C. B. Zeller

Here is what Section 4.03(b)(1) of our FTWilliam basic plan document says:

Testing Compensation would not typically be defined in the plan document. In general you are free to use any definition of comp that satisfies 414(s) for testing purposes.

Only the benefits accrued as of the effective date of the amendment are protected from cutback. In other words participants have to be 100% vested in all their contributions up through 12/31/2017, and contributions made on or after 1/1/18 would be subject to the new schedule. This is what is legally required, but plans can choose to be more lenient. For example in your case they might choose to let anyone who was a participant as of 12/31/17 remain under the old schedule even with respect to future contributions, so that they do not have to track vesting separately for different portions of their accounts. A well-written amendment should be explicit about to whom the new schedule applies, and when. My guess is that the participant in question is subject to the new vesting schedule since she had no balance on the effective date, but it will depend on exactly what the amendment says.

Can you even imagine ... Facebook already knows everything you look at on the internet, now they know your retirement account too. You look up a medical procedure on the internet, next thing you know you're getting ads that say click here to take a hardship withdrawal from your 401(k).

I don't use Relius, so I can only comment on the general testing question. When grouping EBARs, you treat every person in the range as having an EBAR equal to the midpoint. But, practically speaking, is there any difference? They will all be in the same rate group regardless. Maybe there is a side-effect of banding that I am not thinking of. And, ratherbereading, here it is whether you want it or not: EBAR = contribution * (1 + interest rate) ^ (retirement age - current age) / APR / monthly comp

The portion of the accrued benefit derived from employee contributions is not subject to 415(b). The employee contributions are considered annual additions subject to the DC limits. 1.415(c)-1(a)(2)(ii)(B) and (b)(3).

Based on counting hours, or elapsed time? If elapsed time, the hours don't matter and the service spanning rule means you don't have a period of severance.

Rev Proc 2017-57, sec. 3.02: So, I think this would have to be considered a change in funding method (since it's not a change in data or actuarial assumptions), and I also think it would probably qualify for automatic approval, assuming you meet all the requirements of 2017-56 4.02. The only way to know for sure though would be to apply for approval for a change in funding method. Edit: I went back and re-read your original question. I had been thinking that you were asking about switching from assuming mid-year to using exact dates, but I realize now you were actually asking about going the other direction. That could present an issue for automatic approval, since 2017-56 4.02(5) requires that the new software be "designed to produce results that are no less accurate than the results produced prior to the modifications or change." Assuming all cash flows occur mid-year would seem to be, by design, less accurate than using exact dates.

Change in vendor is probably the most common case, but I don't see why it couldn't also be used for internally-developed software. A spreadsheet certainly counts as software. There is a requirement that the new software "generally will be used by the enrolled actuary for the single-employer plans to which the enrolled actuary provides actuarial services" so it sounds like you only get the automatic approval if you start using the new spreadsheet for all, or mostly all, of your plans. As to the question of how minor is minor, the rev proc provides a concrete numeric test. The FT, TNC and actuarial value of assets must be within 2% of the value computed with the old software (or 1% if you changed software and used the automatic approval in the prior year). Since a change to the method used to calculate ROR would not impact any of those values, I think that you could argue that a change to any reasonable method of calculating the ROR would be acceptable at any time. A more cautious approach would be to consider that the credit balances are part of the plan assets, and show that the carryover balance and prefunding balance calculated under the new method are within 2% of the amounts calculated under the old method.

Rev Proc 2017-56 provides automatic approval of a change in funding method due to a change in software. Check the rev proc to see if the specifics apply to your situation.

Worst case, the DFVC filing penalty would just have to be included in the plan setup costs for these late adopters.

If the matching contributions meet the definition of a QMAC (safe harbor contributions would, generally) then they may be used in either the ADP test or the ACP test, but not both. The plan will be subject to both tests.

Are you asking if employer contributions can be considered catch up? The answer is no. Only deferrals can be used as catch up.

I don't imagine it was their intention to exclude long-term part-time employees from Roth eligibility. Since no one will become eligible under these rules for a few years still, hopefully there will be some official guidance to clear the issue up before then.

I agree, I did not consider the deduction limit in my reply. It only occurs to me now that 6,800 is exactly 25% of 27,200 which might suggest that this person is the only participant in the plan.

I'm not sure what "plus catch up" means here but I think you're asking if the employee can get $12,800 in profit sharing? Let's see: Annual additions = 19,000 (deferral) + 12,800 (profit sharing) = 31,800 415 limit = lesser of 100% of comp or 56,000 = 27,200 Annual additions exceeds the 415 limit by 31,800 - 27,200 = 4,600 This is less than the catch-up limit for the year so reclassify 4,600 of deferrals as catch-up Amount of deferrals that counts for annual additions is now 19,000 - 4,600 = 14,400 For 415 we have 14,400 + 12,800 = 27,200 So yes, you can do $12,800 in profit sharing, and it will result in $4,600 of the deferrals being reclassified as catch up.

