C. B. Zeller

In order to transfer to a QRP the plan must provide that excess assets will be reverted to the employer upon termination. The employer can then transfer 25% or more of the amount that would have been reverted to a QRP in order to reduce the excise tax to 20%. If the plan says that excess assets will be reallocated, then the participants in the plan are considered to have an accrued right to the benefit increases that would result from the reallocation. Transferring any excess out of the plan would deprive them of those benefit increases, so you can't do it (5-year amendment rule notwithstanding). If the plan says reallocate, and you increase all participants to their 415 limits, but there are still excess assets left over, then you revert the excess. I suppose you could do a transfer to a QRP in that case to reduce the excise tax. I am not 100% sure on this scenario so I would be happy to hear from anyone that has direct experience with it.

An organization engaged in the field of health is automatically a service organization for the ASG rules, regardless of whether capital is a material income-producing factor. The best way to find if an ASG exists is to hire an ERISA attorney to make that determination for you.

I agree that if you have a safe harbor non-elective plan then a last day condition is not helpful. Worse than useless really, since it can force you to do an -11(g) amendment in some cases which will possibly require that you grant additional vesting. My experience has been that while giving an allocation to a terminated employee might sometimes be helpful to pass testing, most employers would rather pay more to one of their current employees than give a contribution to somebody who left if they don't have to. That's not always the case, so always discuss it with the client before you decide on any plan provisions.

Is the participant actually requesting a distribution or is this just for valuation purposes? If this is just for your assumptions I think you can do anything reasonable. For example assume that A is distributed first and then limit the lump sum in B to the maximum lump sum minus the lump sum value of A.

I had a sort-of similar case a couple of years ago. We took over a 2-person plan (one doctor and one employee) and found that the statement for the employee's account was labeled as an IRA. The prior TPA said that it was really a plan account, but mislabeled. After several hours on the phone with the investment provider, we determined that it was not a trusteed account, and there would be nothing stopping the employee from taking the money out if she chose. We concluded that if there was no trustee then it could not be part of the plan trust. The good news is we got a VCP approved pretty quickly to move it out of the IRA and into an account titled under the name of the plan. I'm not sure if this helps; in your case it sounds like the trustee probably does have authority over all of the assets if they are in a single checking account, so it's possible it could meet the requirements of a trust. The sponsor probably breached their fiduciary duty of diversification if all the assets are held in a checking account, but that is a separate matter. I agree of course with the other posters who point out that IRA can by definition not contain assets for more than one person - the "I" stands for "individual" after all. Is it possible that the client is confused about the difference between an IRA and a plan? What type of plan did they have before?

If by "class-allocated" you mean that every participant is in their own group, then yes - as long as the document provides that contributions to each group are totally discretionary, the employer can elect to contribute $0 to any particular group. One good reason to keep a last day requirement, even with each participant in their own group, is that it allows you to exclude terminees with less that 500 hours of service from the coverage test. If you have low turnover, or a HCEs who do not receive an allocation, this may not be a concern.

I just tested it - if you change your email address for mailing purposes, it also changes it for login purposes. I was able to log in with the new email address that I supplied and was no longer able to log in with the original one.

I'm in favor of the change. Until just now I wasn't aware it was an option to log in with your display name. Regarding changing emails, it could be a problem if you no longer have access to the old email account and you need to reset your password. Does the system support changing your email for login purposes? Or can a backup email be added?

Maybe contact the ABCD. This is definitely a violation of all sorts of codes of conduct.

If the receiver is a Qualified Termination Administrator, then they have fiduciary protection against any breaches that occurred prior to their becoming QTA under the final abandoned plan regulations. The former shareholders, to the extent that they failed to execute their fiduciary duties, would still be liable.

It should still come out right, since deferrals for self-employed individuals are deducted on their Form 1040 Schedule 1, not on their Schedule C or K-1, but the income from Schedule C or K-1 (before the deferral) is used to determine the self-employment tax.

Deferrals aren't normally exempt from FICA/FUTA taxes so any amount that would be taxable should still have been taxable during the year in which they were mistakenly withheld. I will admit I am not thoroughly versed in the complexities of self-employment tax issues beyond the pension arena, so there may be some subtlety I am missing here.

Sure, you can use any of the 415 safe harbor definitions of comp. If the question is, can you use the shareholder's passthrough income reported on their Schedule K-1, that answer is NO.

The participant is misunderstanding what the IRS is saying. Not surprising, since it is kind of a subtle distinction. This means that the employer is not required to look into the employee's personal finances - bank statements, investment accounts, credit cards, etc. to see if they have some other means available to them to satisfy the hardship. It does not mean that the employee is not required to substantiate the existence of the hardship. The IRS has this page about hardship substantiation: https://www.irs.gov/retirement-plans/its-up-to-plan-sponsors-to-track-loans-hardship-distributions Although summary substantiation is permitted, the plan administrator is well within their rights to use the traditional substantiation method. The participant has to comply with the plan administrator's procedures if they want to request a hardship withdrawal from the plan.

