ERISAAPPLE

I am reading the regs again, and it seems to me if an employer contribution is actually made during the stub period in the calendar year after the end of the non-calendar year plan year, that contribution counts, regardless of the effective allocation date. Using the same example above, but assuming a 10/1/2016 to 09/30/2017 plan year, the 401(k) contributions made from 10/1/17 to 12/31/17 are allocated to the plan year beginning 10/2017, but they are still included in the account balance when calculating the RMD due by 12/31/2018 (assume this is not the first RMD). If the employer makes a profit sharing contribution on 11/15/2017 that is allocated as of 09/30/2017, that profit sharing contribution must also be included. That contribution is not optional. If the employer makes a profit sharing contribution on 12/15/2017 that is allocated as of 12/15/2017, that contribution must also be included in the 12/31/2018 RMD. If the employer makes a profit sharing contribution on 01/15/2018 that is allocated as of 10/1/2017, the inclusion of that amount to calculate the RMD due by 12/31/2018 is optional. And finally, if the employer makes a profit sharing contribution on 01/15/2018 that is allocated as of a date after 12/31/2017, that amount cannot be included in the calculation of the RMD due 12/31/2018. Does this seem to be a reasonable interpretation of the regs? What about a contribution that is made in 2018 but allocated as of 09/30/2017 or earlier in the plan year? I am thinking that amount must be included in the calculation for the 12/31/2018 RMD, because it was not allocated as of a date after the valuation date.

Thank you. That is good point, Tom Poje, about how the distribution would be calculated.

How do you calculate an RMD from an individual account plan that has a non-calendar year plan year and uses pooled investments? Assume the plan has an 09/30 plan year and gets a valuation only once year on 9/30. The regs suggest you take the account balance as of 09/30. Then you add contributions and forfeitures allocated from 10/1 to 12/31, and subtract distributions during that same period. For pooled investments, it is as simple as taking the 9/30 account balance, adding the 401(k) contributions (and forfeitures, if any) from 10/1 to 12/31, subtracting any distributions, and that is the value that gets divided by the life expectancy? What about the earnings from 10/1 to 12/31? My read of the regs is they are not picked up until the following year.

Card, Good point.

Yep.

On call is w-2 as well.

Under the safe harbor rules, everyone who is eligible to defer is required to get the safe harbor contribution. If they do not, you don't have a safe harbor plan. You can disaggregate the otherwise excludible employees, and apply the safe harbor to one disaggregated plan and the ADP to the other disaggregated plan, but that seems to be not what is happening here.

The QJSA does matter. You have to get the waiver and spousal consent to make the distribution out of the plan. Once the waiver and spousal consent are obtained, and the rollover is finished, then that money is subject to the terms of the new 401(k) plan.

What is a non-producing firm? Never mind. I looked it up on the internet.

They can roll it into the 401(k), into an IRA, or take it, pay their taxes, and throw an office party.

I'm not sure how mandatory cash out could be a trigger. The statute says death, after 59 1/2, separation from service, and disabled. I am thinking maybe we could argue after 59 1/2, but I don't like that argument. Under the plan, a distribution made after 59 1/2 is really described as an in-service distribution, and the participant here was not in-service at the time.

I found my answer. Thanks. The better answer is (probably) the first year is OK but the second year is not.

Thank you Madison. I was thinking along the same lines. Yes the second contribution was discretionary. The problems are (1) the distributions were not in the same year and (2) there was no separate "triggering event," unless the second contribution can be considered a triggering event. I will have to give this more thought. I was sure I could find something about this on the old 5-year averaging rules, but I have not been able to find anything.

The idea is that the plan sponsor is not acting as a fiduciary when it amends the plan to define the fiduciary. There is no question I am acting as a fiduciary if I am the 3(16) administrator. I think the biggest value I provide is risk transference. Hire me and you won't find yourself as a defendant in a lawsuit, at least not as the administrator. You won't be assessed any 5500 penalties, be liable for a failure to provide the plan document, etc. In other words, you don't have to worry about the judge making the wrong decision. You won't even be before the court. Sure anyone can sue; we all know that. By naming someone else other than the company or a committee as the plan administrator, the employer is in fact setting the most clear path possible.

My business model is to serve as 3(16) administrator. The duties are limited to those required by statute. i don't hire brokers or investment advisors. The only service provider I have to select is the auditor, if one is required. Even then I don't really select them. I hire them and the sponsor or the plans, but I select them based on the advice and consent of the plan sponsor. I would never agree to select an auditor that is not a member of the AICPA employee benefit plan audit quality center. There is risk, but there is risk in everything we do.

