JustMe

Client recently notified us that they have a 457(b) plan for their executives and they are not sure if they have a Rabbi Trust in place. Their plan was established over 10 years ago. Is there a problem with establishing one for the assets now?

https://www.irs.gov/retirement-plans/fixing-common-mistakes-correcting-a-roth-contribution-failure The IRS link above states that if a participant requested deferrals be withheld as Roth, but the employer inadvertently withheld the deferral as pre-tax, then the employer MUST transfer the erroneously withheld funds from pre-tax to Roth - corrected tax forms, etc. Conversely, if a participant requested deferrals be withheld as pre-tax, but the employer inadvertently withheld the deferral as Roth , then the employer CAN transfer the erroneously withheld funds from Roth to pre-tax - corrected tax forms, etc. Does anyone else agree with the interpretation that the correction is not necessarily REQUIRED when the participant requested pre-tax and the funds were inadvertently withheld as Roth? Since it's not spelled out in EPCRS, I'm not sure how I want to interpret this. The IRS isn't necessarily the best at drafting their materials....

Does anyone know what is required to be submitted for the summary documentation for VFCP filings? I know my client meets the requirements to file summary documentation, but not sure what constitutes summary documentation. Does it have to be authorized by the plan's recordkeeper to reflect that the contributions were deposited and the amounts, or is a report of the contributions deposited to the recordkeeper sufficient?

We have a similar situation in which the employer deposits the safe harbor match each pay period. The adoption agreement and the document provider state that the "true-up" of the safe harbor match is discretionary. However, the safe harbor notice does not mention the timing (allocation period, e.g., payroll or plan year) for the safe harbor match, nor does the SPD. Is this an issue that the employer is not communicating the period for which the match is calculated?

Great, thank you so much for responding John. That is my understanding/interpretation as well.

@John Feldt ERPA CPC QPA - The plan may need to be amended to allow an additional participating employer so that a newly acquired entity may now participate in that plan. I'm thinking that sort of an amendment that changes the coverage population would destroy it, but would appreciate your thoughts. @Flyboyjohn - Unfortunately this group doesn't have the 2 year transition period since the group exceeded the 100 person mark due to acquisitions.

Client maintained a SIMPLE IRA at the time of acquisition of an employer with a 401(k) plan and both plans will remain through the transition period of the end of the plan year following the year of the acquisition transaction. The SIMPLE IRA still only benefits the participants originally eligible for it and the same with the 401(k) plan. Can the 401(k) plan be amended and not destroy the transition period that allows the 2 retirement plans to exist simultaneously through the transition period?

I have a Cycle A IDP filer that submitted the plan to the IRS for DL in the final cycle. Since this restatement pertained to the 2015 Cumulative List of Changes, the document was restated effective 1/1/16. However, it was not executed until January 2017. Any issues? I'm thinking not since the RAP ended 1/31/17, but maybe I'm missing something.

I was wondering if the acquiring entity could join the SIMPLE for the 2019 plan year as an alternative. These are two small entities, so the two combined would not exceed the 100 threshold. I assume since they are now considered one employer under the controlled group, all employees of the employer would be able to participate in the SIMPLE, but wanted to make sure I wasn't missing anything in that regard.

I have a client that acquired a company with a SIMPLE and we are now outside of the transition period and the SIMPLE was not terminated. There is no other 401(k) plan in place yet, but the client wants to start a 401(k) plan as they were not a part of the SIMPLE. For 2019, could the employees (only 4) of the acquiring employer just begin contributing to the SIMPLE IRA? Alternatively, since we are in January, very few contributions have been made so far to the SIMPLE IRA. Should I suggest the client go through VCP and claim an Employer Eligibility Failure for 2019 and state that all contributions cease the day after the NEW qualified plan is signed into place? Is that it? Will the IRS just approve this or will the January contributions be subject to repercussions as a result of the SIMPLE becoming disqualified? Any other suggestions greatly appreciated!

