ldr
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Everything posted by ldr
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Thank you VERY much! We watch the new, current John Hancock webcasts and were not aware of a library of past webcasts. This gets us through the current question and in the meantime we can get better educated on Schedules A and C. Have a great day!
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HI Lou S., Thanks for the response but it doesn't quite answer the question. He is specifically concerned about revenue sharing income. For most of our clients, we receive less than $5,000, it's for plans that file the 5500-SF, so it's a moot point. However, we do have a few with over 100 participants who have to file the full blown 5500 with the attachments, and he's trying to figure out, for this one where the revenue sharing is over $5,000, how to report it correctly. What are the rest of you doing in these cases? Thank you as always.
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Good afternoon to all: From a colleague in my office: "Requesting advice regarding completion of Schedules A and C for large plans using a John Hancock style (insurance) product. We believe that Commissions to Insurance Agents and TPA Fees deducted from plan assets (Distribution and loan fees) are reported on Schedule A. Revenue Sharing (Forum Compensation) could be reported on the A or C and if reported on the A then it would be left off the C. Any thoughts on this? " Thank you as always for any advice.
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Thanks as always, Larry Starr. I thought about your approach, too, but I don't know enough about the client, his anticipated hiring patterns, etc. I will mention this to the person who actually has the plan and see what he wants to do. Meanwhile it's a comfort to know that it's common practice to exclude by name if we need to do it.
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Thank you, C. B. Zeller. The software provider had told us that it was okay to have them in the rate group test but we were still uneasy about it and now we can stop worrying about that. Thanks also for the confirmation that it is okay to exclude those non-owner doctors by name. We do charge for amendments, though not an exorbitant amount, and I don't suppose the practice will grow so very fast that this would be a consideration more than once a year.
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Good morning to all, We have a client, a medical practice, with one owner-doctor, 100%, and two non-owner doctors, along with some rank and file employees. The plan was set up to exclude "non-owner doctors" from eligibility to participate in the plan. All the doctors are HCEs. Now, the owner-doctor would like to make an offer of employment to a new non-owner doctor and he wants to make the plan available to just this new non-owner doctor but not the two non-owner doctors he already has. We were thinking about amending the plan to simply exclude the two existing non-owner doctors by name. As we have never done that before, we are not 100% comfortable doing it without asking the advice of the experts. Would you do it that way or is there another technique? As an aside, every year when the rate group testing is done for the new comparability profit sharing contribution, our software includes the two existing non-owner doctors in the test, even though they are not eligible to participate in the plan. We are not 100% comfortable with that, either, and would like to know if this is really right. The fact that they are HCEs and they do not get a contribution helps to pass the tests and that doesn't really seem "fair" but if it is permissible, we will continue to take advantage of it. Thank you in advance for your advice!
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Thank you all esp Larry Starr for explaining more about how to do this. We have never done it either - we have heard of it and mentioned it to a client or two, but never actually did it until now and it's looking very likely that the hospitality company will need this, going forward.
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@ Larry Starr, Thank you very much. I agree and that's what I am going to propose in a meeting this week with the client and the advisor. Meanwhile I learned that the advisor wasn't aware of the possible technique of splitting the plan in two to avoid the audit. She's having to back down a little bit, at least in emails so far. They may yet opt for 3 plans total. The characteristics of the small company are nothing at all like the characteristics of the large company as far as type of business is concerned. One is a professional office and the other (large company) is in the hospitality/service industry. They are not keen on blending these groups and having any personnel in one office accessing plan records of anyone in the other business and vice versa. But the important part of all this is that at least the hospitality business can have its plan split in two and avoid the audit. The professional office will never grow large enough to have this problem. Thanks to all of you for your input!
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@C.B. Zeller Thank you. We are a small shop with small, uncomplicated plans and normally the all of the plan sponsor's stock is owned outright by 3 or fewer people. This is almost certainly the only plan we have where any trusts are involved, so we just didn't know.
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Hi justanotheradmin - the other experienced person in our office, who is supposed to be on vacation, just weighed in and said exactly what you said. He said that as a controlled group, they could have had one plan all along, but that it wasn't set up that way to avoid the need for the audit.
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I agree, RatherBeGolfing. This is a situation where I needed first to nip this idea of a MEP in the bud immediately but I needed a good reason to do so. I got that. Now, we have a little bit of a breather in which to find out just how many participants really are going to be in Company B's plan for 2018, and to look at the impact of having 3 plans as Larry suggested. There's no doubt that splitting up Company B's plan into two plans is going to be less expensive for the employer than paying for the audit. I do agree with an earlier comment that was made about the new investment advisor trying to make a splash by coming up with something "cutting edge" without knowing all the ramifications. I have no idea to what extent the employer will pay any attention to her in the first place. I do know that this idea is now right out for 2018, and that was my goal in asking the questions.
