C. B. Zeller

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.

I think this can be self-corrected as an "Excess Allocation" under Rev. Proc. 2019-19 sec. 6.06(2). You would remove the money from the spouses' accounts and put it in an unallocated* account. No further employer contributions may be made until the money in the unallocated account is allocated to participants. *The unallocated account is similar to a forfeiture account but is not actually forfeiture. For example, true forfeitures may be used to pay plan expenses, but this unallocated account may not.

Failure to correct a failed ADP test by distributing excess contributions before the end of the following plan year can be corrected by using the "one-to-one" method described in Rev. Proc. 2019-19. Basically, you distribute the excess contributions (adjusted for earnings) and make a QNEC to the NHCEs equal to the amount of the excess contributions - but please read the actual rev proc for details. There is no second-tier tax imposed by sec. 4979. There is a penalty for late filing the Form 5330 and paying the excise tax however. See the instructions to the 5330 for details. The penalty can be waived for reasonable cause.

Notice 2016-16 specifically prohibits a mid-year change to the type of safe harbor plan. You can make this change, but only at the beginning of a plan year.

If you were born born between July 1, 1948 and June 30, 1949, then you turned 70.5 in 2019 and your first distribution calendar year is 2019. RBD is 4/1/2020. If you were born between July 1, 1949, and December 31, 1949 then you will turn 72 in 2021 and your first distribution calendar year is 2021. RBD is 4/1/2022. The only people whose RBD will be 4/1/2021 are non-5% owners who were born 1948 or earlier (age 72 during 2020) and terminate employment during 2020.

This seems like a bad idea if the company has, or ever might in the future, have any employees.

Having formerly written and maintained applications with an Access DB backend, I will say that you probably outgrew it the minute more than one person needed to use it at the same time. That said, there are some interesting document management solutions out there, but as for us, we just use a plain-old folder hierarchy, which used to live on our own file server, and is now on one of the big cloud storage providers. Anything that comes in a non-electronic form gets scanned and saved to the appropriate client folder.

You may be considered a highly compensated employee if you own or are deemed to own more than 5% of the company. "Deemed to own" means you are attributed ownership from certain family members, but you are also "deemed to own" any shares that you have the option to buy, even if you do not actually own the stock. Has your employer granted you any stock options?

One possibility - if the distribution code (box 7) on the Form 1099-R says "M" (it may say "1M" or "7M" or similar) then you have a "qualified plan loan offset" which means you can roll over the loan, thus avoiding current taxes and penalties, by repaying the defaulted amount to an IRA by your tax filing due date. Based on the facts provided, it does not sound to me like you would have a qualified loan offset, but there may be additional facts I am not aware of. Your plan administrator or custodian would be in a better position to make that determination. Form 1099-R is required to be mailed by the end of January. You'll want to make sure they have your right address for this.