RatherBeGolfing

I'm not sure there is enough information here. In a community property state, property can be owned separately, either because it was one spouses property before the marriage, or because it is treated as separate due to an agreement to treat it as such. Does she have 50% interest under CA law? If yes, then I would say she is not excluded. If no, then she is excluded. Either way, this is a perfect time to amend your plan language to remove any confusion

To take that thought a step further, if you have eligible participants in 2016 but no contribution for whatever reason, the DOL/IRS would still expect a form 5500 right? If a 5500 is required, I don't see how they can possibly say that the plan did not exist in 2016.

I'd say you are correct, the plan is not top heavy for 2017. Playing devils advocate, could the IRS/DOL claim that you established the plan with no contribution in 2016 with the sole intent of avoiding the 2017 top heavy status? Not even sure if that is a winning argument for them though, there is no requirement that you make a contribution during the first year.

More important than fairness, is understanding why it happened and how to prevent it. This type of surprise is completely preventable. This type of situation should have been considered when the plan was created, and it should have been designed to either avoid it altogether or at a minimum make it very clear to the sponsor what they can and can't do in order to avoid a "surprise". Obviously, service providers can only do so much, and sometimes the client completely disregards what they have been told. In any event, it will never be a surprise if there is proper planning from day one. At this point, you contribute what you need to contribute due to top-heavy minimums and you sit down and re-design the plan to prevent this from happening in the future.

No... Not knowing the rules is not an "administrative error". An administrative error would be something like depositing 10,000 instead of 1,000 because you added an extra 0 by mistake. Finding out that you messed up is not an administrative error.

You can't disregard prior service because you did not have a 1 year period of severance (even if that is what the employer wants to do). Because the employee returned from severance within 12 months, he is credited with service from 3/15/14 to 3/24/16, with an entry date of 1/1/16. See Treas. Reg. §1.410(a)-7(a)(3)(vi) (Service spanning rule) (vi) Service spanning. Under the elapsed time method of crediting service, a plan is required to credit periods of service and, under the service spanning rules, certain periods of severance of 12 months or less for purposes of eligibility to participate and vesting. Under the first service spanning rule, if an employee severs from service as a result of quit, discharge or retirement and then returns to service within 12 months, the period of severance is required to be taken into account. Also, a situation may arise in which an employee is absent from service for any reason other than quit, discharge, retirement or death and during the absence a quit, discharge or retirement occurs. The second service spanning rule provides in that set of circumstances that a plan is required to take into account the period of time between the severance from service date (i.e., the date of quit, discharge or retirement) and the first anniversary of the date on which the employee was first absent, if the employee returns to service on or before such first anniversary date.

Bad idea. Also, I don't think the sponsor can force a participant to set up their own account. If the participant does not act, the sponsor will have to. After establishing an account at XYZ because the participant failed to act, you would have to make sure the assets go into a suitable default investment.

No. Making deferrals and directing investments are two separate issues. If investment direction is THAT big of an issue to the employer/plan administrator , they should simply make the plan trustee directed.

I agree with Lou. HC is attributed 60% of company I's 60% which is 36%. Add that to the 40% direct ownership, we still don't have enough to meet the 80% threshold.

Ah yes, gotta love the "here is a document, put some X's somewhere and keep the copy" approach.

Correct. Years prior to 2012 should be submitted using the current year 5500. That is funny about the selection tool, it couldn't have been that much more work to code it to work for pre-1999 years EFAST2 FAQ: Q4 https://www.dol.gov/ebsa/faqs/faq-EFAST2.html

Hey MoJo, This would have been mutual funds. As I recall, the were told that they could do it, but since they never actually went through with it it is possible that it would have been nixed at a higher level. J

I had a situation that was a little different, but it may be helpful. I have a client, a fairly large medical practice with 10+ physicians and about 70 employees. The practice does very well. During a yearly meeting, the physicians asked whether they could pay all investment expenses out employer assets rather than from the investments. They never pulled the trigger on it but we verified that it could be done. We looked into it with the adviser and the record keeper and indeed, there was a way for the employer to get quarterly invoices for the amounts that would have been fees per the expense ratio. The fee would never be deducted from plan assets, and the employer gets to write them off as a corporate expense. I agree with ETA though, I don't think you can do it by reimbursing fees already paid by a participant and not consider it a contribution.

She can get 15%.