My company offers 3(16) services as well. At first it seemed like a good idea, but when you implement it, it can be extremely difficult. I have decided I will take it only in very limited circumstances. I do not believe, however, that hiring another party as the plan administrator is necessarily a fiduciary function. If the plan document names the employer as the administrator and gives the employer delegation authority, then delegating that authority to a third party is a fiduciary function. If, however, the sponsor amends the plan to define ERISAApple as the 3(16) administrator, I am of the view that is a settlor function, not a fiduciary function. The point is not to scare clients into hiring you. The point is to see if I can make their life easier if they outsource a function they don't want to do for whatever reason - whether it is because they feel they are not qualified, are too busy, or for any other reason. Ideally I like to try and ensure that the value I provide is equal to the value I receive. Because, in the end, the love you take is equal to the love you make. I don't see a difference between outsourcing the 3(16) function and any other plan-related function. With multiemployer plans, at least in the union context, they can even outsource plan sponsorship. The same would be true with open MEPs (if we ever see them). As for personal liability, if the plan document names the employer as the administrator, I can't imagine a judge in the world holding the individual who signs the 5500 on behalf of the employer personally liable for penalties imposed on administrators, such as $1200+ a day (or whatever it is now) for a failure to file the 5500. Companies cannot act without people, and if that person were liable instead of the company, effectively employers could never be the administrator. That of course is contrary to the language of the statute. As for personal liability for fiduciary acts, that raises the question of whether an employee or officer of a company can be a fiduciary if the plan document names the company as the fiduciary. There is a lot of case law on that, and so I won't go into detail. The short answer is often that person can be held to be a fiduciary. It really depends on the facts and circumstances. Moreover, as everyone knows, that person would be a fiduciary only to the extent of the company's fiduciary authority. The person could also be a co-fiduciary, which also raises other case law, and I will go into no detail about that.

In 2017 a participant terminated and received a single sum distribution of company stock derived from employer contributions. In 2018 the employer made a profit sharing contribution, a portion of which was allocated to the participant who had terminated in 2017. As a result, the participant received a second distribution of company stock in 2018. Can either or both distributions be considered a lump sum that would exclude the NUA from the participant's income? If not, can we correct under EPCRS, have the participant repay the first distribution, and the make a distribution in 2018 that is considered a lump sum for this purpose? For this second question, assume the plan document did not permit the first distribution in 2017.

Over the years I have had a lot of clients with real property in their qualified retirement plans. Usually it was for DB plans, but I have seen a few DC plans have it. I never saw it work out well in the DC plan context. Then again, few plans would have come to me with real estate issues if it did work out well. I have, of course, never seen any plan hold a participant's "second home," or any single residential dwelling for that matter regardless of whose home it was. Obviously plans can hold land. There are a lot of traps, and it generally works only if the land is part of a much, much larger diversified portfolio. Obviously plans cannot own a participant's "second home." In addition, any small to medium-sized plan that owns real property is practically begging for a DOL audit.

A client filed a 5330 to pay an excise tax for unpaid minimum contributions. The client received a Notice CP-220 that assesses an adjustment to the excise tax. We have no idea how the IRS got its numbers, and we want to appeal. There is nothing on the face of the notice that explains how to appeal. Does anybody know how? Do we just write back to the address on the notice and say we want to appeal?

The participant would be alive whether the spouse is consenting to a waiver of the J&S or designating a different beneficiary. I just think a non-participant spouse would more likely consent to a waiver of the J&S than the designation of a different beneficiary. It is just my gut telling me that; I have no demonstrable evidence to verify my opinion.

jpod, if the non-participant spouse consents to the QJSA waiver, the money goes to the participant spouse: the same household. If the spouse consents to a different beneficiary, the money goes to a different household.

JPOD, waiving the J&S is different from giving all or a portion to somebody else.

The owner is not required by law to give the new spouse 50% if a QDRO already awards it to an AP.

I would add that if the owner is concerned about the subsequent spouse automatically disinheriting the children from the prior marriage, why would the owner be satisfied giving those kids only 50%? I still say the QDRO is the way to go. They are just not that expensive or difficult to obtain if the owner is doing it for his or her kids. The ex doesn't even have to be involved in that QDRO.

If there was no plan document which defined the administrator then the employer was the administrator.