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@Bird, Thank you very much! This is what I thought might be the case. Now i feel comfortable recommending that they NOT do this - of course the answer might change if company B ends up having over 120 participants for 2018 - but at least for right this minute, we can say this is not a good idea. It's probably not a good idea for other reasons as well, not the least of which is that we as the TPA don't know much about MEPs yet, but the reason that will sway the employer is the possibility of having to pay for the independent audit.
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@RatherBeGolfing - No, WE don't want to create a MEP and would never have even thought of it. We may get pushed into it whether we like it or not, and I'd rather find out a little more about it sooner rather than later. If creating a MEP automatically pushes them into having to hire an independent auditor for say, 2018, if this was done by December 31st, then we know the sponsor won't want to do it, and that will be the end of it, at least temporarily. Sometimes I think you guys must live in some idyllic world where hot and cold running minions keep you from getting into situations where you are over your heads. I am not embarrassed to admit that I don't know everything all by myself and that's why I ask questions on here, even at the risk of looking foolish or less than expert. Sometimes we get called upon to do things that are beyond our scope just by virtue of working in very small enterprises where there are no minions below us or experts above us to make these things go away......
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Good morning to all, We have a takeover case in which we want to be sure we correctly identify the Key employees. We are not sure because we do not know anything about trusts. I know the following is convoluted but I am not making this stuff up! The company was started by two brothers, who we will call Bill and Sam. Bill is the president of the company, and Sam has passed away. The ownership of the shares of the company are as follows: 24.7% belongs to a Q-TIP trust for the wife of Sam who is not an employee. We aren't worried about this. 41.1% belongs to Bill. That's a no-brainer. He's an owner and President of the company. Key and HCE. Bill's 3 kids are on the payroll. One of them owns 0.8% of the stock outright. Another 15.9% of the stock is in a trust for Bill's 3 kids, who are treated equally under the trust. To our knowledge, the trust and the percentages are irrelevant here. The fact that the kids are on the payroll and their father owns 41.1% of the stock is sufficient to make all of them Keys and HCEs. Now comes the part we are not sure about. Sam, remember, is deceased. Sam's 4 kids are on the payroll too. One of Sam's kids owns 1.6% of the company outright. Then, as in the case of Bill's kids, 15.9% of the stock of the company is in a trust for these 4 kids and they share equally in it. So one son has his own 1.6% that he owns outright plus 3.98% that he indirectly owns through the trust for a total of 5.58% of the stock being for his benefit. His 3 siblings just have the 3.98% each that they own indirectly through the trust. Are Sam's kids Key and HCE or not? We don't know what impact the trust has on making this determination. Our suspicion is that maybe the son who has the total of 5.58% is a Key and maybe the siblings who only have 3.98% are not, because they have less than 5%? We'd much rather hear what the experts have to say than just go on our suspicions. None of these children, neither Bill's nor Sam's, has a sufficiently high salary to be considered an HCE just on that basis. None is an officer of the company with a sufficiently high salary to be considered a Key just on that basis. It's all about the stock. Your advice will be greatly appreciated.
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Hi and thanks for all of your responses. I did leave out some important information. Just one man owns 100% of both businesses. These two 401(k) plans are identical in every respect as far as the plan provisions are concerned. It's just that plan A covers one of his businesses, which has about 40 people at most at any one time, and plan B covers a different business with nearly 100 people now. I don't see how there could be any issues with non-discrimination since both companies' employees are treated exactly the same. They don't have any problems with ADP testing because the HCEs scarcely use the plan. The owner is too cheap to do a Safe Harbor contribution. They do have a puny match, and neither plan is highly utilized by either set of employees. My fear is that if this new advisor pushes the plan sponsor to create one MEP out of it, she will automatically push them into a position where they will have to engage a CPA for an independent audit sooner rather than later. Business B is growing, they tell me they have hired a lot of new people since 12/31/2017, and by the time we get the census for 2018, it may be a moot point if they have over 120 participants. Does a MEP file one 5500 that covers all of the employers who belong to it, or does each employer file its own 5500?
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Good afternoon to all, We have virtually no experience with MEPs. We have a client who owns two separate businesses and maintains a 401(k) plan for each business. One has well under 100 employees and one is dangerously close to needing an independent audit. There is a new investment advisor to the plans and she is wanting to create a MEP out of the two plans, claiming that there will be lower fees from the recordkeeper if they become a MEP. My question is this: Is this potential new MEP considered one plan with one 5500 to file, and will it now be thrust into the category where it needs an independent audit because it will have over 100 participants with the two companies combined? Your advice is greatly appreciated.
