C. B. Zeller

I don't think that works. Even if you are doing daily testing, you still determine whether or not the employee is benefiting based on whether or not they satisfied the conditions to receive a contribution for the year. There is not a lot to go on, but here is what it says in 1.410(b)-8: (a) Testing methods—(1) In general. A plan must satisfy section 410(b) for a plan year using one of the testing options in paragraphs (a)(2) through (a)(4) of this section. Whichever testing option is used for the plan year must also be used for purposes of applying section 401(a)(4) to the plan for the plan year. The annual testing option in paragraph (a)(4) of this section must be used in applying section 410(b) to a section 401(k) plan or a section 401(m) plan, and in applying the average benefit percentage test of §1.410(b)-5. For purposes of this paragraph (a), the plan provisions and other relevant facts as of the last day of the plan year regarding which employees benefit under the plan for the plan year are applied to the employees taken into account under the testing option used for the plan year. For this purpose, amendments retroactively correcting a plan in accordance with §1.401(a)(4)-11(g) are taken into account as plan provisions in effect as of the last day of the plan year. (2) Daily testing option. A plan satisfies section 410(b) for a plan year if it satisfies §1.410(b)-2 on each day of the plan year, taking into account only those employees (or former employees) who are employees (or former employees) on that day. (3) Quarterly testing option. A plan is deemed to satisfy section 410(b) for a plan year if the plan satisfies §1.410(b)-2 on at least one day in each quarter of the plan year, taking into account for each of those days only those employees (or former employees) who are employees (or former employees) on that day. The preceding sentence does not apply if the plan's eligibility rules or benefit formula operate to cause the four quarterly testing days selected by the employer not to be reasonably representative of the coverage of the plan over the entire plan year. (4) Annual testing option. A plan satisfies section 410(b) for a plan year if it satisfies §1.410(b)-2 as of the last day of the plan year, taking into account all employees (or former employees) who were employees (or former employees) on any day during the plan year. (5) Example. The following example illustrates this paragraph (a). Example. Plan A is a defined contribution plan that is not a section 401(k) plan or a section 401(m) plan, and that conditions allocations on an employee's employment on the last day of the plan year. Plan A is being tested for the 1995 calendar plan year using the daily testing option in paragraph (a)(2) of this section. In testing the plan for compliance with section 410(b) on March 11, 1995, Employee X is taken into account because he was an employee on that day and was not an excludable employee with respect to Plan A on that day. Employee X was a participant in Plan A on March 11, 1995, was employed on December 31, 1995, and received an allocation under Plan A for the 1995 plan year. Under these facts, Employee X is treated as benefiting under Plan A on March 11, 1995, even though Employee X had not satisfied all of the conditions for receiving an allocation on that day, because Employee X satisfied all of those conditions as of the last day of the plan year.

In this case, I think the $5k would be taxable gains, and the business would get a deduction when they contribute it to the plan.

Credit for the comic goes to Ryan North of Dinosaur Comics. Hope I can bring a little levity to everyone's Friday

Life annuity payments are already exempt from the excise tax under 72(t) and 20% mandatory tax withholding. Presumably, if the participant is a qualified individual, they would be able to treat up to $100,000 of their benefit payments received during 2020 as a coronavirus-related distribution, and would be able to recognize the income over 3 years, and/or repay it to an IRA or qualified plan.

I would remind this client that, while they would be within their rights as Plan Administrator to deny the request if they believe the participant is not eligible, remember that plan benefits, including availability and timing of distributions, must be definitely determinable and not subject to administrator discretion. If they are going to deny the request, they better have a damn good reason, and, preferably, documentation supporting their decision. Given that the law explicitly allows the Plan Administrator to rely on the participant's certification, it seems like a very aggressive position to deny that certification. I would be concerned that a Plan Administrator taking this position would be exposing themselves to unnecessary liability.

Coronavirus-related distributions are exempt from the requirement to allow direct rollover. Most of the provider forms I have seen so far don't even have a spot to enter rollover info. What is the participant trying to accomplish in this case? Rollovers are already exempt from the excise tax under 72(t), and not includable in income, so why bother with the qualified individual certification?

Could the sponsor restrict the availability of loans solely to qualified individuals (within the meaning of the CARES Act)?