I agree with Luke - it needs to be tested under both. The contributions are conditioned on employee deferrals, so it is a match and needs to satisfy the ACP test. Each rate of match needs to be tested for nondiscriminatory availability of benefits, rights and features under 401(a)(4). It does not need to satisfy the general test for nondiscrimination, a.k.a. rate group test, which might be what you're thinking of as 401(a)(4), and is used to test nonelective employer contributions that do not satisfy a design-based safe harbor.

The standard for a deemed hardship is "Expenses for (or necessary to obtain) medical care that would be deductible under section 213(d)". If an expense is "necessary to obtain" medical care then it follows that the financial need (and hence the withdrawal) precedes the actual provision of the medical care. So it seems to me that the reg at least contemplates, if not outright authorizes, withdrawals before the expense is actually incurred. I agree it does carry some risk to the plan and a plan administrator would be well within their rights to limit the availability of hardship distributions where the expense is expected but not actually incurred yet.

The participant doesn't necessarily have to furnish proof of the expense to the plan administrator at the time the hardship is requested - the plan can rely on a summary substantiation. There are plenty of other issues raised by allowing a hardship before the expense is actually incurred. For example: What if their insurance changes next year, and covers the drug? What if their doctor decides to change to a different drug? What if they get better? While there is not, strictly speaking, a requirement that the participant incur the expense before the hardship withdrawal is made, if the participant ends up not having the expense after the plan already made a distribution, then there is a qualification problem. Within the plan, if loans are available, then that might help get the participant at least part of the way. Outside of the plan, as someone who's been in a similar situation in the past, I'd recommend that they call the drug manufacturer. Often they have programs where they will offer the drug at a discounted price and/or on a payment plan to people whose insurance doesn't cover it. Some states also offer a charity care program which this person might be eligible for.

I count 4: The husband's RMD, paid to the wife as beneficiary (code 4) The wife's RMD (code 7) The wife's rollover to the IRA (code G) The rollover of the husband's balance to the wife's account (code 4G)

Can you enlighten me as to what 87-44 refers to? I can't find anything related to qualified plans under that number.

Maybe you can explain something to me, because I don't see how you do this without it being a cutback. Say the plan covers 10 employees, each of them has comp of $100,000. On the last day of 2019, the plan's allocation formula states that each participant is entitled to a pro rata share of the employer contribution. The employer makes a discretionary contribution for 2019 of $10,000, so under the plan's formula, each employee is entitled to $1,000 of the contribution. After the end of the year, they adopt an amendment to retroactively grant employee Q an additional $5,000 (let's assume coverage and nondiscrimination are satisfied - it's not relevant for my question). What you are saying, as I understand it, is that because there was an employer contribution allocated under the original formula, you can use an -11(g) amendment to "add on" an additional contribution under a completely different formula. The way I'm looking at it, the employer contribution for 2019 is now $15,000. Under the formula in effect on the last day of the plan year, each employee is entitled to $1,500 of the contribution. Under the amended formula, Q is entitled to $6,000 and all other participants are entitled to $1,000. Therefore the amended formula is a cutback for everyone other than Q, and is not permissible. The fact that the employer would not have made the additional $5,000 contribution if not for the amendment is irrelevant (see the 3rd to last paragraph of TAM 9735001).

Larry, I appreciate the feedback. Cunningham's Law at work, perhaps? However I'd like to dig a little deeper. The W-2 safe harbor definition of compensation comes from 1.415(c)-2(d)(4) which says "amounts that are compensation under the safe harbor definition of paragraph (d)(3) of this section, plus all other payments of compensation to an employee by his employer (in the course of the employer's trade or business) for which the employer is required to furnish the employee a written statement under sections 6041(d), 6051(a)(3), and 6052." (d)(3) says sec. 3401(a) wages, plus deferrals. 6041(d) describes who is required to furnish a statement, and the information required to be reported on it. 6051(a)(3) says "the total amount of wages as defined in section 3401(a)." Notably, third party sick pay is explicitly required to be reported on the statement by 6051(f). However, since the safe harbor definition of compensation under 415 refers only to 6051(a)(3), and not to 6051(f), I understand that to mean that third party sick pay is not compensation under this definition. 6052 refers to payment of wages in the form of group-term life insurance.

Not sure that I agree here. 3rd party sick pay is reported on the W-2, yes, but it is not "compensation paid by the employer to the employee" and therefore would not be compensation for plan purposes.

First distribution calendar year is 2018. RBD is 4/1/2019. However participant is not vested at that point so no benefit is payable. As of 12/31/2019, participant has 2 years vesting service and is still not vested. Still no benefit payable. Upon completing a third year of vesting service in 2020, the benefit becomes payable. Exactly when could depend on how the plan defines a year of vesting service, however if benefits commence by 12/31/2020 you should be ok.