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Good afternoon to all, A plan of ours has a 3 doctors plus staff. While all docs are HCEs, only one is also Key - the 100% owner. The other 2 doctors have signed irrevocable waivers of participation and are not part of the plan. They are in the census in our software program, classified as being in an ineligible class of employees. When we run the Top Heavy calculation, we get error messages saying that we have failed to meet the TH requirements because these two doctors are not getting a TH minimum contribution. If they have signed the irrevocable waiver, it is our understanding that they are not eligible for any portion of the plan at any time, including the TH minimum. Are we correct on this? Yes we have read the plan document and yes we have a call in to the software provider to see if we are coding things incorrectly. But in the meantime we wanted to ask the experts if these two doctors are supposed to be counted for any purposes in anything in the plan, Top Heavy or anything else? Thanks for any advice and don't shoot the messenger. Per usual I am being asked to resolve something on a plan that is not mine.
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@ Mr. Bagwell, yes, I believe all of our other clients who fund a discretionary profit sharing contribution do it after the end of the plan year. We are normally asked to calculate it for them. This situation is highly unusual but of course there's nothing wrong with it - as you said, they can choose how they wish to make the deposits. They just can't choose to leave eligible participants out of it altogether!
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@ Larry Starr and Mr. Bagwell, From what I have understood from my colleagues who do work on this plan, it was started in 2016. The employer set a certain % of pay - I think 5% in all years - that they wanted the participants to receive and they funded it on a payroll by payroll basis. This is not in the document at all. The document calls for a totally discretionary contribution allocated on a pro-rata basis. In 2016 they simply didn't give anything to a few participants with no explanation as to why. We booked a receivable contribution for those participants at the same rate the others got and told the client they owed these contributions. Whether they funded them or not, I do not know. For 2017 they did the same thing, but this time it was more than just a few people, and the excuse given was that the "division" they work for doesn't have any money and doesn't want to pay the contribution. So as I type this, my colleagues are delivering the news as described above that they do have to pay the contributions in arrears for 2016 and 2017, they do have to treat everyone equally for 2018, and that for 2019 they can amend the plan to describe a variation in contribution levels by division, on the assumption that they will continue to have only NHCE employees in the plan.
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@Mr. Bagwell, thanks for your considerate reply as well! Interesting - this tribe also has a non-ERISA plan as well as an ERISA plan. It's not my plan, personally, so I don't know all the details. I was just asked to do the research on the question without much to go on besides a hurried description of what they wished to do. Actually two of my co-workers are going to deliver the news in person, that anyone omitted and carried as a receivable to the plan (by us) for 2016 and 2017 has to be funded, that it's too late for 2018, but that for 2019 they can amend the plan. As for no HCEs, since it's not my plan, I can't be 100% sure. That's just what I was told. The plan has well under 100 participants so no auditor has been involved.
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@jpod Thank you very much for your considerate reply. That makes sense. We are going to tell the client that they cannot omit anybody for 2016, 2017 and 2018, but that for 2019 forward, their plan can be amended to specify that different divisions may contribute varying amounts. Their document is attorney drafted so it will be between her and them to draft whatever language they want.
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Of course I read the document. It does not have anything to say about divisions at all. We all work in a world that is driven by non-discrimination tests. We are so programmed to be on the alert for anything that might violate them, we or at least I, don't know how to think about a plan that is not plagued by non-discrimination issues. I merely wanted to know if anyone else had run into a similar situation. It had occurred to me that the way the document is written, it would seem that all participants were supposed to be treated alike. There is no mention whatsoever of anything being done differently by divisions. Our gut reaction here is to say to the client "No, you can't do this" but we wanted to be sure we were on solid ground. Since we couldn't tie our reasoning to anything to do with non-discrimination testing, we just thought we'd run it up the flag pole and see what others had to say.
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Good morning to all, A client, which happens to be an Indian reservation, has a commercial entity that sponsors an ERISA covered 401(k) plan. That commercial entity has no HCEs. The employer decides that overall for 2017, it will contribute 5% as a profit sharing contribution for the year. Per the plan document, profit sharing is totally discretionary and is supposed to be allocated on a salary ratio basis. However, each division within the company is responsible for being a profit center and one division says it doesn't have the resources to make any contributions for 2017. This means that about 2/3 of the employees get a 5% of pay contribution and 1/3 of the employees get nothing. Again, there are no HCEs. Top Heavy status is not an issue. Passing 410(b) coverage testing is not an issue. Does anyone see any problem with this? Is it permissible for the 1/3 to get nothing in profit sharing for the year? Your thoughts and suggestions are always appreciated! Thank you.
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Thanks. I am an ASPPA member and I will look them up.
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@RatherBeGolfing, thanks again. That clears up some confusion I had about whether this had to be done once a year or once a quarter. I appreciate your comments!
