ERISAAPPLE

Mike, As usual you are correct.

Thanks Mike. I corrected the typo. Also, I think we need to talk to the PBGC.

There are a lot of facts involved here, so please bear with me. We took over this client in 2016, when they had directed trustee XYZ Bank. The Plan is a DB plan. Back in 2014, the ABC Bank was the directed trustee. ABC was an affiliate of mega-vendor DEF. In 2014 the client moved from Mega-vendor to local TPA and changed the trustee to XYZ Bank. In 2017 client terminated the plan, distributed all assets, issued 1099-Rs, filed a final 5500, etc.: they closed out the plan. Now it is 2018 and we have learned that back in 2014 somebody dropped the ball and left about $900 at ABC Bank. Nobody seemed to notice it until now. That $900 belongs to about 12 different participants. We are cleaning everything up now. My question is whether we need a Schedule SB for the 2018 Form 5500.

I was just about to ask a similar question, and I will still ask it in a different thread. To answer your question, I would ask an auditor. If you don't want to ask an auditor, then consider, if you want to dot all your i's and cross all your t's, filing an amended 2016 5500 that is not final and shows an account receivable. File the 2017 5500 with the same account receivable. Then file a final 2018 5500 that shows the refund as income and a distribution of the same amount. I am not an auditor and I'm not sure this is correct, but it seems like it might work.

We need a lot more information. Let's start with whether this arrangement is a qualified plan, a nonqualified plan, or something else, like an annual bonus or long-term incentive plan paid on a short-term deferral basis. If the plan is a qualified plan, what does it say now?

Why would the expense of the annuity paid by the plan not be considered a 415 annual addition? The money that is used to pay for the expense must have been contributed to the plan.

Are you saying you can exceed the 415 limit by the amount of the surrender charge? If so, I don't think that works. Are you saying you can put in the 415 limit, have the plan buy an annuity with that funding in the same year, and then fill up the bucket again in the same year over the 415 limit? If so, I'm not sure that works either. If you are saying fund the plan up to the 415 limit and then use the excess outside of the plan to buy an annuity, I don't see a problem with that.

Carl Sagan had it figured out. Pi is an encryption code from God. We just have to break the encryption.

Ah, yes. This is a church plan (at least we are assuming it is). I agree with the recommendation to seek legal counsel. One question they will ask is whether the church plan elected ERISA coverage. The question suggests it may have.

The question is what do they do if nobody asks for the money. The answer may be different depending on the identity of the beneficiary (or beneficiaries).

Do participants get a year of service when they reach 1,000 hours or at the end of the vesting computation period in which they were credited with 1,000 hours. For example, assume a DC plan has a 5-year graded vesting schedule (20% each year), using actual hours and YOVS = 1,000 hours during calendar year. On 12/31/2017 the employee had 4 years of vesting service. The employee terminates on March 31, 2018 with a 1,000 hours, and takes an immediate distribution. The Plan has the cash-out rules that provide a forfeiture upon a distribution. I think in this example the participant would have five years of service and be 100% vested. The participant does not have to wait until December 31, 2018 to be credited with the fifth year of service before taking a distribution in order to receive 100% vesting.

My guess is the employees who work 20 hours or more per week are not excludable from the universal availability rule. If so, and by that I mean if you have to cover them under the universal availability rule, a retroactive amendment is not permitted. That would be like operating a plan to require 5 years of service where the plan only requires one year, learning about the mistake, and then adopting a retroactive amendment to require 5 years of service for eligibility. That simply would not be allowed. Similarly here, you can't violate the universal availability rule with a retroactive amendment. If they are not required to be covered under the universal availability rule, you might try a retroactive amendment under EPCRS, but I'm not sure you would get it. Maybe, maybe not.

I don't think the original question has been answered yet. Do we know who the beneficiary is? We can't give an answer until we know who the beneficiary is.

Does anyone know where I can find a guide to understanding what items are included in the different definitions of compensation (W-2, withholding, safe harbor, etc.) for S-Corp. shareholders?

