CuseFan

Was there a service agreement and were those services paid for?

Yes. I deal with DBPs where the distribution provisions/timing for termination before retirement can and often are different, do you not have those different options in your PSP?

Tentatively I say yes but a better way might be to include such provision in an appendix/addendum.

I don't think you can ignore that prior service or start the vesting clock anew for the new CBP, at least for anyone who was in the prior plan.

Exactly - and what I am telling everyone is that this only works for two types of plans: 1) HCE-only plans that do not need to test and 2) very large plans that can pass ACP testing with the VAT contributions. If your plan(s) is(are) in between, fuggetaboutit!

You and I are partners and trustees of the plan - I terminate and initiate a distribution of my total benefit and leave you with less than your total benefit, are you happy? Is that fair? Even owners and HCEs are entitled to and afforded some protections by these rules.

I think you're OK, and if the deferred bonus does not vest until the end of the 3-year contract and is paid at timely thereafter (within 2 1/2 months or tax year-end), you have a short-term deferral and don't really have to deal with 409A at all.

Yes, your prorated 401(a)(17) compensation limit for the 10-month short plan year would be $237,500. The plan document should have language similar to this in the definition of compensation, as related to the compensation limit: If an Annual Compensation period consists of fewer than 12 months, the Annual Compensation limit is an amount equal to the otherwise applicable annual compensation limit multiplied by a fraction, the numerator of which is the number of months in the short determination period, and the denominator of which is 12.

For a short plan year the 401(a)(17) compensation limit and 415 limit are prorated 10/12. I'm not sure, but I thought a partner's earned income is deemed to all be earned on 12/31, so you don't prorate income for a short year but you limit the income according to prorated limit.

Yes, provided coverage passes, as you note. Also, as ESOP Guy pointed out in responding to another post, such an amendment could create a partial termination. So you kick these employees out of the plan prospectively but may have to fully vest them at 1/1/2022 in whatever account they have accumulated and then track those inactive accounts until there is a distributable event.

So to piggyback Bird - you don't need a separate statement showing all the brokerage account information but do need to communicate those necessary annual items that might otherwise have been on a statement.

Loans are part of the participant's account balance, (usually) just a directed investment, so I don't know how that can be "on the fence" in terms of statement presentation. However, if they get an annual statement on just their loan from some source, you're probably covered. You mention brokerage statements for those fully vested - so you give statements off your system for those not vested but then stop once they're vested? That seems odd. Also, does the obligation to tell someone they're fully vested go away after you tell them once? I don't know, but just throwing that out there as well. As you note, lifetime income disclosures will likely change that landscape regardless.

Correct, not an issue to exclude HCEs prospectively. But if this person was in the plan for one year and created a failure, how did you deal with that? Or did you pass on average benefits but the plan sponsor would prefer not to incur the expense of having to run that test each year?

My position is that we inform the client (on the record for CYA purposes) of the reasonable compensation requirement and that it is up to the client, hopefully with formal input from their accountant and/or legal counsel, to determine reasonableness. If it flies (with or without subsequent scrutiny) then great, and if it doesn't you have the "I warned you/I told you so" in your defense - not that a legal defense is needed. And YES - that is always sound advice!

His TPA is wrong.

I see that. Will be interesting to see how far he gets.

When did compensation and contributions cease? I think that would be the relevant end date for testing.

Not getting in the middle of all you American Leaguers as I'm an NL guy, but when I first saw the new name I instantly thought of the Guardian Angels. I mentioned them to a colleague in his 30's (I'm late 50's) and provided their website and, no surprise, he never heard of them. To my surprise, they're still around. Anyway, instead of the typical baseball cap, the new Cleveland Guardians can wear red berets. Wondering who else remembers Curtis Sliwa & company from the 80's? Among the younger generation the name Guardians more likely conjures up images of Guardians of the Galaxy - maybe their new mascot can be Groot!

The impetus is on the participant to keep the Plan Administrator informed of whereabouts. DOL "aggression" is targeted at missing participants when benefits become due and payable, basically NRA and/or RBD. If a plan had optional early retirement at age 55, it wouldn't have to find and communicate with all TVPs upon attainment of age 55. I'm sorry I do not have a suggestion for dealing with what has already occurred other than "too bad, so sad, now you know why you should make sure we have your updated address." For future reference I can tell you that our window amendments now always have as an eligibility requirement that a participant must have an updated/correct address on file with the Plan Administrator and the PA is not responsible for missing participants/bad addresses - basically a CYA provision.

Plans can and often do exclude non-resident aliens with no US-source income, and those are permitted statutory exclusions (like union, under age 21, etc.). Plans are not required to do so. Could a plan exclude non-US citizens regardless of resident status and US-source income? Yes, but such would not be statutory and would be included in the denominator for your coverage testing. If this population is small relative to the employer that is not likely to be an issue. If the plan sponsor wanted to include such employee(s) in the plan then that is permissible but then they have to deal with the complexities for distributions if any employee is then out of the country when paid. I do not know the IRA allowances/prohibitions in similar instances.

What about using 83 hours in December 2020 for a special 1/1/2021 entry and then going to 12-month 1,000 hour rule thereafter? That might limit (most of) your early entries to full timers. Or 167 in Nov/Dec? Or 250 in 4Q2020? You get the picture.

You can pay an AP immediately if the terms of the plan allow (e.g., an option in the FTW VSP is ability to QDRO in lump sum in any amount at any time - i.e., no limitations, unless you have 436 or top-25 HCE restrictions). IMHO, if the QDRO says AP gets X% of account balance then AP gets X% regardless of the assets and independent of any benefit/account balance the AP has accrued under the plan as a participant. AP may or may not be able to get this distributed immediately, depending on terms of the plan and funded status. AP as participant cannot get her individual account balance/accrued benefit unless employment terminated or otherwise eligible.

Since first year, is there ability (and support in plan document) to pull out excess employer contribution that is not deductible, either on mistake of fact (insufficient compensation) or on the failed contingency that it is deductible? Not sure if/how this works if tax return has already been filed with the excessive deductions.

You cannot exclude solely based on "scheduled to work...." and must include PT et al if and when any such employee completes 1000 hours in an eligibility computation period.

Similar to an article on Mitt Romney years back, again putting Roth IRAs back in the news and framing (again) as an abusive tax loophole for the rich. If they didn't want rich people to shield billions from taxes via Roth, they should have put an accumulation cap and brought back the excise tax on excess accumulations.