Ron401k

For a really large plan, especially a MEP or PEP, forcing RMDs earlier than required for deceased participants is attractive. Managing all of the different types of beneficiaries and timing requirements can become a challenge in a really large plan. So many participants fail to designate a beneficiary, and that results in a lost participant account. The big question is whether a plan document dictating an RMD earlier than 401(a)(9) causes the amount to be ineligible for rollover. That surely can't be ok, as it is not in the best interest of the participant/beneficiary. If the RMD is paid our earlier than required by 401(a)(9) it seems appropriate to apply mandatory withholding and assume the entire payment is rollover eligible. Appreciate further feedback and comments on this.

Single employer plan is merging into a PEP. If mid-plan year, important to make sure there are no benefit cutbacks. Important to make sure all protected benefits in the single employer plan carry forward to the PEP. Single employer plan would need to file a final Form 5500 and report that all assets transferred to another qualified plan. Assuming HCEs and keys benefitted under both plans offered by the same Employer, all testing would be as if one plan for the entire plan year (required aggregation). I'm not sure if the pre-approved document providers' software offers amendments to document the merger of a plan into another, but you'd want a solid paper trail on what happened to the prior single employer plan (why did the CODA stop for example). I don't see how anyone could argue that "terminating" the single employer plan is appropriate. I'd consider the PEP a successor plan to the single employer plan, thus wondering how the single employer plan supported distributable events (which is what the article above seemed to suggest).

Currently we still require documentation to support the financial hardship, and are told by newer participants "I didn't have to do this at the last place I worked." Here is what we see in a 150k+ participant plan. Participants with no intention to save for retirement, defer to get the match. Then, several times a year claim financial hardship to prevent eviction AND can produce a valid eviction notice. As a very large employer it is a challenge to question this behavior, as we would be viewed as questioning an employee's integrity. We expect to see more of this if we move to deemed hardships (self-certification) and have set system warnings for participants that take more than X hardships within X months, to then request supporting documentation. Despite our best efforts, if we are not careful, 401(k) plans will become more and more like personal bank accounts, with a nice ROR if there is a match!

The pre-approved plan document we use has language in the basic plan document that a QNEC to pass nondiscrimination testing, whether or not a discretionary QNEC was elected in the adoption agreement, can be made. Generally, you wouldn't apply any accrual requirements (LDR, 1000 hrs) to a QNEC for the sole purpose of passing ADP/ACP.

Took over a plan without knowing there was a life insurance asset. Prior bundle provider did not disclose this asset on their statements/reporting. We discovered the asset while trying to prepare the 2016 5500 and realized we were short over $1M in plan assets. Concluded that the life insurance asset was rolled into the plan in 2015, and it appears to be an owner's life insurance policy, it is in the name of the plan and appears to have a $90,000 loan against it (not being repaid). Prior document had no indication that life insurance was allowed as a plan investment. Trying to decide if we want to keep the plan admin business or let it go since we don't have experience with life insurance as a plan asset. We can learn, but do we want to? Is the $90,000 loan an issue? Any guidance is much appreciated.

Most TPAs use an industry recognized plan document service provider, which allows them to "purchase" the use of their IRS pre-approved 401k plan document. Examples of providers are Sungard Relius, ftWilliam and Actuarial Systems Corporation (ASC). ASC also offers great webinars on all things 401k, including plan design. ERISApedia.com also offers webinars, often free of cost. Avoid the "safe harbor plans aren't subject to testing" trap. Safe harbor plans offer automatic satisfaction of some of the required nondiscrimination testing, but not all. Coverage testing is the most important test, and often overlooked. Beware of controlled groups of companies - companies with common ownership. Regulation requires companies with specific common ownership to be treated as if they were a single company for purposes of tax-advantaged plans. 401k plan administration is complex, but very interesting and rewarding. Good luck!