Correct. The text of CARES sec. 3608(a) provides a delay in any minimum required contribution amount determined under IRC sec. 430. Required contributions for money purchase plans are determined under the plan's formula, not IRC 430.

I don't think there's anything saying you have to do it one way or the other. But if you're doing it one way and you wanted to change, that would be a change in funding method which would have to be approved by the IRS.

If the site will give you single life APRs and a 100% J&S APR, you could use those to calculate the 50% APR. Just let me dust off my life contingencies notes here ... Ax = Single life APR for life aged x Ay = Single life APR for life aged y Axy = Joint life APR for lives aged x and y 100J&S = Ax + Ay - Axy Axy = Ax + Ay - 100J&S 50J&S = Ax + 0.5*(Ay - Axy) = Ax + 0.5*Ay - 0.5*[Ax + Ay - 100J&S] = Ax + 0.5*Ay - 0.5*Ax - 0.5*Ay + 0.5*100J&S = 0.5*Ax + 0.5*100J&S = 0.5*(Ax + 100J&S) So, take your primary annuitant's single life APR, add the 100% J&S APR, and divide that by 2 and you should get the 50% J&S APR. I spot checked this with a few randomly selected ages and mortality/interest assumptions from my software.

I don't think the quoted section necessarily applies to an EACA, it comes from the QACA regs. Uniformity for EACA is defined in 1.414(w)-1(b)(2), which references only 1.401(k)-3(j)(2)(iii). What about 1.401(k)-3(j)(2)(iii)(B), which says that the default percentage may not reduce the contribution rate for any employee?

Possibly, although taking that line of thought a step farther, what would prevent any employer, controlled group or not, from spinning off a portion of their plan and terminating its safe harbor mid-year? If you could do this, wouldn't it make that section of 2016-16 meaningless?

Safe harbor match requires a notice to be given before the beginning of the plan year. Therefore it is impossible to add SH match mid-year. Thanks to the SECURE Act it is now possible to add SH nonelective mid-year or even retroactively after the end of the year.

Yes. CARES increased the limits of 72(p) and DB plans are permitted to allow loans under 72(p).

The difference is that, if it were 2 plans, you could terminate the safe harbor for one of them (assuming the conditions MWeddell specified are met) and retain it for the other. The plan that terminated its safe harbor would be subject to the ADP test for the year, but the other plan could continue its safe harbor status. Assuming they both pass coverage, of course.

Yes, that's it. The regulation referenced there contains rules for aggregating DB and DC plans for testing, including the 7.5% combo gateway. So under the plan document, each participant who received any profit sharing was required to get at least the gateway, and if they didn't then you have an operational failure which can be self-corrected.

Depending on the timing, you might be able to do a 60-day rollover by paying the amount to the IRA.

Then you can't do it. Notice 2016-16 covers permissible mid-year changes to safe harbor plans, and prohibits a mid-year change to reduce or narrow the group of employees eligible to receive safe harbor contributions.

The major thing you need to be aware of with using different eligibility for deferrals and safe harbor match, is that you no longer get your free pass for top heavy. If the plan ever becomes top heavy, you will be subject to the top heavy minimum, even if the only other employer contribution for the year is the safe harbor match. Other than that, there is no problem with having different eligibility requirements for deferral and match. For the ADP test, the employees who have not completed 1 year of service are disaggregated as otherwise excludable, and as long as they are all NHCE that group does not need to be tested. For the other group they satisfy the ADP/ACP test by way of the safe harbor match.

Is it 1 plan covering both entities, or 2 plans tested together?

No.

Generally deferrals have to be withheld from amounts paid during the year. Was the pay and the deferral included in their 2019 W-2?

Compensation for the ACP test must be 414(s) compensation. If you are using anything other than a safe harbor definition of compensation, such definition has to be reasonable, and it has to satisfy the compensation ratio test. I have no idea whether a definition that excludes all pay after a given date would be considered "reasonable."

I don't know that there has been any official word on the use of code 2 for coronavirus-related distributions, but it seems like a reasonable approach. The loan offset is a qualified loan offset (code M) since it is due to termination of employment. It probably benefits the participant the most if you do $80,000 from the account as code 2, $20,000 from the loan as code 2M, and $20,000 from the loan as code 1M. Then they have the opportunity to repay $20,000 of the loan offset to an IRA by their tax filing deadline for 2020 in order to avoid being taxed on it and avoid the penalty under 72(t).