CuseFan

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.

Depending on plan provisions you must commence payments in the normal form if participant fails to make election when benefits are payable - either (and most likely) at normal retirement or (if plan deems failure to elect commencement to be an election to defer) the required beginning date. Remember also the statutory commencement language - unless otherwise elected by participant, benefits must begin not later than 60 days following.... Once you commence, participant cannot make a new election unless the plan allows (creates new annuity starting date, haven't seen one that does, outside of dealing with PPA restrictions). The exception being that if you commence in-service RMDs in the normal form you can allow a new ASD and election upon actual retirement, but again, plan provisions must allow. Putting language in the distribution package that clearly says if don't make a timely election then you get the QJSA and are stuck with it forever hopefully provides incentive enough for the participant to respond. I understand that participants do "disappear" but resolution of such and disposition of the benefit should not be procrastinated until the RBD, do it when the first mail comes back undeliverable, then again at NRD. If benefits are due but unable to be paid, have a plan provision that covers. Unless trying to find hundreds of people each year, the cost of internet search tools to do this is minimal.

I'm checking with our IRA product champion on this, we might have a solution, but he's on vacation until tomorrow.

Depending on what provisions were amended, you could file for a document failure under VCP and ask IRS to allow the retroactive application, especially if the plan was operated in that fashion. However, if the amendment served to lower benefits or appears to favor HCEs, then the chances of that diminish.

As an aside, note that DOL has an initiative to make sure that plans are commencing benefits timely - i.e., that deferred vesteds are given opportunity to commence at normal retirement date, so waiting to try to locate missing participants when their RBD rolls around may not fly as a valid excuse in the future. This seems more of a DBP issue, but paying out accounts at NRD unless the participant defers is also a DCP issue. Personal opinion, since all ERISA plans are required to distribute annual notices of some sort to ALL participants, there is no reason that missing participants cannot be identified in a timely fashion and then search methods undertaken so that benefits can be paid when due.

Agreed - if you can fund while waiting then is the waiver really needed? The key is to able to demonstrate that the hardship necessitating the waiver is temporary and the prospects for recovery and making future contributions, including the amortized waiver payments, are favorable. if a waiver just postpones the inevitable distress termination (as noted by kc) and increases PBGC liability, then it won't be approved. The resulting funding deficiency (if contributions not made and waiver rejected) will save the contribution cost but not the excise tax, which can jump to 100% in year two. Finally, the user fee and the administrative costs for a funding waiver application are not insignificant, so all told, I would recommend applying for a waiver only if there was a high chance for success based on all the facts and circumstances. it is not the type of situation to test the waters to see what happens, in my opinion.

if this is contemplated to be offered as a fund in which rank and file participants can invest then I would raise the fiduciary red flag. If this is an owner only plan, go for it, I've seen worse over the years.

Maybe it's just on d-letter application questions, but all the IRS requests for information I've received say you can fax if it is less than 20 pages. For an agency that wants as many tax returns as possible to be paperless (e-filed), the IRS's Employee Plans division does not seem to be following suit.

check your spd or ask your plan administrator.

i believe IRS safe harbor definition says to repair damage to your principal residence but does not specify it has to be caused by a natural disaster. if failure to secure these repairs will make your residence uninhabitable and result in "eviction", you might be able to get some documentation from the local codes officer to that effect which might be sufficient for your Plan Administrator. Good luck.