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ldr

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Everything posted by ldr

  1. ldr
    @RatherBeGolfing - here's a 5 page explanation I found, and notice at the bottom of page 2, you will see the quote I gave. The key seems to be setting up the electronic delivery itself to conform to all the requirements and once that is done, it appears that a plan sponsor can either transmit the document itself or point to where to find it on a website. At least that's how I understood it. What are you doing about 404(a)(5) notices? We weren't doing anything at all - well we know that's wrong. So now we are trying to fix it. I'd love to get it right the first time so please keep the ideas coming! We are a non-producing TPA - i dotting T crossers - not investment people. We are just trying to protect our clients and ourselves against future problems due to not having distributed something that either they or we or both should have been on top of, and we never depend on investment advisers to do anything at all. A_Guide_to_Electronic_Delivery_of_Participant_Disclosure_Materials.pdf
  2. ldr
    @401king - Thank you. With that information I was able to find the DOL guidelines and several explanations of those guidelines. One of them has the statement that "A plan administrator may also send, via electronic or paper mail, a link to the required information on a website". That's going to be a lot more appealing than printing off and distributing a 13 page notice that nobody but the CFO will understand (and even that's not guaranteed!.
  3. ldr
    Hi to All, If a 401(k) plan is on a platform like John Hancock, and JH produces the 404(a)(5) notice, how must it be distributed? It's available on the participant's account page at JH. Is it enough to tell the participants via an email or a written memo how they can access it themselves on their account page? Or must the employer access it off the Plan Sponsor page, download it, and either distribute paper copies or email it to the participants? Must this be done every quarter? I am not picking on John Hancock - I could have used any platform provider - we just happen to have a number of plans with them. Thanks for any information you can provide. Yes I realize we should already know this and we are getting to the table late but better late than never!
  4. ldr
    This case took an interesting turn and I want to post the results in case some other reader has the same problem someday. In reading ERISA Outlines, I came to the conclusion that due to transition rules for mergers and acquisitions, there is indeed an exception to the exclusive plan rule. If Company B assumes the sponsorship of Company A's 401(k) plan, it does NOT invalidate Company B's SIMPLE IRA plan. Company B would have up until December 31, 2019 to choose one of the two plans and get rid of the other one. I called an ERISA attorney to get confirmation of all this and got further information. She said to amend the 401(k) plan of Company A to exclude Company B's employees through the transition period. She said to amend the definition of compensation in Company A's 401(k) Plan to include pay received from either Company A or Company B. The Company B employees need to be notified that they are not eligible to participate in the 401(k) Plan and the Company A employees need to be notified that they are not eligible to participate in the SIMPLE IRA plan. Finally, she said to put plenty of references to the transition relief in the Board of Directors Resolution. To sum it up: Company A's plan goes on operating normally, except that it gets a new sponsor, which is Company B. The same employees that were in it pre-purchase are in it post purchase. Company B's plan goes on operating normally with the same employees in it pre-purchase as post-purchase. And all that is IF Company B is amenable to taking over A's plan. But at least, it can be done. There is no partial termination, no 100% immediate vesting , no excuse for the employees to take their funds out of the 401(k) plan. Company B has up to the end of 2019 to decide what they want to do. Stay tuned!
  5. ldr
    Thank you, Lou and WCC. I did print off and read the pdf on correcting a SIMPLE where the employer adopts a 401(k) in the same year and I am certain that Company B will not be interested at all in doing this. We were just hoping that there might have been some little-known exception to these rules in a merger and acquisition situation but I guess there isn't. So it's sounding like they have a choice of having a partial termination of A's 401(k) plan that stays open for the owners through 12/31 and lets employees take a distribution or roll their funds out, followed by either 1) having Company B assume sponsorship of Company A's plan as of 01/01/2019, OR, 2) having Company A terminate their plan as of 12/31/2018 and hoping that we can create a new 401(k) plan for the combined companies as of 01/01/2019 or 3) having Company A terminate their plan as of 12/31/2018 and their former employees will be eligible to participate in the Company B SIMPLE as of 01/01/2019 if Company B cannot be persuaded to start a 401(k) plan or take over the existing one. For our client, 3 is the least attractive proposition of all because they want the higher contribution limits afforded by a 401(k) plan. We were also pretty sure that a partial termination is occurring at Company A, full vesting will be required, and participants will need to be allowed to make their choices. Our client really didn't want this to happen, either, and wanted us to find a way around it if we could. He's coming from a paternalistic viewpoint of wanting the employees to leave their money alone so they will have something for retirement instead of blowing it all now. If anyone has any other ideas or perceptions, please speak up!
  6. ldr
    @Lou S. I was beginning to think the same thing yesterday as I was typing our all of this to ask the question. Naturally we'd like to do whatever our client wants if it is possible, so that's why the question is posted here - we simply don't know whether or not what they want can be done. What our client wants is to know what is legal and possible and then "steer" company B into doing what is best for Company A. We have to meet with our client soon and give them the possibilities, let them choose their preference, and then meet again with our client and Company B to lay it all out. Company B probably intends to keep their SIMPLE IRA and go on making deferrals to it through the end of the year. Are they required to keep it? Can they terminate it and take over our client's 401(k) plan as of 08/15/2018? I can see several different ways this can go, but it depends upon what's legally permissible. We may end up having to engage an ERISA attorney to make that determination but we were hoping not to have to do that.
