C. B. Zeller

Presumably the owner must be doing some non-union work; as the management, after all, he would be the other party in the collective bargaining agreement. In the next paragraph of the reg you quoted, 1.410(b)-6(d)(2)(i) it states "An employee who performs hours of service during the plan year as both a collectively bargained employee and a noncollectively bargained employee is treated as a collectively bargained employee with respect to the hours of service performed as a collectively bargained employee and a noncollectively bargained employee with respect to the hours of service performed as a noncollectively bargained employee." I think as long as you can account for the non-union hours, you can base a plan just on those hours (and presumably the comp paid just for those hours). However I can't disagree with ERISAAPPLE's suggestion to get advice from an attorney first.

There is a new code M for 2018 used to report loan offsets due to termination of employment. The withholding is 20% of (cash distribution + loan offset) and it is taken entirely from the cash distribution, since it can't be taken from the loan offset. There is no withholding on the amount rolled over.

Yes, unless your plan document says otherwise, you can use average annual compensation to test amounts that were allocated based on current compensation.

You can use any 414(s) definition of compensation for testing, it does not have to be the same definition used for allocations.

Larry, Not to doubt you, but can you provide a cite? Required beginning date is pretty clearly defined for a non-5% owner as April 1 of the calendar year following the year in which the participant turns 70-1/2, or retires. It doesn't make any reference to when pre-retirement in-service withdrawals begin. If the participant is not yet retired as of 12/31/2018, then her RBD would not be 4/1/2019, and therefore 2018 would not be a distribution calendar year, and therefore the distribution taken in 2018 would not have to comply with 401(a)(9).

Does testing on average compensation help? Does the document contain a fail-safe or any other language that would apply? If you have to fall back to the general test, you only need to satisfy the gateway if you cross-test. If you are able to pass by, for example, imputing permitted disparity on allocation rates, then the gateway is not needed.

SCP can be used to correct significant failures up to the end of the second plan year after the failure occurred. The deadline to make the 2015 SH contribution was 12/31/2016, so you would have until 12/31/2018 to self-correct that failure. Furthermore, insignificant failures can be corrected under SCP at any time. I can't determine for you whether or not the failure was insignificant, but based on the number of participants affected and the dollar amounts it may be.

I sincerely doubt there was a determination letter. We have as yet been unable to locate the original plan document though. Honestly there are quite a few document issues and we are planning to go to VCP after the 5500 issue is settled. The government might know the plan exists, because 1) they have been reporting profit sharing expense on their corporate returns for many years, and 2) we recently put in a new cash balance plan for this company with plan # 002 (and those 5500s have been filed timely).

The plan has never filed Form 5500 in the past. The plan started in 2005 and covered just the owner and his wife. The balance was over $250,000 due to a large rollover contribution in the first year. It continued to cover just the owner and his wife until 2012, when an employee became eligible. So we have late 5500-EZ filings for 2005 through 2011, correctable under Rev. Proc. 2015-32, and late 5500-SF filings for 2012 through today, correctable under DVFCP. However, we are still waiting for the client to find the end of year account balances for 2005 through 2007. Without that info we cannot prepare the EZs for those years. My question is, should we do the DFVCP filings now, in order to close the door on the DOL penalties, at the risk of potentially alerting the IRS to missing past EZs? Or should we wait until the client is able to find their old account statements, and do both submissions at the same time, hoping that neither the DOL nor the IRS come knocking at their door before then? Has anyone had a similar situation in the past? Am I just paranoid thinking that the IRS will see a "First return/report" with an opening balance greater than $250,000 and immediately come looking for the past EZs?

Correct, because the new law doesn't talk about rolling over a loan, it talks about rolling over a loan offset. The offset is the lump sum distribution of the outstanding balance of the loan. The participant can roll it over by paying the amount of the offset to the rollover account by the appropriate deadline.

No (maybe). In the DC plan, 1.416-1 M-7 does state that you cannot use the rule reducing the TH minimum to the maximum key contribution rate if the DC plan is being aggregated with a DB plan for coverage or nondiscrimination testing. However if your DB plan is frozen then (presumably) there were no accruals and so no testing would be required. So the plans are not being aggregated and you can reduce the DC TH minimum to 0. On the DB plan, if no key employee benefits during a given year, then the year is not counted in determining the employee's years of service for purposes of determining the TH minimum. So if their benefit satisfied the TH minimum in the previous year, then it should still satisfy it in the current year, provided that their high 5 year average comp hasn't increased. If the DB plan provides for TH minimum benefits under the DC plan, then I'm not sure. My feeling is that it's probably not required, since the purpose of allowing the DB TH minimum to be provided in the DC plan is to replace the minimum accrual, and if no accrual would be required for a given year then the corresponding contribution should not be required either.

It would depend on the document, but most that I've seen have language saying that a participant who terminates with 0 accrued benefit is deemed to have received a distribution of their benefit. In that case, I think you would be ok, since once they've been paid out you're done with them.

I think it would cause issues with 401(a)(26), specifically the prior benefit structure would not pass.

