CuseFan

We've set up a few of these with advisors - our VS documents allow for after-tax voluntary contributions. Is the intent to distribute after-tax amounts annually and roll into a Roth IRA? Because that will incur annual distribution processing and reporting fees in addition to normal annual administration.

Thanks people. New comp/cross-testing doesn't work well with the demographics. Two separate plans to cover 5 people isn't cost effective. Who would have thought it'd so difficult for a doctor to provide benefits for employees which he doesn't have to provide! Maybe just giving the <1000 people a bonus they can put in an IRA if desired will be sufficient for him.

I found this answer - yes - and it looks like my document will not allow an integrated formula for non-excludables and something different for otherwise excludables. I could probably exclude the <1000 hour people from PS but add a 401(k) provision with immediate entry for current employees and then they are entitled to 3% top heavy. Any other suggestions?

Background: I have a relatively young doctor who has one older >1000 hours employee, another older <1000 hours employee, and two younger <1000 hours employees. Already has max 401(k) elsewhere (no CG, ASG or 415 aggregation concerns), so looking at doing PS only and getting $56k max. Including all and cross-testing doesn't work well because only one of the two younger employees are substantially younger than the owner. The one >1000 hours employee is fairly low paid, so an integrated formula at the lowest threshold, excluding the <1000 hours people, works very well. HOWEVER - and hold onto your hats because how many times have you seen this with a doctor - he wants to include everyone. In that scenario, whether integrated or cross-tested, the contribution rate required for employees is substantial, not an issue with one low paid employee but a different story including everyone. Questions: I know I can include in the Plan and essentially carve out from testing the <1000 hours people as otherwise excludable employees, but can I have the integrated formula for the >1000 hours people and something else, TH minimum or greater, for the <1000 hours people? If the only way to do (or mimic) this is individual rate groups and testing on contributions with permitted disparity, must I use the SSWB? I assume I cannot arbitrarily pick something lower even if allowed formulaic if designed that way, but wanted to confirm. Any other thoughts are appreciated.

https://www.lordabbett.com/en/perspectives/retirementperspectives/how-to-reject-retirement-account-inheritance.html Check this out. There was also a long BL conversation on this back in 2009. Regarding getting the mother to complete required paperwork, the following encouragement should do the trick: Mrs. X, under the terms of the ABC Plan, you are the default beneficiary and your son's death benefit must be paid to you unless you take immediate formal actions to reject the benefit. Note that if you fail to properly and timely complete these actions, the Plan will issue payment to you as required. Also please note that the distribution will be reported to the IRS as a taxable payment to you and your decision to cash or not cash the check will not impact such reporting or tax treatment. (and you can provide a copy of the recent Rev Rul that states as much) That should pretty much guarantee she either completes required paperwork or changes her mind and accepts payment. And then the plan must move on to the sister, regardless of what the mother says.

One might think the existing plan actuary would be in the best position to do such a study, having the data and first hand knowledge of the plan's experience in terms of mortality and other relevant factors. However, might that actuary also be conflicted and predisposed to endorse the status quo? If the actuary was originally involved in helping the sponsor determine the AE assumptions or never commented on their potential lack of appropriateness over a protracted period or simply doesn't want to deal with the legal requirements and system changes necessary to implement a change, that is a possibility. Might an outside actuary be predisposed to find issues that discredit the incumbent? I would hope not, but in either case is there total independence and unbiased determination? I don't know if there is a right answer or a best practice, I only know there are lots of questions, and it's not only mortality but mortality and interest. Depending on the size of the plan and the desired comfort level, as well as cost concerns, maybe the best alternative is for the incumbent to run the study and, if the actuary says everything is just fine as is (and as is has been in place for 20-30 years or more) without further comments, clarifications or suggestions, then engage an outside actuary for a second opinion.

or Dear Agent Montoya

As these knowledgeable practitioners know very well, there is often a wide chasm of warnings between "can" and "should".

seconded

Agree, and I was surprised as many others I'm sure, that they even needed to issue this ruling for clarification. The clarification that was/is still needed, and the question has already been raised, is how is this all treated and reported if the check was not received for whatever reason - person moved w/o forwarding address, is incapacitated in some way (hospital, nursing home, etc.)? And unless you incur the expense of certified return receipt mail (probably a best practice) how can you prove the person received the check?

