kmhaab

If a plan provides that an employee will become a participant eligible to receive employer contributions "immediately" upon meeting the eligibility requirements, and the eligibility requirement is 2 eligibility computation periods in which he completes 1,000 hours of service, does the employee enter the plan on the last day of the second eligibility computation period, or the day after? In this situation the eligibility computation period is the 12-month period beginning on date of hire and then switches to plan year. Date of hire is 1/1/2022 and plan year is calendar year. So eligibility computation periods are 1/1/22 - 12/31/22 and 1/1/23 - 12/31/23. Does the employee become a participant on 12/31/23 or 1/1/24? I have generally interpreted similar terms to mean that the day has to be completed for the eligibility period to be completed, meaning the ECP ends at 11:59 on 12/31/23 and then the employee becomes a participant immediately at 12:00 am on 1/1/24. But the TPA's interpretation is the employee became a participant on 12/31/23. This is a money purchase plan, if that's relevant, and the issue is whether the participant should have received a contribution based on his compensation for the day of 12/31/23.

I have a question on filing an amended Form 5500 to include the audit report with the following facts: The Form 5500 for 2022 was initially field without the required audit report. The plan sponsor has received and paid a penalty notice from the IRS regarding the incomplete filing, but has not received anything from the DOL. The audit is now complete and they ready to file an amended 5500 with the audit report. Do they do this through the DFVCP?

When a TPA processes distributions for a retirement plan sponsor, including federal tax withholdings and deposits and related tax filings, is it typical for the TPA to use their own EIN on the Form 1099-R and Form 945? Does it depend on whether the TPA is also the custodian and/or trustee? Thanks in advance!

Yes, you read that right. Apx 10 years ago plan sponsor adopted an amendment to freeze contributions to a money purchase pension plan, but the intent was to cease contributions to the profit sharing plan instead. The plan sponsor has been operating and making contributions to the pension plan as if it were not frozen and has made no contributions to the profit sharing plan since that time. Thoughts on whether this can be corrected through VCP by retroactively amending the pension plan to revoke or rescind the freeze amendment? The plan was operated as if it were not frozen, participants' expectations were that it was not frozen, and I believe revoking the freeze amendment increases the benefits to participants (as they are entitled to $0 with the freeze amendment in place). (The profit sharing plan has a discretionary contribution and a freeze amendment was not necessary to effectively cease contributions, so the profit sharing plan has been operated correctly.) Thanks in advance for any insights.

Thank you CuseFan, that's helpful. I'm not sure of the details re: Fidelity's role yet. In the scenario you described, I assume the funds would need to flow through an account in the name of the plan? The employer can't deposit the funds into a general account and then cut the check from there, right? This seems very wonky to me. I'm trying to make sure this process won't mess up the direct rollover (and doesn't violate ERISA, of course).

I've run into something that I need to run by others and confirm whether I'm missing something... An employee terminated employment and requested a rollover from the 401(k) plan in a letter to the employer and the employer forwarded the request to Fidelity. The request was for a direct rollover to an IRA. Apparently a check was issued to the employer, who deposited it into a company account and will be issuing a check to the IRA custodian. Is there a scenario where this is ok? Shouldn't the distribution go from the trust directly to the IRA custodian? But I feel like I must be missing something if Fidelity issued the check to the employer? TIA!

Thank you both for your input.

Is there any guidance on the difference between a true change in residence and extended travel (i.e., length of time)? In February of this year Employee submitted an election change form to remove spouse from health coverage due to spouse's move out of the country. 6 weeks later Employee requested to add spouse back to health coverage due to spouse's move back into the US. Employee has now requested to remove spouse from health coverage again due to spouse's move out of the country again. The Employer thinks the spouse travels back and forth to the couple's home country a few times a year for 6 weeks at a time. Are these qualifying life events?

Yes, thank you, but HOW should they return the overpayment to the participant? Can it be paid as a distribution from the plan, similar to an excess amount? Can it be reverted back to the employer due to it being contributed in error and then paid to the participant as wages? In searching the message boards I came across comments on a similar situation where a commenter stated the amounts could not be paid back from the plan because the amounts became plan assets once they were contributed to the plan. I've been unable to identify any guidance confirming this opinion so far.

Plan sponsor terminated a previously frozen DB plan last year. All benefits were settled by the purchase of annuity contracts at that time. There were no active employees in the plan at the time of termination. The DB plan was overfunded and there is $180,000 excess amount left in the plan. Plan sponsor wants to transfer the excess amount to the Company's current 401(k) plan. My understanding is there is no clear guidance on whether the 401(k) plan would qualify as a Qualified Replacement Plan (QRP) when there were 0 active participants in the terminated DB plan at the time of termination. I'm interested in whether others agree or have different opinions on this?

What should a plan do with 401(k) loan overpayments? Overpayments occurred due to an administrative error by the plan sponsor (they deducted one too many loan payments from a couple of participants' earnings and transmitted these amounts to the plan. Can these amounts be distributed from the plan back to the participants? Does the answer change if the overpayments were made in a prior plan year/tax year?

How do most 401(k) plans handle RMDs when the plan's only form of payment is a single lump sum? Do they require full distribution upon a participant reaching his or her Required Beginning Date? And if so, how do they handle it if a Participant does not request a full distribution?