  7. ldr
    @WCC I did see this conversation yesterday when I was searching the forum for previous discussions. It did not seem to apply to my situation because it's an asset purchase and because the intended survivor is the 401(k) plan, not the SIMPLE.
  8. ldr
    @ WCC This is an asset purchase, per our client.
  9. ldr
    @Larry Starr Mine says virtually the same thing. Point well taken. It's not my primary area of responsibility and I assumed that the protocol here was established by someone who had trained those who are responsible. Proof just once more about making assumptions and what that leads to!
  10. ldr
    Good afternoon to all, Our client, a P.A. we will call Company A, sponsors an active 401(k) plan. Very soon (like in 2 weeks), Company B is buying Company A. Company B, not currently our client, sponsors an active SIMPLE IRA plan. Company A will continue to exist and pay salaries to its owners out of receivables through 12/31. The staff of Company A will be paid by Company B from 08/15/2018 forward. The owners of Company A will continue to make deferrals out of their salaries but the employees of A will no longer have any mechanism for making deferrals to A's plan. Company A, in a perfect world, would have liked for Company B to assume sponsorship of Company A's existing 401(k) plan, open it up to all of Company B's employees, and move forward with as little disturbance as possible. However, we are pretty sure that Company B can't have a SIMPLE IRA and assume sponsorship of a 401(k) plan in the same year. Company A's next preference would be to have Company B take over the existing 401(k) plan as of January 1, 2019. This leaves the employees of Company A without a way to make deferrals from 08/15 through 12/31 since they have no pay coming from Company A anymore after 08/15. Is that permissible, to just suspend their ability to make deferrals and then have them be able to once again on January 1? Has a partial plan termination been triggered by the change of how the employees get paid as of 08/15/2018? If it matters, most of the employees of A will still be employed, by B, as of 08/15/2018, but not necessarily in the same jobs they had before. It should be noted that at this moment we do not know (and neither does our client) whether this subject is addressed in the buyout agreement and we do not know the wishes of Company B. Any advice on the correct way to handle this will be greatly appreciated! Thanks in advance.
  11. ldr
    @ACK - I should have looked on the IRS website first - sorry - it's right there in the Retirement Topics - Hardship Distributions. Very clearly the next 12 months.
  12. ldr
    @ ACK, Good morning! We are having this very discussion this morning in our office. A participant has applied for a hardship withdrawal for a dependent's upcoming tuition. He has furnished a bill for tuition due on August 20th. Standard protocol in our office has been to look backwards, not forwards, and we seem to be under a mistaken impression that it is for past expenses, not upcoming expenses, on the theory that someone could take a HSW for a future event and then just not show up for classes and do something else with the money. This appears to be an erroneous line of thinking on our part. Could you tell me where to find "chapter and verse" that explain the "next 12 months" stipulation with regards to tuition? Thank you in advance for your help!
  13. ldr
    @Tom Poje Update: the prospect opted to go with your solution! Thank you again for a great idea. As a side note, someone involved with this plan objected vehemently and insisted that accruals do NOT belong in the Top Heavy test and that this methodology is flatly wrong. If that was true, then there would be thousands upon thousands of plans whose Top Heavy tests are not being done correctly, because every TPA firm I have worked for in the last 40 years has included the accruals in the participants' balances when the Top Heavy test was run. Our software provider has as many years of experience as I do and she also said all of her clients, to her knowledge, include the accruals. She told me how to exclude them if I wanted to do it - enter the accruals as a separate investment item and carve them out of the test - but why, when nobody does this, was her point. Thanks to everyone who wrote in. All's well that ends well!
  14. ldr
    @Tom Poje it has been a few years, I guess. I just remembered that you taught some classes I saw there and that you were really good. But I have been going to the annual convention off and on for about 24 years so I am not sure what year(s) those were. I am not going presently just because I now live and work really far away from DC and it has gotten prohibitively expensive for very small shops to send people. In past years, when it was still at the Hilton and I lived in MD, it was feasible for my employers, but not now. So I watch a lot of John Hancock webinars! Have a great day! :)
  15. ldr
    @ Tom Poje and Kevin C: Thank you both for suggesting the extra profit sharing contribution to tip the scales in favor of the NHCEs to bring the percentages to just under Top Heavy. For the prospect, we have made the suggestion and explained how it works. To be seen whether they will follow the advice and whether we will eventually have them as a client. This was an interesting case. Once we finally got our hands on enough data to know the situation, it turned out that the Key balances as adjusted for distributions came to only 60.13% of the total. A contribution of only .058% of pay as a profit sharing contribution would drive them back down to 59.99% for the Keys. This is far less than the cost of a 3% SHNE or even a basic Safe Harbor match (for 2019) and could work for them for a few years. This technique also worked beautifully for a 03/31/2018 plan I just finished. We will go explain the concept to the client and see if she wants to go for the very small profit sharing contribution it would take to tip their plan back under the Top Heavy limit. Their Key balances are only 60.04%! It won't take much money at all to fix their situation. It's embarrassingly simple once we know it, but we never thought of it on our own. If Tom Poje had not recognized that I didn't "get it" at first and hadn't persisted, this wouldn't all have turned out this way - you are a great teacher whether it's in person at the annual ASPPA convention or online! Much appreciated!
