duckthing

So they're interpreting "The individual is not a director or employee and does not participate in the management of such corporation at any time during such taxable year" to mean "The individual is not a director or employee, or is a director or employee who does not participate in the management of such corporation at any time during such taxable year"?

Sorry, should have been clearer. It definitely allows both, but (as you said) not in the same section. Agreed on your follow-up comment as well.

Good point and I think it would probably come down to the language. Our document doesn't permit you to make both a 3% SHNEC and a SH match. Choosing one option would "blank out" the other in the adoption agreement in the same section -- by comparison to the prior document, the amendment doesn't just say "add 3% NEC to satisfy ADP/ACP safe harbor", it says "add 3% NEC and remove the match". Since the removal of the match mid-year would be a problem, the amendment has a problem and I don't think you'd have to struggle to convince the IRS of that. But you're right, I could definitely see a situation where the document is set up differently and your amendment could essentially amount to "Effective X/X/XX, a QNEC contribution will be made annually to satisfy the ADP/ACP safe harbor..." and then it's a lot tougher to argue you're not on the hook for both.

Millennium Trust can also do an address search for missing participants for you and the results we've gotten from them have been good -- I've only had a few people over the last year or two that they could not provide updated results for. I'm sure others provide something similar but Millennium is the only one I'm familiar with. (However, I don't know offhand if they will balk at opening IRAs for balances that low.)

Hey, it's moderately exciting!

Totally agreed, and I told the people I spoke to exactly that. Have not gotten any pushback on it so far, at least.

I can't answer that question, but it's apparently not an uncommon misconception. I've gotten this question a few times in the last month or two, and at least once or twice last year, from HR contacts on behalf of W-2 participants who are positive they've done exactly this with previous employers/plans. To the HR folks' credit, they've at least prefaced the question with "I know the answer is no, but let me double-check in case something has changed..."

I don't know why having an outstanding loan would disqualify a participant (who otherwise qualifies) from taking a hardship withdrawal. I was under the impression that making sure other sources of funds, including any available distributions and any non-taxable plan loans, were tapped first was actually part of the safe harbor requirements.

Vlad, could you please clarify what you mean by "the compensation paid during the first few weeks of the next plan year is excluded"? I think you mean "excluded from compensation for the current year [2017 in this example]", not necessarily "excluded from compensation entirely". Our document has a separate item in the AA for including/excluding post-severance comp.

The fix-it guide does make it a bit unclear! I'd refer to RP 2015-28 instead. An "Employee Elective Deferral Failure" is defined in 3.04 and includes situations where elective deferrals were not correctly implemented, not just employees excluded improperly. 3.03 describes when the reduced QNEC can be used. Roughly, the "no QNEC needed" applies if the period of failure is less than three months, and the 25% QNEC applies if the period of failure exceeds 3 months but does not extend past the SCP correction period for significant failures. Participant notice is required and any matching contributions owed would need to be paid, along with lost earnings on both pieces (QNEC and match).

I don't think that applies to active employees; I believe it would only be for determining whether the employee is a highly compensated former employee (see 414(q)).

It sounds like the employer submitted the checks but they were returned. If MM returns a check to the employer, it's generally because they have no idea what to do with the checks -- in other words, the employer probably didn't include any information with the checks indicating that they were for your husband's loan repayment. In that case MM would (should) have contacted the employer to ask what the check is for. By the sound of it, whoever was in charge of payroll at the employer's office didn't get those messages or didn't know what to do with them, and didn't think to ask anybody.

Depends on the document. Some permit in-plan Roth conversion of amounts that wouldn't have been distributable otherwise. Good quick answer guide at https://www.irs.gov/retirement-plans/designated-roth-accounts-in-plan-rollovers-to-designated-roth-accounts.

Edited. Looks like the document I pulled up was from some Examination Guide put out by the TEGE folks. I'm not able to find a date for it. It doesn't look like there's official guidance aside from the PLR that NJ Mike cited, so I'll defer to that!

I think ESOP Guy's answer is spot-on, but I'm trying to figure out how the accountant might be looking at it. The only place I can think this would even be questioned is a non-calendar year plan that is not valued daily, and maybe the accountant is concerned with a scenario where the plan year ends (say) 9/30/17 but final distributions don't happen until 12/15/17. The 2018 RMD would be based on the adjusted 12/31/2017 account balance. That would be the balance as of the last valuation date (9/30/17 in this example), adjusted for contributions, forfeiture allocations, and distributions prior to the end of the calendar year -- so assuming everyone is fully paid out by 12/31/17, that should make everyone's adjusted balance $0, hence no 2018 RMD. Alternately, if everyone has been paid out on the last day of the (short) plan year, then the account balance as of that date is $0 and there are no adjustments (since you're neither allocating to nor paying out from a terminating plan), so the 12/31/17 adjusted balance is still $0, so no 2018 RMD.

