initials matched this group's name. I am impressed! My 4-0-1(k) it is in trouble And I just turned age 50 How can I save up quickly? A D-B. And in my hour of darkness The solution’s right in front of me Yes there’s an easy answer A D-B. A D-B, a D-B, a D-B, a D-B A great big tax deduction A D-B. And when the broken hearted people Living in the world agree Yes there will be an answer A D-B. For though the company defaulted Still there is P-B-G-C oh Yes there will be an answer A D-B A D-B, a D-B, a D-B, a D-B A great big tax deduction A D-B. A D-B, a D-B, a D-B, a D-B A great big tax deduction A D-B. Pause (instrumental) A D-B, a D-B, a D-B, a D-B A great big tax deduction A D-B. And when the night is cloudy There is still a benefit for me Yes there will be an answer A D-B. I’ll wake up to the sound of money Monthly checks are mailed to me Yes there’s an easy answer An-nu-i-ty!!!! A D-B, a D-B, a D-B, a D-B A great big tax deduction A D-B. A D-B, a D-B, a D-B, a D-B A great big tax deduction A D-B. A D-B, a D-B, a D-B, a D-B A great big tax deduction A D-B. letitbe.mid

Code D simply tells the govt to delete them from the system (don't send out a letter to the person when they hit age 65 or whatever triggers that) so if the person was previously reported you are covered. if they were never reported, well, you can't delete someone who wasn't previously reported, but then on the other hand, they would never have gotten a letter anyway, so that seems fairly neutral end result. .............. if you report them as a B, that implies they should exist as an 'A' already and if they don't I'm not sure what the heck will happen. it is after all, the govt system. if it was years ago, you could argue they were reported on paper but the data mustn't have gotten entered, but now since most of these are filed electronically I would assume the prior admin did things correctly (though from what I've seen that is probably not the case) to throw a wrench into it, what if the prior admin files them the year they term rather than one year after the fact. so someone quit in 2014 and they were filed as an A. you would have waited a year, giving them a chance to get paid out, and lo and behold they do get paid out in 2015. now, how do you know you need to report them as a D in 2015, if you are assuming something else? ...... to my former co-worker - Dennis - Is that avatar a picture of you looking for the penny in the corner....

If the document says you get a match, you get a match. you might fail testing with the prior testing, but that is slightly different than saying the HCEs get nothing. Unless your document is written such that you can cap HCEs so you don't fail testing.

over the years I've ended up with a number of these. I think maybe 14 or 15, saved here and there on the computer. what a disorganized mess I have. Here is one of the Beatle's songs. 'They' did a song for both 401k plans and another for DB plans so I'll have to find the files for that version as well The Beatles - Yesterday Yesterday, sixty-five it seemed so far away Now it’s come today, it’s here to stay I wish I had a 4-0-1 k Suddenly, I’ve not half the cash I used to see The bill collectors shadow me Retirement came suddenly My sa-vings are so low, I don’t know just where I’ll stay I did something wrong, should have saved and put away 4-0-1(k)s, oh it’s such an easy way to save now I need a place to hide away and it’s too late for a 4-0-1 k My sa-vings are so low, I don’t know just where I’ll stay I did something wrong, should have saved and put away 4-0-1(k)s, oh it’s such an easy way to save now I need a place to hide away and it’s too late for a 4-0-1 k Mm mm mm mm mm mm mm good yesterdy.mid

and taking it one step further if they worked 3 month and met the entry date they could have deferred, so they are included in coverage and ADP test (whether or not they defer) assuming same conditions for match, they are included in coverage and ACP test.(whether they actually receive a match or not) But if in addition there is any hours requirement or last day provision for the match and they failed that, then not on the ACP test. as for coverage for match, it is optional to treat them as included and not benefiting if they terminated < 500 hours.

Sunrise Sunset (from Fiddler on the Roof) Originally this was going to be for EGTRRA and the Sunset provisions, but EGTRRA changes were made permanent, so it 'devolved' into the following expressing my feelings about the work load and all the other headaches at this time of year. Thanks to Dave "Good job Walt" Baker for making it possible to attach MID files. I'll have to post the other ones I created as time goes on. This job it seems to be so harried Why has my bushy hair turned gray? I don't remember growing older I work all day! My balance used to be a beauty. When did it shrink to be so small? I work for little pay And thats not all! Sunrise, sunset Sunrise, sunset Swiftly flow the days A-D-P failures and loan defaults Ive never even seen a raise Sunrise, sunset Sunrise, sunset Swiftly fly the years One plan is following another Laden with too much work and tears What words of wisdom can I give them? How can I help to ease their way? Now they must learn about their failures Day by day! The IRS they want an audit. And I know who theyll blame its me! Is there an excise tax in store for me? Sunrise, sunset Sunrise, sunset Swiftly flow the days A-D-P failures and loan defaults Ive never even seen a raise Sunrise, sunset Sunrise, sunset Swiftly fly the years One plan is following another Laden with too much work and tears sunrisesunset.mid