duckthing

Two quick questions off the top of my head, and I'm sure others will have additional thoughts. Who was "the person setting up the accounts"? Was this somebody in your office, the advisor's office, the client's office, etc.? And... what does your service agreement with the client say?

Very handy. Thank you, Mr. Powers!

The plan document almost certainly has the answer here. Many documents will say that compensation paid within a certain period after termination can be included for plan purposes, but often they'll say something like "but only to the extent the compensation would have been paid had the participant not had a severance from employment." You'll have to check yours for the answer.

Sure, but I think Congress's goal here was to stimulate the economy more broadly. If people are getting paid to sit home and watch NetFlix, they've got more money available to spend on consumer goods and services, even if the pool of places they can actually buy those goods and services has shrunk because those employers are also paying their workers to sit home and watch NetFlix.

Maybe I'm missing a detail here, but have you run the test already? If it passes, you're all set regardless of how it's classified -- either it's a taxable fringe benefit and excluding it doesn't cause your definition to fail to be a 414(s) safe harbor definition, or it's not a taxable fringe benefit but the CRT passed so your definition seems to satisfy the requirements of 1.414(s)-1(d). Of course if the test fails you're back to the original question, but I don't know that I'd spend a ton of time trying to classify it unless you have already determined you can't pass the test.

It doesn't sound like a taxable fringe benefit to me. But it does sound like there's a good chance it would pass 414(s) ratio testing, depending on what the demographics look like.

At the risk of sounding like a broken record: I don't think anybody knows. There's just no guidance on this yet, at least not that I've seen.

If she's truly an independent contractor, she is not an employee. But the determination of whether or not she's an IC has nothing to do with how she's paid. The sponsor can't simply start paying her via 1099 rather than W-2 and use that to conclude that she's now an IC and therefore no longer employed.

This participant does not seem to meet the criteria based on your description, but this is a common situation and I think the consensus is that we will get guidance to clarify that this is one of the "other factors as determined by the Secretary of the Treasury during the COVID-19 pandemic".

We had a sponsor receive one of these calls a few months back, and the caller was kind enough to leave a voicemail which the sponsor forwarded to us. I don't know if I'd use the word "scam" since I'm sure they're providing a real service (albeit one of questionable value) but it definitely feels like a sleazy pitch. They're intentionally being vague about what fiduciaries are required to do with respect to reviewing their plan, and suggesting that their service would meet these requirements if performed regularly -- the caller in our case stated that this review is required to be performed every 6-12 months for all plans. I'm not familiar with the group and for all I know they do great work. But the message we heard didn't make a good impression on the sponsor or on us.

As a pension plan, a money purchase plan would still be subject to the age 59.5 in-service distribution rules.

I don't think you're missing anything. I would not be surprised if this a case where the "or other factors as determined by the Secretary of the Treasury (or the Secretary’s delegate)" language comes into play and we get additional guidance covering that scenario.

Theoretically? Sure! It depends on how busy the TPA is and how good the client is about responding to requests for information. For a small plan without a lot of complications, and a sponsor who responds quickly and accurately to email queries? That's probably reasonable. If you're talking about a plan with hundreds/thousands of lives, sponsors who don't get back to the TPA on needed info, contributions reported by the sponsor that don't tie to recordkeeper-provided totals, unusual situations that require a lot of manual review (say, early entry for 401(k) participation and a workforce that has lots of terminated/rehired employees, so it's not clear at a glance who's statutorily excludable for testing purposes) that might not be reasonable at all. Speaking of GIGO principles: I would also add that if it looks like the data is incomplete or a mess and the sponsor is not going to be forthcoming with the info that's required, some TPAs might not be willing to take that work on at all.

The CARES Act increases the maximum loan amount permitted by adding language to 72(p). Plans by and large specify the loan limit directly in the AA or loan procedures document -- i.e. they specify $50,000 or 50% of vested benefit. The CARES Act does not override this language and plans are not required to offer the maximum loan amount available under 72(p). So the higher limit is indeed optional, unless your plan's loan procedures incorporate the 72(p) limits by reference. The "delay of repayment" section under the CARES Act provides that due dates for repayments during the period from 3/27/2020 through 12/31/2020 "shall be delayed for 1 year". No discretion there.

I'm assuming from the way you phrased the question that Company A and Company B both participate in the plan. Your plan document probably also a provision specifically defining Compensation for self-employed individuals. Just because you elect "W-2 compensation" in your adoption agreement doesn't necessarily mean anybody who doesn't get a W-2 has $0 Compensation for plan purposes.

I think what Peter is getting at (and I apologize if I'm misstating it) is that participants aren't precluded from taking distributions that are otherwise permitted by the plan document. Participants are just not required to take distributions under 401(a)(9) for 2020, and any distributions they do take in 2020 are not RMDs since they're not actually required by statute.

The CARES Act does not override plan-imposed limits like that one. However, the coronavirus-related distributions (CRDs) authorized by the act are not hardship withdrawals so there's no reason a participant who has already taken a hardship in the current plan year would not also have access to a CRD if the plan sponsor wants to allow that.

Just in case you didn't already see it: https://benefitslink.com/boards/index.php?/topic/54494-rate-banding/ has some good (hopefully useful) discussion. Hopefully Relius was able to get back to you on this as well!

Not sure I follow your reading of 401(k)(2)(D). That specific item relates only to the statutory service requirement under 410(a)(1), and all they've done is change it to the earlier of the prior requirement or 500 hours in 3 consecutive years.

Is the CPA using the same logic to argue that partners can't defer at all?

Before considering that, check to see if there's another way to get the funds moved without the MVA. Participants should be able to request a transfer of their own funds held in the guaranteed fund to the new recordkeeper in order to avoid the MVA. It's a hassle to get everyone to complete the paperwork (it has to be participant-directed, not trustee-directed) but it beats the alternative especially if the MVA is significant.

I'm curious what they're trying to accomplish here. Do they have a specific "few people" in mind who wouldn't be getting a contribution? The first thing that comes to mind -- by no means is this a complete answer -- is whether this amounts to making eligibility for the non-elective contribution dependent on a deferral election. Of course it's technically possible for somebody in this plan to make an investment election without electing to defer, but I think in practice you're going to end up with people who figure "if I don't plan to defer, what's the point?" and don't realize they're cutting themselves out of a non-elective contribution by doing so (or claim as much later). I don't know if just having them sign a paper saying that they understand is sufficient. It seems hard to believe participants are going to knowingly give up free money just because they don't want to spend a few seconds randomly picking from a list of funds and signing their name, so it sounds like they're thinking they can get out of contributing to people who haven't taken the time to "opt in", which kind of defeats the purpose of a non-elective contribution (at least in spirit). Maybe there's another possibility I'm not seeing!

Yes, if the arrangement is also an EACA. I'll see if I can dig up a cite for that, but for the moment I know I looked at this before when I had a sponsor who wanted lots of info about all the possible options.

I've only had one client receive that letter so far. They had already completed most of the corrections, so we encouraged them to file under VFCP since DOL is clearly at least looking at these, and they got their no-action letter without any pain or suffering. In this case the amount of total late deposits reported on the 5500 was a substantial percentage of total employee contributions for the year, but the actual lost earnings amounts involved ended up being small. I have no anecdotal evidence of investigations and I'm hoping to keep it that way!

Unless I'm missing something in the facts as you outlined them, these periods of severance should be included in determining her eligibility service under the "service spanning" rules. The language you quoted from your plan doc just says that this person's eligibility computation period didn't restart each time they were hired after a period of severance, since they have not yet had a one year break in service.