That doesn't change my take on it. If anything, specific language to that effect seems like a pretty clear acknowledgement on the part of the plan sponsor that this change is in fact a change to the formula.

I think you're getting at is whether or not modifying the true-up provision counts as a modification of the matching formula; in other words, whether or nor this change would fall under one of the prohibited changes outlined in Notice 2016-16, a mid-year change to modify a formula used to determine matching contributions. The "at least 3 months prior to the end of the plan year" exception would not apply in this case, given that the year is almost over (I'm assuming plan year = calendar year). To me, it does. While you could argue this is a modification of a procedure rather than of the formula per se, the result is potentially higher matching contributions to some participants as a result of a mid-year change. I don't know that the argument "well, the matching percentage specified in item X.Y of the AA hasn't changed" will hold up when the end result is additional contributions being made that were not provided for in the original document. I'm mostly concerned about who's benefiting as a result of the change. Is this mostly intended to help out HCEs who just realized they're losing out on match by contributing the 402(g) max right at the end of the plan year? Of course other people could benefit from the true-up as well, but it seems like this would raise eyebrows. The extremely limited amount of time remaining in the plan year after the notice is given further limits how much benefit NHCEs could get from the change. Maybe I'm being overly cautious, but I'd wait until 1/1/18.

In that case, hopefully the document gives an hours equivalence (e.g. 10 hours per day or 45 hours per week or...) for salaried employees or employees for whom hours are not tracked. Possibly useful discussion:

If you're comfortable with VBA/VBScript you have access to basic SQL functionality in Office programs through Jet -- it's built in, there's nothing to download or add. Depending on your needs (and how much time and energy you have to do this) you can set up an Excel workbook as a "front end" for everything, with an Access database that just holds the data. This may or may not be overkill for what you're doing, but I figured I'd mention it's an option even if you can't or don't want to install anything extra.

Sorry, I should have clarified: that comment was a response to an earlier comment, not your original post! Had the failure not occurred, there's no way the 2016 RMD would have been payable to the beneficiary, so I don't believe any correction that pays it to them is restoring the participant/estate to the position they would otherwise have been in.

I'm hardly a maven but I agree completely with the original post and this answer. Correct the missed RMD exactly as you would have were the participant still alive (except that the estate is now the payee), restoring them to the position they would have been in had the correction been made immediately prior to death, follow the Plan/Code on any 2017 RMD, then worry about the survivor's benefit. I would not endorse the "tough luck for the IRS on the 2016 distribution" approach; you have an operational failure that needs to be corrected and they have examiners looking for RMD problems.

I personally wouldn't want to be the one explaining to a DOL auditor that they were "just borrowing" the forfeiture money.

The vesting schedule would still need to meet the minimum required by PPA. How would you justify forfeiting a matching contribution to somebody with 10 years of vesting service? Even if you could, presumably the sponsor would want to have the money available in a forfeiture or suspense account right away. With this approach, it would be 'locked up' until a distributable event occurs, which could be years away depending on what the Plan says about forfeitures.

It sounds like in one post you're wondering if, as long as the $25K withheld ends up in the trust somehow, it's okay. I'd say at best you still have a PT, since in essence you've still lent plan assets to the employer. (And what are you gaining by funding deferrals from forfeitures, then depositing the withheld money to the forfeiture account? If the answer is something like "improve employer cash flow" then you have a problem.) But in your original post you're asking if the employer can "[1] not transfer to the plan amounts withheld from employees' pay as elective 401(k) contributions and loan repayments and [2] credit to the accounts of the affected employees instead amounts pulled from current forfeitures" (numbering and underline mine). Absolutely not. The withheld amounts are plan assets, and while participant balances might end up the same if this is done, the plan is then short the $25K that was withheld but never deposited. (Quick example: If allocated assets were $1M, forfeiture account was $100,000, and $25K is withheld from employee checks, then plan assets are $1,125,000 as soon as those withheld amounts can be segregated from the employer's general assets. If the deferrals are "instead" funded from forfeiture account, the trust only contains $1,025,000 in allocated assets and $75K remaining in the forfeiture account. There's $25K missing from plan assets... well, it's not exactly missing -- it's in the employer's checking/general account.) FWIW, I also think Belgarath's cite is very clear.

To make sure I'm following the example: what would they do with the $25,000 they withheld from employees' paychecks? I don't think you can notwithstand that away: the trust is not in any way a pocket of the employer.