Thanks for all your wisdom and happy retirement! And for resurrecting great memories - my old world German grandmother made those, they were awesome, and she lived to almost 103 (must have been the cookies!), so wishing you that quality time with your mom. Best of luck!

It's not clear exactly what you are asking or the general context of the question. You mention deferred commencement, retroactive annuity starting date, and required minimum distributions. Your plan should have clear definitive language regarding all of these and your vendor's software solution should not permit anything inconsistent with those provisions - but you should start with your vendor.

You can have a SEP and a qualified plan but cannot use the IRS model SEP (or whatever the proper description) and must use a provider SEP document, the terms of which allow for sponsorship of another plan.

No, you are not crazy but that is exactly the proper accounting treatment (it is still a participant loan and a plan investment, just not a participant directed/segregated investment). This was how all loans used to be administered before the days of any participant investment direction (for those of us old enough to remember). That is also a primary reason for the long standing requirement that the loan bear a market rate of interest.

Exactly. Plan should either have SoB provision (and notice provided accordingly) or the plan should provide for the automatic commencement of benefits if/when actuarial increases would otherwise cause benefit to exceed 415 limit (which is a standard in the pre-approved plans I've seen and we use).

I believe the requirement is you cannot contribute to a SIMPLE and a qualified plan for the same tax year, so I don't think 401k needs to formally terminate, but why maintain, file 5500's, etc.?

Yes, in general your understanding is correct.

A simple non-actuarial general response is that yes, to the extent asset under performance results in the plan being under funded then the employer will be responsible for additional contributions, but on an amortized basis (pay off the shortfall over time) rather than an immediate dollar for dollar requirement. As noted above, there are a lot of moving parts and actuarial calculations and other experience related items like forfeitures that enter the equation.

Exactly - it clearly defines the contribution amount/percentage to which everyone is entitled. Regarding nondiscrimination, you may need to test, but that doesn't change the contribution allocation obligation because it's a MPPP, and any failure would need to be addressed via 11g amendment (or plan failsafe provision) and NHCE increase.

Yeah, was going to mention that as possibility as well - good call - but then you have to treat anyone else coming from X in the future the same way, unless you give the amendment limited window period.

Sure, why not?

So a 3% SH plus a 10% match? I would be asking/checking if they really need to be a SH plan with a match like that and with up to 13% available/possible for employer contributions, are they as efficiently designed as they can be - subject to employer objectives of course. I thought you had to ACP the entire match, but I don't do that testing so I'm not sure.

rather than amend and allow in by name, maybe consider something like PAs hired between X-Y, or similar. comes across more like satisfying a business need rather than catering to an individual employee. but purely semantics.

If A has no assets or liabilities or such is being liquidated/settled and A no longer exists as an entity, and then the former employees of A become employees of B, then hard pressed to say a merger, but is that truly the case? If there is equipment and/or a book of business/patients that are transferring to B then more likely a merger.

Just had this conversation with a colleague but in the context of a single employer plan, so not sure if requirements are the same. Yes, you generally must provide updated SPD to all participants but there is an alternative manner of compliance with respect to deferred vested and retired participants. If you had provided them with the latest SPD and subsequent SMMs at the time of separation or commencement, then you can provide them with a notice that the SPD has been updated, and they can request a copy (at no charge), but that their benefits were determined on the basis of the terms as presented in the prior version of the SPD/SMMs which they received. See 2520.104b-4 Alternative methods of compliance for furnishing the summary plan description and summaries of material modifications of a pension plan to a retired participant, a separated participant with vested benefits, and a beneficiary receiving benefits