401(k)athryn

Thank you, Luke! I was asking mainly because I needed to confirm whether a couple of church 403(b) Plans, for which we had prepared documents back in 2009, will actually require an updated plan document, along with all other 403(b) Plans, by March 2020. It turns out that the investment company has them coded as 403(b)(7) accounts and the document does not state that they are 403(b)(9), so I guess it is clear that they are 403(b)(7). I am told that a 403(b)(7) church plan does not require a plan document at all. Do you agree?

How can I definitively determine whether a church plan is a 403(b)(7) or 403(b)(9) account? As far as I know, for the client in question, all of the plan assets are in mutual funds on the American Funds platform. The existing plan document does not reference investments. To be an RIA, it seems that you have to specify this in the plan document, but there was not an option to specify this is our plan document, although there will be with the updated pre-approved version. Can this RIA designation be made elsewhere, such as in the service contract with the investment company? Also, if the plan only allows employees to invest in mutual funds with American Funds, can it still be an RIA?

Thanks, Belgarath! I was referring to the DOL's Voluntary Correction Program. I appreciate the response!

I have the same situation - late deferrals to an ERISA-covered 403(b) Plan going back a few years. I will need to amend 5500s to reflect late deferrals and will be separately fixing an employer contribution error under the IRS VCP program. Easy question - I am not seeing a fee to file with the DVFC program. Is that correct?

Thanks everyone! This has been helpful although not conclusive, which I did not expect it to be. This great aunt and the 3 cousins who have been contacted, do not want to be in charge of filling out any paperwork to establish the estate. I do not want to spend time trying to determine beneficiaries of this deceased participant and neither does the plan sponsor. I also do not feel that it is my responsibility to educate anyone on small estate rules. Does the plan sponsor have a responsibility to find beneficiaries or pass on small estate information? I really like ESOP Guy & My 2 Cent's posts (and possibly Fiduciary Guidance Counsel's post), which seem to suggest that the plan sponsor can do nothing with this account until someone claims the money and then, after five years, if no estate has been established, we could forfeit the money, like we would with a lost participant. Does anyone feel very strongly that the above is not a good solution? Thanks!

A participant dies at age 37. He had no 401(k) Plan beneficiary form on file. He has about $6,000 in his account. In the absence of a beneficiary designation, the plan document states that the death benefit shall be payable to the Participant's spouse or, if there is no spouse, to the Participant's children in equal shares or, if there are no children to the Participant's estate. The participant had no spouse and no children. His parents also predeceased him. There is a great aunt who has indicated that no one will be establishing an estate and no one will be claiming the retirement funds. She had been advised that, as great aunt, she would not be entitled to the money. Instead, it would go to the deceased participant's first cousins (of which there are 14), who either have no knowledge or no intention of creating an estate. What should be done with the money if there is no estate or other beneficiary?

My understanding is that you cannot specifically exclude an HCE from a SEP Plan. What about in the following situation? Wife has a SEP sponsored by her self-employed real estate company. She has no employees, so she is the only SEP participant. She works for her husband's company, of which she and her husband are the only two employees. Her husband is the 100% owner. The two companies are controlled with the wife owning 100% of her company and she is deemed, through attribution, to own 100% of her husband's company (this would not be the case if she did not work for him). I have not seen her SEP document, but I highly doubt that her husband's company is an adopting employer of the plan. So, can he be excluded from the SEP if his company is not a sponsor of the plan? I do not handle SEP plans and rarely need to get involved. Do most of them have language that indicates that employees of related companies will be automatically included, in which case a specific reference to the husband's company would not be needed and we have an issue since he has not received SEP contributions? Thank you!

ETA - I like your though process and, in this case, the church would be happy to hear that they can direct the transfer of the entire plan to a new vendor. If the only reason that a non-church non-ERISA 403(b) can NOT have an employer-directed transfer is because of the ERISA implications, then it makes sense that the church CAN do it. I admit that I am still hesitant. I guess I am unsure if ERISA status is the only consideration. Can 403(b) Plans that ARE subject to ERISA (assume not a church) have employer-directed transfers of entire plans? I am not clear on that either, but, if the answer is YES, then I will feel better about the church plan doing this.

P.S. It is non-ERISA because is a church 403(b).

I see plenty of threads on this question and I see that the answer is NO, an employer cannot transfer an entire plan and that each participant must direct the transfer. Since these threads are outdated, I was just wondering if anything has changed to make it possible for an employer-directed plan transfer? In this case, it is a non-ERISA 403(b) plan, if that matters.

There is no withholding on a direct rollover. Or a plan-to-plan transfer. In both cases, the money would go from one plan to another and there is no taxable distribution. I have no experience with plan-to-plan transfers that seem to be specifically available to 403(b) Plans and am needing to know why this would be more beneficial than the rollover. It is not easier, in this case, as the two separate options are on the same withdrawal form. Any other ideas? Thank you!

An employee terminates from Employer A and starts working for Employer B. They are not related. Both plans allow Plan-to-Plan transfers into and out of the plans. What is the benefit of this participant doing a Plan-to-Plan transfer instead of it just being done as a rollover? Thanks!

After some more thought - I completely agree with you BG5150! The actuary does NOT agree, but certainly would allocate a higher amount to an NHCE (the active one!) if we ask him to do so. Thank you!