Personally, I don't think a plan or plan administrator can be too concerned about protecting the victim (I know that sounds terrible, but hear me out). They should treat the victim as being able to make a decision for themselves, and make sure the victim has all the relevant information needed to make the decision. This is somewhat similar to the principle that an employer can't make the decision for a pregnant employee to remove the employee from a job area that might be hazardous to the employee. It must be the employee that makes the decision. But the plan administrator should inform the victim of domestic violence if information is going to be sent to the house regarding the distribution, etc. I can't see a scenario where a plan admin would have any legal liability for a victim incurring further abuse following a distribution.

Can an ESOP contain a provision allowing the plan sponsor to elect in its sole discretion to diversify a portion of participants' accounts (as long as the diversification is nondiscriminatory and applies equally to HCEs and NHCEs) and buy back the shares? I have been unable to find any legal authority on this either way. Maybe I'm overthinking it? I'm aware of the authority on rebalancing participant accounts, but don't believe that would apply here, and most information on buy backs speaks to buying shares from terminated participant accounts only. Thanks in advance.

We're trying to determine if the plan must change the RMD age this year or if they can wait and do it in the future. i.e., can they continue to use age 72 this year?

Can a plan have a younger RMD age than the age required by law? The RMD is age is the latest age at which a participant must begin taking distributions, but is there a reason a 401(k) plan couldn't use a younger age than required? Put another way, can a 401(k) plan require a participant that turns age 72 during 2023 to begin RMDs by 4/1/2024?

Does offering a group health plan that only offers preventive services allow an ALE to avoid the 4980H(a) penalty? The only definition of minimum essential coverage I can find is on the CMS website and states that a MEC plan includes "employer-sponsored coverage." Providers of preventive care only MEC plans argue that such plans satisfy an ALE's requirement to offer coverage and avoid the 4980H(a) penalty. I see how you could get to this conclusion based on the statute, but it doesn't seem consistent with the intent of the ACA employer mandate. Is there any guidance from the IRS or other agency on this? What are your thoughts? TIA!

I think it's important to be aware that Marriage and Family Therapy is just a type of therapy that can be used to treat diagnosed conditions such as anxiety, depression and other mental health disorders. For example, treatment for an adolescent with depression may involve family therapy sessions. I don't know why Marriage and Family Therapy should be treated any differently than Individual Therapy from a coverage standpoint.

Can anyone comment on how long the IRS has been taking to issue plan termination favorable determination letters following submission of a 5310 in the past few years? Are ESOPs taking longer? TIA!

What advanced notice, if any, is required to be given to plan participants when there is a significant change in health plan benefits due to a stock purchase transaction? Here's the situation - Company A is about to be bought by Company B in a stock purchase transaction. Company A currently participates in Parent Company's fairly rich health plan as part of a controlled group. Company A's participation in Parent Company's health plan will cease at the time of the transaction and Company A will sponsor a new MEC plan going forward. Parent Company (the Seller) doesn't want to give any notice whatsoever prior to the transaction. Purchaser is concerned about potential liability related to claims not covered by the MEC plan, that would have been covered by the Parent Company's richer plan, if employees are given zero notice. Does the 60 day advance notice requirement for changes during a plan year apply? I would think not, as the new MEC plan's plan year will not begin until the day following closing so it's not really a mid-year change. But it seems illogical that no notice is required in this situation. Any thoughts appreciated!

When merging two 401(k) plans into a single plan, is it possible to merge the two trusts into a single trust after a designated plan merger date (i.e., corporate action taken to approve the merger and documents merged on the designated date, but trusts moved later)? Plan sponsor acquired a company with a 401(k) plan in 2021 and did not do anything about merging the plans until recently. Section 410(b)(6) transition rule ends 12/31/2022. Providers have said it's not possible to merge the two trusts by that date. Can the plan sponsor approve the plan merger and adopt a single plan document as of 12/31/2022 and merge the trusts in February 2023? Does this satisfy Section 410(b)(6)? Or do the trusts have to be merged to actually constitute a plan merger? Also, in what situations (if any) can two members of a controlled group maintain two separate 401(k) plans?

If a 401(k) plan has no participants and no assets, is a Form 5500 required? The plan provides for employee deferrals only (no employer matching or other employer contributions) and no employees have enrolled in the plan to date. The plan has never held any assets. Is a Form 5500 required? TIA!

What happens if an employee's gross pay for a pay period is insufficient to cover the employee's salary deferrals and they are therefore not deducted in accordance with the employee's election? Is this a plan failure? I recognize this would be a rare occurrence, but think it's possible in a scenario where an employee has fixed $$ deductions that take precedence over benefits (i.e., child support, wage garnishments). Thanks in advance!

The instructions for completing Form 1095-C state that an employer can only use the W-2 Affordability Safe Harbor if it applies for the entire year. I assume this means calendar year (tax year) as that is the reporting period. Are the rules any different for a non-calendar year health plan? For example, if the plan year is July 1 - June 30 and premiums are "affordable" Jan - June but increase on July 1 and are not affordable Jul - Dec, can the employer use the W-2 Safe Harbor code for only Jan - Jun? My interpretation is no, it seems straight forward, but I am getting push back from an accounting firm and would like to make sure I have not missed something. Thanks in advance.

How are others interpreting a plan sponsor's obligations related to the delayed deadline for payment of COBRA premiums during the PHE? i.e., If an individual is currently receiving COBRA and not paying monthly premiums, does the plan sponsor have to keep the coverage active until the delayed payment deadline is passed? Or can the plan sponsor cancel COBRA and reinstate it retroactively if payment is received by the delayed deadline? My interpretation has been that COBRA should not be cancelled for nonpayment of premiums until the delayed deadline has passed, but I am hearing chatter that others are interpreting it differently.