  16. ldr
    @Kevin C Thanks! That's a great idea too. The only drawback I see to that is that the money would be 100% vested immediately where the PS money wouldn't, but that might not matter.....
  17. ldr
    @Mike PrestonIsn't that the truth! We were just discussing that, and being surprised that this plan still has a comp-to-comp formula. That would certainly be a must-do recommendation, should we eventually land this prospect as a client.
  18. ldr
    Lol - at least you had a chance to say that before the plan year was over and it was too late! We think your idea on the TH situation is very creative - we simply never thought of this before and we actually had a client of our own we could have used this idea on earlier this year! Thanks again :)
  19. ldr
    @ Tom - indeed, the Key compensation is only 27.93% of the compensation that would be eligible for a profit sharing contribution. This really could work. I passed the information along.....let's see if there is any interest.
  20. ldr
    @ Tom - I see! Thanks for suggesting that. It could be worth exploring even if the Keys do have to receive the same % as the non-Keys.
  21. ldr
    @ PensionPro.....for 2017 this wouldn't be a top heavy minimum allocation. This is just an additional profit sharing contribution whose purpose is to boost the non-Key account balances to the point that the plan would not be Top Heavy for 2018 based upon 2017 test results.
  22. ldr
    Hi to all and thank you very much for your responses. To answer all your thoughts if I can: We have been led to believe that they were warned on time and that the Keys have not yet deferred anything for 2018 (which I find very hard to believe but ok, maybe). These are not high rollers who could afford a DB plan. They are balking at the idea of giving anything to the rank and file and are all ticked off over 3% so they certainly wouldn't do 5%. The salaries of the Keys are not even quite up to the HCE determination level. Stock ownership is what makes them Keys and HCEs, not salaries. No, there probably isn't any advantage to having the Keys use IRAs and then roll the money into the plan. For just a moment I was thinking about that old belief that retirement money is safer in a qualified plan than in an IRA but that was explored thoroughly in another thread a few weeks back and the general idea put forth was that this used to be true but isn't any longer. I will ask about the non-qualified deferred compensation idea. Nobody has given us the exact figure for the TH percentages but it's reasonable to assume they are just barely TH since this is the first year they have been TH. I will ask for the %s. Now just to be sure I understand: it's being suggested that they might yet put in just enough profit sharing contribution for 2017 for the NHCEs to tip the account balances back to being not Top Heavy. That's very clever. The obstacles I see are these: 1. They may have already finished up and filed their corporate return and their 5500-SF for 2017. Of course those could always be amended, I suppose. 2. Their document calls for a straight up salary ratio profit sharing allocation for all eligible participants. Can the Keys choose to exclude themselves from a potential allocation? If they can't the purpose would be defeated. I think most places I have worked have turned a blind eye to anything that discriminates against Keys and HCEs, but isn't that technically failure to follow the terms of the plan document?
  23. ldr
    @ PensionPro - a non-qualified deferred compensation plan separate and apart from the 401(k) plan? It is worth suggesting to the referral partner. We don't design or try to do anything of service for that kind of plan but they could pursue it elsewhere.
  24. ldr
    @JackS.....I like that idea of having the Keys contribute to IRAs and roll the money into the plan at a later date.....I wouldn't have thought of that. Ok, it's not a rabbit out of a hat but it's at least a chipmunk.....Thanks!!
  25. ldr
    Today my skills as a magician are being questioned, as I have failed to pull a rabbit out of hat.... A referral partner has brought us a situation with a client of his who is not our client. The party in question has a 401(k) plan that eliminated its Safe Harbor match in 2012 and has been subject to all testing ever since. This employer is angry because he has been told that for the first time, his plan became Top Heavy for 2018 based on the 12/31/2017 results of the test. He has been told that if he doesn't want to be obligated to make a Top Heavy contribution of any kind, then the Key employees cannot defer in 2018. Deferrals count, and even if a Key only deferred 1% of pay, then the company would owe the non-Key participants 1% of pay as a TH minimum contribution. Of course if any Key deferred 3% or more, then the company would have to make the standard 3% TH minimum contribution. The referral partner is looking to us for some kind of magic trick to allow the Keys to defer whatever they want to defer and somehow not owe a TH minimum contribution. My crystal ball must be cloudy or something because there's nothing I can find to do about 2018. For 2019, they should adopt Safe Harbor provisions again, whether it's the 3% SHNE or the basic SH match. If they aren't willing to do that, then they just have to accept the fact that the Keys can't defer. Am I missing something? The referral partner has been told that a "creative solution" should be found. I can think of all kinds of creativity for failed ADP/ACP tests, cross-tested formulas that don't work out, etc., but I don't know of a "creative" solution to Top Heavy! Any ideas will be appreciated. Thanks!
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