A nonelecting church plan sponsors a 403(b) Plan. All employees are eligible and there is one platform provider. Much nicer and cleaner than most 403(b)s! Oone of the pastors would like to have the church start a separate plan with a company dedicated to retirement advice specific to clergy, which appears to have a MEP for church plans. The only reason for this change seems to be that the pastor has personal investments with this company already. The church would like all employees to be able to choose between the new plan and the existing plan. I understand that 410(b) does not apply, but there are still pre-ERISA coverage requirements. Questions: 1) Can each plan exclude employees covered under another plan sponsored by the church? Would it need to be specific as to who is covered under each plan or is it okay to allow participants to choose? 2) If the new plan is set-up, can this pastor move his existing 403(b) Plan assets? There is no distributable event that I can see, but is there a way to do a 403(b) plan to plan transfer? Thanks, Kathryn

One of the employees receiving 2.7% is active and eligible for a PS allocation. The other is terminated, but the last day requirement is waived so that she can receive the 2.7% required to meet gateway. The 11(g) amendment would be for the four employees receiving the 4.5% in PS. In other words, everyone in the "group" receives 2.7%, but then the four employees are bumped up to 4.5% to meet gateway. BG5150 - Is your opinion that this should NOT be done at all and that the employees who have been allocated only the 2.7% in PS should be receiving the full 4.5% so that everyone in the group receives the same PS?

Thank you both! I think 11(g) is the way to go here. The fail safe language in our document allows us to waive allocation requirements for profit sharing to someone receiving a safe harbor, top heavy or QNEC, but does not indicate that we can increase allocations to only one or some of the employees in a group to meet gateway. Thanks again!

I have a client that implemented a Profit Sharing Plan at the end of 2016. The plan document was drafted with the addition of a 401(k) and Safe Harbor feature, to be effective February 10, 2017, as this was expected to be the first pay date from which deferrals would be withheld. The plan sponsor decided to switch platform providers late in the game, requiring all new contract paperwork, and the implementation process in still under way. Now, the expected deferral start date is May 10, 2017. Employees had previously been provided with an SPD and Safe Harbor notice referencing the February 10th date as the date on which they could start deferring. I did not think that we could amend the effective date of the deferrals that was already in a document signed prior to the end of 2016, which left me thinking that this was a deferral failure that was going to be corrected within three months and so I only needed to provide a notice to the employees (there is no match). Questions: 1) The notice requirement under EPCRS for the deferral failure must reference deferral percentages that were to be withheld. Enrollment meetings have not occurred yet so no deferrals have been elected. So, am I going about this all wrong - is this not the way to correct? 2) Is it possible to just amend at this point to change the effective date of deferrals and safe harbor to be May 10, 2017 with no additional notice or correction for the employees? The thing is, I am sure that this happens ALL the time with start-up plans. For a multitude of reasons, the plan may be delayed in getting set-up and ready for deferral submissions or enrollment meetings are delayed. 3) What do you do in this situation where deferrals don't start on the effective date referenced in the plan document? Thank you so much!

A plan sponsor has a Cash Balance Plan and 401(k) PS plan with a 3% safe harbor allocation. The PS plan has a cross-tested allocation with 7 different allocation groups. The plan was not designed to have one group per participant because the plan sponsor is a Partnership and the IRS has stated that this may not be appropriate (separate discussion). The two owners and two employees are included in the CB plan. 4 additional NHCE employees are excluded from the CB plan, but are included in the 401(k) PS Plan. The special gateway is 7.5%. For the 4 employees NOT in the CB plan, they receive the 3% safe harbor plus 4.5% profit sharing to meet this gateway. The 2 employees in the CB plan only need 2.7% in PS to pass testing. This leaves employees in the same PS allocation group receiving different PS percentages (4.5% vs. 2.7%). I would not have thought that this was okay because the 401(k) plan document states that all employees in the same group should receive a pro-rata allocation with the group (i.e. same %). Are there special rules that allow us to give differing % in the same PS group if it is merely bumping up the allocation for some employees to meet the minimum gateway? If we are allowed to give different percentages, does it require an 11(g) amendment? Our actuary says no, but I am not 100% convinced.

I am considering taking over administration for a plan into which one of the doctors rolled his nonqualified IRA balance in a prior year. Is a rollover from nonqualified (not 457) accounts permissible in any 401(k) Plan (or any qualified plan)? I believe the answer is no, in which case, the next question would be - what to do about it? I don't want to recordkeep these assets, so should I just suggest the doctor roll the money back out as soon as possible? Thanks!

Thanks, Mike! That does help!

Yes, that is a reasonable interpretation in your example, but completely different than my situation. We are moving forward with the distributions. The employees will still have a few weeks or maybe more to increase their deferrals to make up the difference, if they so choose. Thanks everyone!

The plan document excludes the fringe benefits for purposes of deferrals. The IRS Fix-It guide is very clear that any deferrals from this compensation should be distributed as excess deferrals. If the IRS has a specific correction, I always do it. And yet, I see your point. Why require these employees to take distributions just so that they can maybe turn around and put the same amount back in from eligible compensation? It seems unnecessary and the end result is almost the same. Still struggling with this one... Any other opinions?

The plan's definition of compensation was the safe harbor 414(s) safe harbor definition that excludes: reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation, and welfare benefits. The plan is deferral only, but deferral percentages were applied to all compensation. As of November 1st, the plan has been amended to be W-2 only, no exclusions and everything is being done properly. I need to fix the error for the period from January through the end of October. The IRS Fix-It Guide clearly states that we can distribute the deferrals that were withheld on excluded compensation and treat as excess deferrals. My question is: If I have these deferrals distributed before year-end, will the employees be able to bump up their deferrals and still reach the maximum of $18,000/$24,000? I am not sure because, if they net the maximum amount into the plan, their W-2 will show deferrals exceeding the 402(g) limit. But is this okay because they will also be showing the distribution of excess deferrals in the same year? Thank you! Kathryn

Thanks everyone!

Thanks! Your suggestion to do 90 cents on the dollar is similar to my 100% of deferrals option, but would give a little less leeway as time goes by and compensation and annual additions limits increase. Is there anyone out there who chooses, instead, to amend the fixed match formula every year? Thanks!