RatherBeGolfing

Like BG, I suspect they are referring to a specific unallocated account, not all unallocated accounts. 6.06(2) is pretty clear that the unallocated excess contributions must offset contributions, and that no further contributions can be made until exhausted.

As a follow up, how do you treat the assets(contributions) in the unallocated account for deductions? I assume that since they were never truly allocated contributions, they would be deductible in the year when they are finally allocated.

Are they making any other ER contributions until they make the match contribution next year?

How? It was ER money that was deposited, why shouldn't they get to use it?

Yes. 6.06(2) uses the language excess allocation adjusted for earnings so the interest should be used to offset contributions as well.

That makes sense since it isn't actually forfeiture, just an unallocated account. Which would also be why it cannot be used for fees... Thanks!

I think that answers my follow up. Thanks BG

As a follow up, the unallocated account would not have the same restrictions as a true forfeiture account, correct? What I mean is, if the plan is deferral and safe harbor only, and $5,000 was deposited and removed, can it used to fund safe harbor contributions?

I am a little unsure on this one to be honest. I think BG is correct that it has to be used for contributions and that no further contributions can be made until exhausted per 6.06(2).

So never taken from EEs pay but deposited from Employer funds? In that case, I would move both the deposit and associated earnings to forfeiture and use for future contributions or fees.

What actually happened here? They reported too much or the HCE deferred too much? Two very different scenarios. If the HCE deferred too much the excess and interest are distributed and reported on form 1099. If they simply reported too much, there would be no contribution or interest to correct right?

It tends to be an "expensive" plan design so it doesn't work for most of my clients. I have never come across a situation where the rank and file employees did not increase deferrals when going from a 3% SH or regular SH match to a tripple stack. It never falls in the "this is how much you save if participation stays the same" column. The clients who DO use it fall into two categories 1. The client who is willing to pay a premium to avoid giving something for nothing. 2. The client who is willing to give more to those who do more for themselves. I have several clients in both categories and they are well aware that they could be paying less and still max out. the last client I had who switched from a SH Match + integrated PS to triple stack match went from a handful employees deferring to all employees deferring at least 5%. Sponsor is happy, employees are happy, adviser is happy. Not my average client but they do exist.

I agree, this would generally be considered 2016 pay and contributions. That said, it is still possible for a plan document to include "post year end compensation" in the definition of comp. In my document (if elected), Post Year End Compensation means amounts not paid during the year earned solely because of the timing of pay periods and pay dates provided these amounts are (a) paid during the first few weeks of the next year and (b) included in Compensation.

I agree with the above. That said, I have been able to get the DOL to accept a combination of their calculator and a spreadsheet. It has probably been 5 years since I did it that way so I'm not sure if they would still accept it, but it may be worth a try. For example, lets say you have 100 participants who deferred and you have one late payroll. Rather than doing 100 individual calculations,you do one earnings calculation on the entire amount and use a spreadsheet to distribute the lost earnings based on each participants "share" of the late deposit. The result can be a little different from one by one calculations due to rounding, but it is minimal and to be on the safe side you can always round up so that a participant will get a fraction of a cent more rather than less.

I don't think so. OPs plan allows for self direction. It allows for SDBAs (it actually requires it), and it allows for the participants to use a brokerage account other than the default brokerage account. At this point, the BRF are available on a non-discriminatory basis, because they all have the same opportunity (stay with default or go elsewhere). The option to select a brokerage firm other than the default is the feature, not whether Brokerage XYZ will take on Participant A as a client. What would cause a BRF issue here is if the option itself is restricted. For example, If staff are only offered the default option and the owner is offered a non default option would be a problem. Similarly, If there was a minimum balance requirement in order to have the option to use a non default broker, those employees employees with an insufficient balance would be treated as not having the option available.

I agree. My document simply states "The Company shall notify the Plan Administrator in writing of the amount of contributions allocated to each group. anything that meets that requirement should be sufficient.

In a nutshell, yes. Some of my clients will let a participant go where ever they like. I don't like this policy and caution them about their responsibilities and duties. It is still their responsibility to make sure that the broker the participant wants to use is appropriate, that the fees are reasonable, etc. Most of my clients will review a participants request on a case by case basis and it usually isn't an issue because most participants will stay with the default even when they can go elsewhere.

I agree with ETA, the rules are very clear. Do some less honest practitioners disregard rules because their clients don't like the end result? Sure. Have I lost clients/prospects because I refuse to break the law? Sure. If you are finding yourself in a position where you are contemplating breaking the law or intentionally overlooking regulations in order to obtain a more favorable (and incorrect) result for your clients, it is time to take a serious look at your practice and why you are struggling.

I have plenty of plans like this. It is a bit of a different animal from working with platforms but it isn't uncommon. I don't see any issues with how the accounts are set up (name of the trust, FBO, availability of the adviosor, etc.) So it appears that the only concern here is that while the rank and file have an FBO account with XYZ brokerage, the owner has an FBO account with ABC brokerage and you want to make sure that all participants are given the opportunity to go outside of XYZ brokerage. Most of our communication includes a simple section regarding SDBAs such as "please contact John Doe at 867-5309 for more information". Each plan then has its own procedures that controls the when/what/where/how.

What does the service agreement say as to the service provider's responsibilities? Right or wrong, the employer has made the decision that this is no longer an employee, which has created a severance from employment. The service provider should caution the employer about the possible ramifications if there is a determination that a severance of employment did not actually take place, and should recommend that the employer seek a legal opinion. Beyond that, I don't think the service provider owes a duty to investigate the employer-employee relationship.

I would say the SH could be funded after the sale and after the resolution to terminate. In order for the plan to actually terminate, the safe harbor must be funded and distributed. But I agree that the funding of the SH would not hold up the sale or the merger.

The responsibility would remain with the seller unless the purchasing company agrees to take on the sponsorship and liabilities of the seller's plan.

Can you execute a resolution to terminate prior to making the required contributions? Sure. You still have to fund and distribute the contributions prior to filing the final 5500 though...

Yep. It annoys me to no end. And try having this conversation with one of their screen readers in "customer service" and see if you have any hair left on your head when the call is over...