CuseFan

The employer remits the tax when due then withholds from SERP payments until employee portion is recouped, so it may be that the first few SERP payments don't get paid, depending on the amount of Medicare taxes versus the SERP payments.

what about being acquired and becoming part of a bigger national organization?

those payments are most definitely subject to payroll taxes. even bona fide deferred comp is subject to payroll taxes at some point in time. if this is a structured installment payment buyout then maybe it's not earned income.

Agreed, amend eff 1/1/18 to exclude those employees from the definition of eligible employee, no problem, but you need to do so prior to 1/1 and also notify the affected employees in advance, in accordance with ERISA 204(h), either 45 or 15 days prior to 1/1/18 depending on whether the plan is over or under 100 participants.

you'll need to catch them up at some point because once you hit the five-year mark the remaining balance is a violation/PT, right?

participants can be allowed to purchase their life insurance contracts from the plan (for fair value) - but not sure if you can restructure it that way after the fact. policy comes out - no tax implications because it is a purchase - cash goes into plan/participant account and then distributed out to participant, rollover eligible. that's what you want to accomplish right?

plus the deferral limit is individual calendar year limit, which can result in some weird looking PY 401k contributions - but if SH, testing isn't an issue and if payroll has the proper controls/shutoffs, shouldn't be an issue. having a fiscal year plan helps if you add a second aggregated for testing plan like cash balance, because they have to have same PY to combine for testing.

Whenever I hear of plan sponsors asking about "alternative" investments the first thing that comes to mind is they are looking to somehow benefit themselves and since they don't have enough disposable money to do this on their own outside the plan, or maybe even enough in their own plan account, they try to justify putting employee/participant retirement funds at risk so they can take advantage of this unique opportunity. Unless, and only unless, this alternative investment is prudent for retirement funds and is made solely in the best interests of plan participants (not the owner/plan sponsor) will it be OK. A colleague owned a piece of a racehorse than ran in the KD a few years back, and she ended up with net income when it was all said an done, but that didn't mean it was a suitable 401(k) investment. The fact that an LLC has to be established and the plan could not directly invest in this asset leads me to believe it would not be retirement plan suitable and a big fiduciary mistake.

I can relate - can't decide if it's funny or just makes me feel old when all the "kids" I work with don't get my pop culture references - and way more recent than Beatles. Just yesterday, a reference to Stevie Van Zandt (E Street Band, Sopranos, Lilyhammer) got numerous "I don't know who that is" - you're killin' me Smalls!

If you're testing comp definition for nondiscrimination, the inclusion percentage is the 96.52%.

Yes, the 436 restrictions apply to the accrued benefit in total, not the traditional and cash balance benefits separately, so in this case the $15,000 lump sum is well below the restricted limit.

So if they don't use the software for trust accounting/account balances, forget about testing, what are they using it for at all? Almost sounds as if they licensed the software solely for the purpose of providing the internal controls reports. Yeah, fraud and breach of ethics immediately come to mind. We use spreadsheets with the best of them, but not in place of a valuation system, and not while purporting to use that valuation system. Wow.

Correct, governmental plans are not required to file Form 5500.

it all boils down to satisfying coverage. But if all owners and any other HCEs are in the management plan - and that is a small group - with rank and file employees (NHCEs) in the other plan, you probably won't pass coverage. Having different matches under the same plan that includes everyone still doesn't help because of benefits/rights/features issues. FYI, unless no HCEs were covered, what they were doing in the PEO plan before may not have been fully compliant either, in terms of coverage and nondiscrimination.

The IRS would say it's taxable. That the Employer organized but the incentive is funded solely by participating employees does appear to be gambling more than a wellness incentive. Also, that the Employer organized (which I assume also means collected money and will distribute the "winnings") there is likely a legal tax reporting obligation for the Employer. Now if employees did this on their own, it's an office pool and, tax treatment aside, the Employer has no reporting obligation. Can you picture the discussion with the TPA at year end - Why is John's plan comp $500 less than his total comp when there aren't any exclusions? Oh, those are his winnings from the weight loss contest we had, that's not compensation. And such questions/issues seem par for the course in this venue!

We've seen that "incentive" approach (#1) tried as well. sure, why not entice the participant with a 10%, 20% or whatever "bonus"? it's still cheaper than paying a 40%-50% or more premium the lump sum value. On #2, the issue sometimes is finding any insurer who will write a deferred annuity contract that has all the required plan features, including (and most problematic) a lump sum. Not impossible situation, just very challenging, and often requires requesting extension from PBGC for the distribution deadline because it takes so long to get through this process.

The lump sum death benefit should be the present value of the survivor benefit (or the account balance if a cash balance plan) and has nothing to do with the actual contributions made to the plan to fund the benefit. Generally, the lump sum would be rollover eligible for the beneficiary and if not directly rolled over to an IRA it would be subject to mandatory 20% withholding.

Great points! And as an aside, looking through the judgments listed weekly in the newspaper (you remember those), the majority are to hospitals or other healthcare providers - attached to people without 401ks from which to take hardship distributions. I guess this just reaffirms the importance of having that safety net available, as well as a statement on our healthcare system - but that's another story for another time.

PBGC is very stringent on who they deem missing and liabilities they'll take - must truly be missing and not unresponsive. The pool of insurers willing to write small-ish contracts is limited, those who will write deferred contracts even more limited, and those who will write such for plans with a general lump sum feature are essentially non-existent, especially if the sponsor is in NYS. With all the large and mega market derisking going on, small and mid market plans are finding it very difficult if not impossible to place annuity contracts, that is just the cold hard fact. IRS, PBGC and DOL are aware of the situation but not overly sympathetic. Some advice either the DOL or PBGC provided, informally of course, was for sponsors to go back to participants and inform them that they are unable to purchase a (deferred) contract and ask them to change their election to an immediate annuity or lump sum. This might work if there are just a handful or fewer unresponsive/deferreds, but probably not on a $2M block of liabilities. Not sure where to steer you, maybe smaller individual annuity contracts - we had a client go that route on their own. Just finished, so we don't know how PBGC will view those contracts when they do their requisite audit.

so basically A owns 100% of X and 50% of B - no control group if the other 50% owner of B is unrelated to A (i.e., no attribution issues). yes, X can then have a plan for A independent of anything B does assuming not affiliated service group either. A might have a combined 415 limit if B also has a plan and A is a participant - off top of my head I can't remember if that happens at 50% or more than 50% ownership.

Reimbursing for a down payment already made seems contradictory to an immediate and heavy need as the need has already been satisfied by other funds. However, escrow funds - although dispersed later for taxes and/or insurance may not seem like an immediate need - the bank's requirement that such funds be deposited in order to secure the mortgage does indeed create an immediate and, depending on the locality, heavy financial need that I would consider a hardship item.

I think the failure ended the beginning of the year adopted - I don't think the amendment is void. Also, and this isn't my area so I'm not positive, but certain types of provisions can fall under self correction via a retro amendment - like loans or hardships, etc. right?

Is there a 401k provision, so you have eligibles w/o balances who are considered participants for 5500 count?

We support payroll deduction IRAs. Contact Sean Arnold at BPAS for details. SArnold@bpas.com

Some would say yes, others no - I don't know what IRS would say. Presumably you have an ASD on the RBD, so unless the plan has RASD language, providing any election forms (QJSA notice) after the RBD would technically not be allowed. However, if you find someone after RBD and give them an election and commence timely thereafter and retro to the RBD then I can't see where an IRS agent would give you a hard time. I'd take the position that you're making a corrective distribution and it's not a retroactive annuity starting date.