First off, the SECURE Act changed the RMD age to 72, not 72½. Second, please try to use punctuation. It will make your question easier to read for the rest of us. The advisor may be correct. The required beginning date for a plan participant who is not a 5% owner is the later of age 72 or termination of employment. Termination of the plan does not require RMDs to commence for non-owners even if they are past age 72. However you said that there is an acquisition going on here. If it is was an asset sale, then the employees may in fact have experienced a termination of employment. More facts are needed. Regardless, if a participant who is age 72 takes a total distribution as a rollover, and then terminates later in the year, part of their distribution retroactively becomes not eligible for rollover, which could cause problems. Thus it may be advisable to have participants who are over age 72 take a portion of their distribution in cash, just in case. They should also keep in mind that if they roll over their distribution to an IRA, they will be required to commence RMDs regardless of whether they have terminated employment.

Yes. 1.401(k)-1(a)(3)(i) includes in the definition of a qualified cash or deferred election, an election to have the employer provide cash "or some other taxable benefit" versus a plan contribution. I'm sort of curious what this "gift" is exactly, if not cash. I'm trying to imagine what sort of gift I would want my employer giving me. A gold watch? A trip to Hawaii?

It's a 415 violation, so code E. From the instructions to the 1099-R:

Correct. The non-elective contribution portion of the plan needs to satisfy coverage. If the only non-elective contribution is the top heavy minimum, then yes. Your result seems unusual though. The only way I could see to end up with that ratio would be if there were a large number of non-key HCEs who have to receive a top heavy minimum, and also a large number of non-HCEs who terminated and therefore don't get a top heavy minimum, but also worked at least 500 hours and therefore can't be excluded from the coverage test. Does that describe the situation? Don't forget that the SH match contributions count towards the top heavy minimum. If you have any employees who are eligible for SH match and are deferring at least 3%, they would get enough of a match to satisfy the top heavy minimum and wouldn't need to get a non-elective contribution at all. You can also disaggregate otherwise excludable employees from the coverage test, but since those will mostly be non-HCEs who have to get a top heavy minimum as a non-elective contribution (since they aren't eligible for safe harbor), it would probably hurt you more than it would help. Check the plan document. Many plans will include a "fail safe" provision that automatically adds people back in to satisfy a failing coverage test. If your plan contains that provision, then you must follow it. If it does not, then you might have to adopt a 1.401(a)(4)-11(g) corrective amendment to grant allocations to employees who wouldn't have otherwise been eligible for them.

And make sure you get paid in advance!

Is there anything in the document that says withdrawals are limited to one per year?

My understanding of the anti-abuse provision is that it exists to give the IRS the power to disqualify plans which are discovered to be abusive under audit, even if the situation does not directly violate the letter of any law or regulation. In other words, it is usually impossible to determine if you are violating the rule, until the IRS tells you that you have violated it. The sole example in 1.414(c)-5(g) that talks about the anti-abuse provision describes a situation in which one organization has the power to select the slate of nominees from which the directors of another organization will be chosen. In your situation, the directors of one organization apparently have the authority to set the compensation for employees of another organization. I do not know if that rises to the same level as the case in the example. If you want a more authoritative opinion, I recommend you contact Derrin Watson. He (literally) wrote the book on this topic.

You might be right, I just don't encounter it often (or ever) and my mind immediately goes to questions of nondiscrimination, BRFs, and so on.

It might be ok if the employer is merely collecting the fee from the plan and then immediately turning around and paying it to a service provider. It would be much cleaner of course if the plan could pay the service provider directly, but it is not necessarily a PT for the employer to be in the middle of that transaction. I am also concerned that you only asked about terminated participants. Do active participants not get charged this fee? I don't think you can different fee structures for active and terminated participants.

Most payroll systems can track the 402(g) limit, even between pre-tax and Roth, so I don't see how this would be much different conceptually. Of course, what payroll providers' systems should conceptually be capable of and what they are in fact capable of are rarely the same thing.

The plan document probably says that anyone who is eligible for deferrals is eligible for safe harbor. If that's the case, and the deferral feature was first effective after the participant's date of termination, then I don't believe they would be eligible for safe harbor, as they were never eligible for deferrals. If the participant is actually entitled to some contributions under the plan, then yes, they need to receive an SPD as they need to be notified of their rights under the plan. No one is required to receive a safe harbor notice for a safe harbor non-elective plan any more.