Just wanted throw this out there for discussion. Per the Judicial Branch of California website http://www.courts.ca.gov/1037.htm. Obviously this is just what their website says, I didn't look up the actual statutes that would govern annulment, but still... Not sure if that matters here, but if the effect of annulment is that the marriage was never legal, what would be the outcome if a participant who is not married elected to take benefits based on the life of the participant and a named "spouse"? Once it was discovered that this person was never married to the "spouse", would it be treated as a single life annuity or use the original calculation but just pay over the life of the participant? I suspect that no payments would be made to the "spouse" if it was discovered that there was never a marriage.

Just thinking out loud here because we only have some pieces of information to go on. IF the plan requires that a loan balance be paid off by your vested account balance upon termination, they would apply your non-loan assets to pay off your loan. Basically, if you owe $5,000 on your loan at termination, they apply $5,000 from your vested balance to pay the loan off. You are then issued a 1099-R for the $5,000 because it was "distributed" in order to satisfy your loan obligation. You don't get an actual check for the $5,000 because it was used to pay off the loan (and you already have the funds from the loan). This would be reported on the 1099-R as a code 1 if you are under 59 1/2, without the extra L that would be used for a loan default.. The "we can do it when we want" statements are odd though, I'm pretty sure you were talking to a call center.

A code 1 would indicate a distribution prior to attaining age 59 1/2. If it was a deemed distribution, it would have said 1L. You may be dealing with a loan offset.

What does it say in box 7 of your 2014 Form 1099-R?

Look for documentation that was provided when you took the loan. It should be in your loan procedures which was probably part of your loan application. Good luck!

It depends on the plan document. The MAXIMUM cure period is by the end of the calendar year quarter following the calendar year quarter where the payment was missed. As ETA says, a missed payment in the quarter ending September 30 would need to be cured by December 31. Practically speaking, I think most companies would default AFTER confirmation of no payment on December 31, which in this case would be in 2014. I think you can argue that it could be defaulted on December 31 because no payment was made on or before December 31, but I don't think either is necessarily wrong, it just comes down to procedure. Now, a plan document could specify a shorter cure period as well, like your example with a November 30 cure date for a August 31 missed payment with a 3 month cure period (which is less than the maximum cure period)

That is at least an argument you could make. I would probably consider the same argument if it was my client... What if loans weren't allowed at all, but the plan issues a loan amortized over 5 years. The Sponsor does not want to amend to allow loans. What is your correction? It is essentially the same question. You have a failure to follow the terms of the plan. The loan does not exceed the 5 years under 72(p)(2)(B). Without a correction, it is a deemed distribution to the participant. Simply repaying the loan isn't a correction of the failure since the failure occurred when the loan was issued. The simple answer is amend under SCP to allow for loans. I think what you are suggesting (at least in the OP) is that you can: apply the VCP method of correcting a loan in violation of 72(p)using SCP because the loan did not actually violate 72(p), it violated the terms of the plan document. Rev Proc 2013-12 6.02 allows for more than one way to correct a failure, as long as it is reasonable and appropriate under the facts and circumstances.

It is one of those "it depends" answers... In order to use the DOL calculator, you also have to file under VFCP. Otherwise, your lost earnings should be the 1) actual return participant would have earned, or 2) highest rate of return during the period, allocated to all affected participants. Basically, if you use the VFCP calculator and and dont file under VFCP, DOL can come in and say that your correction was insufficient. I believe it is still OK for IRS purposes though. There was a really good article in the Journal of Pension Benefits a few years back that detailed the different steps per the regs. (EDIT: it was the October 2012 issue. "How Much Goes Into Correcting Late Deposits?" by Frank Castrofilippo) The calculator is the easiest step, you just have to go the extra mile with VFCP.

Well, mine was after the merger with Screwem, Goode, and Hart I had a law school professor who was a genius when it came to funny aptonyms on exams. My favorite example was the dentist office of Hurt, Pullem and Yankum.

You do not need to keep 7 years of returned mail (or one year for that matter). Scan and shred away.

Just curious, is that 33 pages in addition to the employee data like Name, SSN, DOB, DOH, etc? Our year end collection is more limited, and is meant to supplement the data we already have for example Our records show that you have an ERISA bond in the amount of $10,000 issued by Dewey, Screwem & Howe SuretyCompany, is this still correct Yes [ ] No [ ]