Luke Bailey

OK. So first, once you have rung the Roth bell within the plan, it stays rung, i.e., you permanently have a Roth holding period dating back to first day of plan year of first Roth in that plan. See 1.402A-1(c). Second, you can't roll from a Roth IRA to a designated Roth account in an employer plan, even if the amount in the Roth IRA came from the plan you want to roll back to. See 1.408A-10, Q&A-5.

Larry and BG5150, I agree with you, which is why I prefaced my remark with, "If the plan document really defines compensation for plan purposes as only w-2 employee wages...." Should have added, "big if."

If he terminated on 12/31/2015 the amount he received in 2016 was either severance or pay for work done in 2015. If the former, it was not 415(c) comp and could not be deferred. If the latter, it was a deferral for 2015, not 2016.

I thought if you start the year as a safe harbor, then except for certain exceptions in 1.401(k)-3(g) and the Notices (and switching from a matching to nonelective safe harbor does not seem to be one of the exceptions), you couldn't fall back on ADP or ACP. See 1.401(k)-3(e)(1) second sentence. See also Section II,B, second sentence. There are rules in 1.401(k)-3(g) for exiting a safe harbor match if you are under economic stress or your plan year notice contained require verbiage, but here they have apparently amended the plan to change from one type of safe harbor to another.

If the plan document really defines compensation for plan purposes as only w-2 employee wages (which question seems to say), I don't see how the 5%+ owner can participate. Would be excluded from coverage. (If the plan really defines comp only as W-2 wages, then presumably also defines "eligible employee" in a way that would exclude self-employeds.) Anyway, 5% owner so HCE, so exclusion would not hurt for minimum coverage.

I'm not sure I completely understand your question. Are you saying the participant terminated employment from company A, took a complete distribution from company A plan ,a portion of which consisted of Roth money, suffered a forfeiture of part of his other contributions, rolled the Roth money to a Roth IRA, and now wants to roll Roth money back into your plan to buy back the forfeitures, but not the same Roth money he/she rolled to the Roth IRA? Is the roll-back Roth money coming from a designated Roth account in another 401(k)?

The deduction should be taken by the company that actually pays the match, which begs the question of who pays. Any plan document that allows adoption by multiple companies, whether in a controlled group or not, needs to have a provision that says which company pays whose contributions. If they file a consolidated return, the location of the deduction shouldn't matter, but unless they have identical ownership who pays for whom will make at least some difference to the shareholders.

My experience is the same as ERISAAPPLE, at least in a case like this where what you are asking for is ratification of having given more money, on a uniform and consistent basis, to NHCEs, based on a CBA.

I work on these sorts of transactions all the time, but have only rarely had to follow up after closing. Does not seem to be a problem. Although your facts could differ, based on experience there will likely be a corporate shell only, with no employees, but one or more shareholders and one or more directors. The corporation will usually stay in existence for awhile to wind up its affairs, of which the 401(k) is only one. The corporation will receive the funds from the asset sale and there may be accounting and tax issues before the liquidation proceeds can be paid to shareholders. Usually the former employees want their distributions pretty quickly, so that would be a source of pressure. And the buyer will want the employees to be happy, so that would be another source of pressure to get it done. Most states' corporate laws provide that the corporation stays in existence so as to have authority to wind up its affairs even post-liquidation. There is IRS guidance (a Revenue Ruling if I recall) that states that you generally should wind up within 12 months unless that is not administratively feasible. But you also have fiduciary issues, e.g. fees and control and oversight of investments or investment choices, so the sooner you can liquidate the plan, the better.

Good to know about the pre-approved plan docs, and it makes sense in some ways, but I think jpod's comment above is accurate and describes what is likely the surer (albeit more resource- and cost-intensive) practice.

Using one document for both is common practice. If the verbiage is going to be the same (which it typically will be, because employers are very wary of presenting medical benefits in language that in anyway departs from the plan language, and the "plan" language, which typically comes from an insurer (whether as insurer or ASO) is often opaque, but written conversationally), why have two documents?

I have no hands-on with anything this late, but I guess in theory you could, provided the contribution passed 401(a)(4) for the prior year, and the contribution and allocation of it was consistent with the plan document in that year. Assuming that you are not allocating an excess contribution that was actually made in or, in a timely fashion, for the allocation year, the deduction will not be in the allocation year return, however, e.g. by way of an amended return, but rather on the return for the taxable year in which made, and the limitations under 404 will also be based on current year facts. Also, the amount will be an annual addition for the current year for 415(c) purposes. See 1.415(c)-1(b)(6). If the money actually went in and you're trying to get rid of the excess, you might run into a conflict with the nondeductible contribution provision and other issues. Actually, I'm not 100% sure you can do this. The devil is going to be in the details for sure.

I would like to add a couple of things that I don't think have been covered. First, as far as I know, the IRS's position is that the CBA is not part of the plan doc, and therefore you have a qualification (not a labor law) problem if you follow the CBA and it is inconsistent with the plan doc. I can't off-hand recall a regulation or ruling (there may be a court case) that specifically says that, but I believe it is the IRS's position and that would be the most straight-forward reading of 1.401(a)-1 written plan document requirement. Second, in my experience, the provisions of CBAs dealing with retirement benefits, if they deal with a single employer plan, are almost always written too broadly to actually be administered without being embodied in plan language that adds details, like what "pay" means, what the applicable entry date is, etc.

If I understand you correctly (i.e., A owns companies X and Y and now B will own Y, and A and B are not related), then yes, the plan can either continue as a multiple employer plan (see sec. 413(c) and regs thereunder), which for a variety of reasons most employers don't want to do, or X could cause the existing plan to spin off the part of itself attributable to the Y employees, or vice versa, and following that the employers could amend or terminate their separate plans. For a termination you would need to navigate the 1.401(k)-1(d)(4) rules, but that should be doable.