First, I would be surprised if the employer has no discretion here. Discretion in this sense is not discretion to decide claims. It is a larger sense of discretion, such as deciding the plan's design. The employer is paying for the costs of the clinic. That alone is discretion in the plan's design. Even if we are talking about discretion to decide claims, I would guess if an employee went to the clinic for some durable medical equipment, such as a cardiac implant, the clinic could not send the bill to the employer and get paid without any input by the employer. The employer would deny the claim. Second, just paying the costs is by itself enough for the employer to be involved for purposes of what you are discussing. Similar issues come up with wellness programs, where the employer pays for employees to get blood work to check their health. Those are generally considered to be group health plans. If the employer already has a group health plan, just wrap this into that plan by adding it as one of the benefits.

This is it. The plan failed rate group testing, which uses the 410(b) rules. This is what the consultant meant. Thanks.

OK. I have more information. They have the safe harbor 3% QNEC and on top of that they have a new comparability profit sharing allocation with a last day of the PY requirement. Two employees terminated mid-year and the additional profit sharing failed 410(b) due to the last day of the PY requirement. It turns out those employees did receive the safe harbor notice. We just need to adopt a corrective amendment to waive the last day of the PY requirement to give those two (or maybe just one of them) the profit sharing. But my contact confirmed they did receive the safe harbor notice. Sorry for the confusion. The only information I had at first was "their safe harbor failed 410(b)...."

By "the employees they are going to add" I mean the employees who are going to be given an allocation via the corrective amendment, who otherwise would not have received an allocation. I have learned more facts. It turns out they have the 3% QNEC and an additional profit sharing contribution. I am thinking they had some employees who terminated with over 501 hours and a last day of the Plan Year requirement. That could be why they failed 410(b). Even if true, I would assume the terminated employees were given a safe harbor notice. I realize I may need more facts, but has anyone seen a safe harbor contribution fail 410(b)?

"Failure to make any installment payment when due in accordance with the terms of the loan violates section 72(p)(2)(C) and, accordingly, results in a deemed distribution at the time of such failure." I have always understood the regs to say the deemed distribution occurs at the time the payment is not paid when due. The grace period allows for a retroactive cure of the deemed distribution, but if the installment is not paid by the end of the grace period, the deemed distribution is reported as of the date the installment was due but not paid.

A consultant referred a plan to me. He said they have a safe harbor plan with the 3% QNEC. He said they realized this year that the plan's safe harbor QNEC failed 410(b) last year. All they have are the 3% QNEC and 401(k) deferrals. They want to correct with an corrective amendment under 1.401(a)(4)-11(g). The problem, the consultant says, is some of the employees they are going to add did not receive the safe harbor notice. He wants to know if they can adopt an 11(g) amendment and separately correct the failure to provide the safe harbor notice under EPCRS. I am struggling, however, with the idea that they somehow failed 410(b) "after the fact" with a safe harbor contribution. It is not as if they have a last day of the PY requirement with terminated employees, which can cause an "after-the-fact" 410(b) failure. Is it possible for a safe harbor plan to fail 410(b) after-the-fact, e.g., due to demographic changes that occur during the year? Could this be a result of the method they use to test 410(b)? I guess I will need to ask the consultant for more details, but I was wondering if anybody here has seen a safe harbor contribution fail 410(b) due to mid-year employee changes, and, if so, how do you correct the failure to give the notice? What if the safe harbor had been a match instead of the 3% QNEC? Something is nagging me and making think it is impossible for a safe harbor that meets 410(b) at the beginning of the year to fail it later during the year due to employee changes.

Why would this not be a group health plan? It is a plan contributed to by an employer to provide employees with health care. I assume the minute clinic does not provide medical services for excepted benefits only. As for being subject to ERISA, more facts are needed. Is it a governmental employer? Is it an ongoing administrative program? Are the four prongs of Donovan met? Is there another fact that should be considered?

My understanding is the position of the IRS is once a participant is vested, that participant is vested in all future contributions of the same type. You can't bifurcate the benefits for vesting purposes. In other words, Option B is the safer approach. I have never used Option A.

Are talking about a 204(h) notice or a suspension of benefits notice? Because you said the plan was frozen, I thought you meant 204(h) notice, even though you said suspension of benefits notice. Now it sounds like you truly did mean a suspension of benefits notice.

I think Penserv is an MWBE. I naturally cannot endorse them, but I can say my experience with them has been very good. I also know they have the capability to handle somewhat larger plans, e.g., over 1,000 participants. I am not affiliated with them in any way.

That makes no sense. My thoughts would be to read the notice and the plans.