C. B. Zeller

I re-read my comment and the responses - I did not mean to imply that the assets should be immediately distributed without formally terminating the plan. What I should have said was that since contributions are no longer recurring and substantial that the plan should be terminated asap, then assets should be distributed and a final 5500 filed.

Disclaimer - I know nothing about this area of law - but if she worked "for free" for many years, could she sue for retroactive status an an employee, thereby entitled to back wages and benefit accruals?

A profit sharing plan which has a complete discontinuance of contributions is de facto terminated. It is debatable how this applies to a plan with a 401(k) feature, since contributions are elective, but in this scenario where the sole employee will not have any comp in the future, I would say it applies. So you already have a terminated plan, you just need to distribute the assets and file a final 5500.

Depends on what the document says. If the document says that contributions will be deposited quarterly then you have an operational failure and need to self correct under EPCRS. If it says the match will be deposited "at a time to be determined by the plan administrator" or other such language then you would true it up at the end of the year. Of course the match would have to be computed based on the whole year in this case.

Here is what FTWilliam said about the change:

I agree with Lou S.'s point about it needing to be re-coded in order to prevent the participant from using it in a 60-day rollover. Moreover, it should be re-coded so that the corrective distribution reported on the 5500 agrees with the 1099-R. Will it invite an IRS audit if there is a mismatch? Probably not, but if it did, I wouldn't want to be the one explaining to my client why I decided to take that particular shortcut. You might be able to re-frame the situation to make it more palatable to the client. Explain to them that they failed the test, and participant X has to take a refund, but since he already took a distribution, you can help them avoid needing to make an additional distribution by reclassifying a portion of the distribution he already took. All they need to do is issue a separate 1099-R in January.

Maybe asking if they waived the QPSA? That's the only pre-retirement election that would apply that I can think of.

We have both a print copy of the 2016 EOB, and ERISApedia in our office. What I like best about ERISApedia: Hyperlinks from the research guide to IRS/DOL/PBGC source material (code sections, regs, rev procs, etc) Easy to browse and search government source material directly (much more so than the Cornell law website) Includes Who's the Employer by Derrin Watson However I still refer to the EOB for some things that I think it covers better - plan corrections is one. I can't speak to EOB online as I haven't used it.

This might simply be because the estate is not his beneficiary, as opposed to because there was no benefit due. Ask the plan administrator who the beneficiary is.

Why were you not required to file at all in 2016 and 2017?

A cash balance plan is a defined benefit plan that defines the normal retirement benefit in terms of a hypothetical account balance. If your plan document or SPD defines the benefit in terms of pay credits (sometimes called contribution credits or principal credits) and interest credits, it is a cash balance plan. In a cash balance plan, the lump sum that is payable is equal to the hypothetical account balance. In other plans, lump sums are subject to 417(e), which means that the lump sum payment may be greater than would otherwise be calculated using the plan's definition of actuarial equivalence. The exact amount will depend on the applicable interest rate and mortality table in effect at the time of the distribution. You were asking about employee contributions originally. The exemption from 417(e) for cash balance plans only applies to employer contributions, so you can disregard everything I said in the first paragraph. How employee contributions work in defined benefit plans depends on whether the contributions are mandatory or voluntary. Contributory DB plans are pretty rare - I don't personally work on any, so I am by no means an expert on the subject - but my understanding is that mandatory contributions count towards part of the normal retirement benefit, essentially offsetting the employer's annual cost, whereas voluntary contributions are allocated to separate accounts and treated basically like voluntary employee contributions in a DC plan, and the benefit is based on the actual investment performance in the separate account. Projected unit credit is an actuarial cost method and is really only useful if you are an actuary using it to determine the plan's costs for the year. If you are interested in the math behind it you can read more about it here: https://www.asppa.org/sites/asppa.org/files/PDFs/White Papers/Actuarial Cost Methods A Review.pdf In short - I think you need to ask the plan's actuary.

You can't amend, since the 5500-EZ is not filed with the DOL. You would need to file under DFVCP.

How about answering 10e "no" (or yes/0) and then amending the filing if/when the carrier provides the updated info?

No such thing. We have plans that fail every year and take HCE refunds every year.

I've always taken the approach that coverage only looks at who benefits and nondiscrimination looks at the amount of benefits. That is, for coverage purposes, $1 is as good as $50,000 (ABPT notwithstanding). So even if your plan allocates with each participant in their own group, as long as any non-benefiting groups satisfy some reasonable classification, then I think you can use the ABT to satisfy coverage.

Issue a corrected 1099-R with code G for the amount of the distribution less the amount of the refund. Issue a 1099-R with code 8 for the amount of the refund. The amount of the refund would be treated as an IRA contribution for the prior year. If this results in an excess IRA contribution, the participant may withdraw the amount from the IRA before their extended tax deadline in order to avoid the 6% excise tax. See EOB ch. 11, sec. VIII

In the past, ASPPA has sponsored a QKA scholarship which pays for the study materials and test registration fees. The link doesn't currently seem to be functioning on their site but if you're subscribed to their email list I'm sure you will hear more about it. If I recall correctly they usually begin accepting applications over the summer and then announce the winners at the national conference in October.

Is the coverage ratio for each rate group equal to at least the midpoint between the safe harbor and unsafe harbor percentages?

Didn't you say it was the owners who made the contribution in question? Why wouldn't they know where their own contributions came from? There should be documentation from the institution that distributed the assets in this case.

1.401(m)-2(a)(2)(i) specifies that the ACP is calculated to the nearest hundredth of a percent. So as long as the sum of the ACRs for the contributing HCEs (also calculated to the nearest hundredth of a percent) doesn't exceed .03%, you have .03% / 7 = .004286% which rounds to 0.00% and the ACP test passes!

No comment on the nondiscrimination issues, but if the plan is a small plan, then amendments adopted in the last 2 years which increase benefits for HCEs may not be included for purposes of the maximum deduction. See 404(o)(4)(A).

They can count it as an annual addition for 2018 as long as it is made within 30 days of the deadline for making a deductible contribution for 2018 (e.g. their tax deadline for 2018). See 1.415(c)-1(b)(6)(i)(B).

To clarify slightly, the RBD is determined based on the plan year ending in the calendar year in which the employee attains age 70 1/2. It is not based on whether or not the person actually owns 5% on the date they turn 70-1/2. If the 5% owner in question is turning 70 on or before June 30 of this year (assuming plan year is calendar year), then they will turn 70-1/2 during 2019. They were a 5% owner with respect to the 2019 plan year, so 2019 is a distribution calendar year for them and their RBD will be 4/1/2020. If their 70th birthday is between July 1, 2019 and December 31, 2019, then they would have until December 31, 2019 to dispose of their ownership interest to avoid being subject to RMDs.

How about a retroactive amendment to allow distributions at 59-1/2?

IRS Rollover Chart