Seems like it could have been a BRF issue or a plan amendment issue, but turns out to an "Additional rule." Good thing you kept on looking!

I certainly would agree with you, Peter. As Mike Preston's earlier response alludes to, there may be a few instances where a DC plan does not generally permit a distribution before attainment of a stated age, with disability being an exception. In such a case, perhaps the benefit is contingent on the plan administrator's determination of disability, so the 503 regs arguably could apply thn. However, in the vast majority of cases, the benefit is payable on separation from service, and that's the reason for the distribution. It's just that the participant may have separated from service because he or she was disabled. So the benefit in that case is not contingent in any way on a determination by the plan that the participant is disabled. The issue of disability only arises because the plan administrator may need to consider it in connection with filling out a government form. Either way, the benefit will be paid. Also, I think that in filling out the 1099-R the plan administrator is really testifying to the IRS, to the best of it's knowledge consistent with the expectations regarding due diligence regarding the accuracy of the form's completion. The plan administrator is not making a determination that the individual is disabled to the point that he/she cannot pursue any occupation (which is what 72(m)(7)).

Agree with those who say plan doc governs for plan qualification purposes, but would point out that that does not affect the fact that if the plan doc gives less and you follow that (which in theory you must for IRS qualification), you have a breach of the CBA. If (as is likely) this goes back to a year before the current plan year, you need to go to VCP, which will likely be sympathetic. This is not one of the plan doc fixes that qualifies for self-correction under 2016-51.

This is not a BRF issue but a 1.401(a)(4)-5 issue. You should find what you need there.

The IRS did see this and tried to block it years ago. The accountant would be part of the equivalent of an affiliated service group with the manufacturer as a "leased owner" if proposed reg. sec. 1.401(o)-1(b) is ever finalized. Don't hold your breath. There are, of course, not even proposed regs for 414(m)(2)(A) and (B), but for A-orgs and B-orgs the statute seems clear enough. 414(o) by definition doesn't work without regs.

Please confirm that the "disability benefits" we are talking about in DC retirement plans are accelerated vesting (if in the plan document) and waiver of last day of year requirement (again, if in the plan document). If there are other disability benefits in DC plans, I would like to know. Thanks.

Just to make sure we're all on same page, the "benefit" is going to be, although not required for qualification, accelerated vesting if you leave on account of disability, and a relaxation of a last day of year requirement for an allocation, right?

Frustratingly, neither the old or new reg defines "disability benefit." However, tucked away in the preamble of the new reg is the following footnote 3. It seems unlikely that many 401(k)'s or other DC retirement plans will have disability benefits: A benefit is a disability benefit, subject to the special rules for disability claims under the Section 503 Regulation, if the plan conditions its availability to the claimant upon a showing of disability. If the claims adjudicator must make a determination of disability in order to decide a claim, the claim must be treated as a disability claim for purposes of the Section 503 Regulation, and it does not matter how the benefit is characterized by the plan or whether the plan as a whole is a pension plan or a welfare plan. On the other hand, when a plan, including a pension plan, provides a benefit the availability of which is conditioned on a finding of disability made by a party other than the plan, (e.g., the Social Security Administration or the employer’s long-term disability plan), then a claim for such benefits is not treated as a disability claim for purposes of the Section 503 Regulation. See FAQs About The Benefit Claims Procedure Regulation, A–9 (www.dol.gov/sites/default/files/ebsa/about-ebsa/ our-activities/programs-and-initiatives/outreach- and-education/hbec/CAGHDP.pdf).

No retirement deductions are taken for partners on the 1065 or K-1's. Only by partners themselves on 1040. Also, it's all self-employment income, Roth and non-Roth, which is what the plan doc will use for non-W-2 participants.

See 4.05(2) of Rev. Proc. 2016-51, then go to App. B, section 2.07. If this goes back 20 years, I am sure it is significant. You need to meet all the requirements of 2.07(3) (e.g., of 401(a), such as exclusive benefit, nondiscrimination), and your included group must be predominantly NHCE. 4.05(2) says: (2) Availability of correction by plan amendment in SCP. A Plan Sponsor may use SCP for a Qualified Plan or 403(b) Plan to correct an Operational Failure by a plan amendment in order to conform the terms of the plan to the plan’s prior operations only with respect to Operational Failures listed in section 2.07 of Appendix B. These failures must be corrected in accordance with the correction methods set forth in section 2.07 of Appendix B. Any plan amendment must comply with the requirements of § 401(a), including the requirements of §§ 401(a)(4), 410(b), and 411(d)(6), to the extent applicable to the plan. If a Plan Sponsor corrects an Operational Failure in accordance with the approved correction methods under Appendix B, it may amend the plan to reflect the corrective action. For example, if the plan failed to satisfy the ADP test required under § 401(k)(3) and the Plan Sponsor makes qualified nonelective contributions not already provided for under the plan, the plan may be amended to provide for qualified nonelective contributions. SCP is not otherwise available for a Plan Sponsor to correct an Operational Failure by a plan amendment.

Stash026, I think your first question is did the error cause a default, e.g. did no payments occur for a period an not caught up by end of next calendar quarter? The fact that default occurred because of the employer's error generally won't make a difference. If the error continued long enough that there were actual defaults, then you would need to correct the defaults under Rev. Proc. 2016-51. If this was caught quickly enough that there have been no defaults, then I think you just need to have some sort of communication between plan and participant showing how the loan was reinstated and caught up and issue corrected 1099-R's.