If we could revive this question, I have a similar issue and wondering, since we are in January, very few contributions have been made so far to the SIMPLE IRA and the client wants to start a 401(k) plan. Should I suggest the client go through VCP and claim an Employer Eligibility Failure for 2019 and state that all contributions cease the day after the new qualified plan has been signed into place? Is that it? Will the IRS just approve this or will they consider the January contributions as traditional IRA contributions for the participants and the participants may incur some tax issues with respect to those contributions and the employer loses the deduction on those contributions?

Thank you all for your responses. Kevin C - that was my thought exactly. If we're filing under VCP, it doesn't hurt to ask for an alternative corrective option. Thank you again!

We have a client that withheld deferrals on severance pay over the past several years. The participants have all taken distributions from the plan and most rolled their funds to another qualified plan or IRA. We are currently working on a VCP submission for the client for all other plan issues. For this issue, I believe the correct method is to issue two corrected Form 1099-Rs for the year of the distribution: 1 for the ineligible deferral amount and 1 for the updated distribution amount eligible for rollover; and notify the participant of the issue and that the funds were not eligible for rollover. Any thoughts on other corrective methods to pose to the IRS since we are going through VCP anyway? Suggest the participant will be taxed on the distribution anyway when the funds are distributed from the plan/IRA, so avoid double taxation and not issue the corrected 1099-R that may not prompt a "tax-free" distribution from the rollover IRA/qualified plan?? Any suggestions/insight with personal experience on this particular issue would be greatly appreciated!

We have a client that wants to change the allocation method of their recapture account effective 12/31/2018. Currently the service agreement (not addressed in the plan document) states that after expenses are paid from the account, the account will be reallocated pro-rata based on account balances. We have not yet seen a copy of the 404a-5 disclosure to see if it contains such details. The client wants to change the reallocation method to be based on the investments of the participants and whether those investments generate revenue sharing income. If the allocation method of the recapture account is not included in the initial 404a-5 disclosure, can the employer change the allocation method without a 30 day change notification to participants?

Thank you so much for your response. Yes, this is a very tough topic!

In addition, the governing law in the Trust Agreement states the governing law of the location of the trustee will apply, but wasn't sure if that meant taxation since the unrelated business did not occur there, nor does the plan sponsor reside or have its principal place of business there.

Where a trust/trustee is located in one state, but the plan and its beneficiaries and the unrelated business are located in another state, what state law applies when considering taxation of UBIT?

I know that Fidelity is taking this approach with their prototype document.

Can you confirm that no 4972 excise tax would apply to this situation since it is just a late funding situation that created the nondeductible issue and not an over-funding issue?

Do the new disability claims procedures apply to flexible spending accounts?

Thank you for your response!

Is there a deposit deadline for employer contributions to a governmental 401(a) plan? governmental 403(b) plan? Thank you!

Great, thank you for your help!

How do you count hours for a leased employee who works for 4 different employers that are not related? One provider employer is the employer of the employees and 3 other recipient employers lease the employees. There is a contract that states that the provider employer employs the staff and the 3 other recipient employers pay 1/4 of the employees salaries and benefits. When determining whether the 3 recipient employers have leased employees, do you count all of the hours worked for the 4 entities (they are unrelated)? Or are the employees credited with 1/4 of their hours for each employer? I see that the proposed regs, that were withdrawn, somewhat addressed these questions, but since those weren't enacted, and Notice 84-11 does not address these questions, how do we handle these leased employees?

What are your thoughts on COBRA notice failures that are not willful and are corrected within 30 days, so no excise tax, and still reporting $0.00 excise tax on Form 8928? I am concerned because if we do not file one then no statute of limitations will apply. So I am considering filing the Form with $0.00, but have multiple (many, many) failures. Do you file a separate Form 8928 for EVERY participant that had a failure? Thank you for your help!