I agree with ETA. Here's a cite from 1.416-1 (emphasis added): T-4 Q. How is a terminated plan treated for purposes of the top-heavy rules? A. A terminated plan is treated like any other plan for purposes of the top-heavy rules. For purposes of section 416, a terminated plan is one that has been formally terminated, has ceased crediting service for benefit accruals and vesting, and has been or is distributing all plan assets to participants or their beneficiaries as soon as administratively feasible. Such a plan must be aggregated with other plans of the employer if it was maintained within the last five years ending on the determination date for the plan year in question and would, but for the fact that it terminated, be part of a required aggregation group for such plan year. Distributions which have taken place within the five years ending on the determination date must be accounted for in accordance with section 416(g)(3). No additional vesting, benefit accruals or contributions must be provided for participants in a terminated plan.

I recently wrapped up work on one of these plans that we took over towards the end of last year. Our software (ASC) doesn't support CB-FO plans so that was a challenge. There were other things that made this particular plan a challenge that I won't get into here. If you asked me would I take on this plan again, knowing what I know now, I would say yes, but only because it's a good client and I value the relationship with the advisor who brought us the plan. I wouldn't go seeking out this type of business in the future and I can't see myself recommending this plan design.

Contributions must be deposited by the entity's tax filing deadline in order to be deductible for that tax year. Minimum funding for a defined benefit plan (you didn't specify whether this is a DB or DC plan) must be made by September 15 for a calendar year plan, regardless of the type of entity.

The contribution becomes an asset of the plan on the date that it would have otherwise been payable to the employee in cash had they not made an election to defer. However the loss date as BG quoted is not defined as the date that it became a plan asset. It is defined as "the date on which each contribution reasonably could have been segregated from the employers general assets." I can certainly imagine a scenario where it's not reasonable for the employer to segregate the contributions immediately on the pay date; for example if the payroll processor sends them a report the next day after the paychecks are cut, then the contributions can't be reasonably deposited until after the employer receives the report.

In cases where one or a few employees were missed on an otherwise normal payroll, I use the date that the other contributions were deposited. If the entire payroll contribution is late, I do the following: Put together a list of check dates and the dates that the corresponding contributions were deposited (this is usually as simple as downloading a transaction history report and making a pivot table) Calculate the number of days between each check date and deposit date Delete any non-compliant deposits Determine the mode of the above data set Loss date = check date + number determined above

318(a)(5)(E) states that it only applies to "this subsection," i.e. 318(a). Now 414(m) does include 318(a) by reference for purposes of determining ownership, but 318(a)(5)(E) explicitly does not apply for purposes of determining constructive ownership of the S-corp, which would be the key element in determining whether the A-org is a shareholder (or partner) in the FSO. I think you're safe to consider the S-corp a corporation. I don't know if Derrin Watson is still answering questions here, but I would be curious to see if he agrees: https://benefitslink.com/cgi-bin/qa.cgi?db=qa_who_is_employer

As ETA mentioned, the rule that a corporations other than a professional service corporation can not be a FSO only applies to A-org groups. An S-corporation is a corporation - just because it elects to be taxed as a pass-through entity does not make it not a corporation. I think sec. 1361 is pretty clear: (a) S corporation defined (1) In general For purposes of this title, the term "S corporation" means, with respect to any taxable year, a small business corporation for which an election under section 1362(a) is in effect for such year. (2) C corporation For purposes of this title, the term "C corporation" means, with respect to any taxable year, a corporation which is not an S corporation for such year.

This sounds like a pretty clear case of an operational failure - a participant was allowed to contribute before satisfying the plan's eligibility criteria. As long as it's corrected before the end of the second plan year following the plan year in which the failure occurred (i.e., before the end of 2019) then I don't see any reason why SCP wouldn't be allowed. I agree with Lou, you should adjust the contributions for earnings and return them to the participant with code E.

Based on what you said I think the answer is that the Company B plan would have to include the Company A employees in its testing, but treat them as if they terminated on 6/28, since as of that date they were no longer employed by the company sponsoring the plan or any member of its controlled group.

I think you need to clarify the situation a little. A plan can not be part of a controlled group. An employer can be part of a controlled group, and an employer can sponsor a plan. Tell me if this describes the situation, and if so maybe it makes the answer to your question a little clearer: Company A and Company B are a controlled group. Company A sponsors a plan. Company B adopts the Company A plan in writing. As of 6/28, 100% of the ownership of Company B is sold to Mr. X, an individual who is unrelated to the owners of Company A. As of that date, A and B are no longer a controlled group. On the same date, Company B revokes its participation in the Company A plan and adopts a new plan. The accounts belonging to the employees of Company B are transferred out of the Company A plan and into the Company B plan.

Yes. A safe harbor plan is considered not top heavy only if it consists solely of deferrals and safe harbor contributions (see 416(g)(4)(H)). Once you start adding in other contributions you are subject to the regular top heavy rules. One option would be to add a second plan just for the PW contributions. As long as no key employees are eligible in the PW plan, the two plans would not have to be aggregated for top heavy.

Here is the full text of the Senate bill: https://www.congress.gov/bill/115th-congress/senate-bill/3221/text I could see the proposed section 401(k)(14)(B)(i) being appealing to a certain type of employer. It says you have a QACA that satisfies the nondiscrimination requirements with no employer contributions required, as long as you limit deferrals to 40% of the 402(g) limit, and you still have to comply with the auto-enrollment and auto-escalation and notice requirements. (ii) and (iii) under the same paragraph seem less interesting; they offer lower safe harbor contribution requirements in exchange for lower 402(g) limits. I suspect that most employers who would be interested in reducing their safe harbor liability at the expense of contribution limits would want to bring it down to 0 or not at all - I could be mistaken though. I would be worried about communication in these plans. If there's one limit that your average participant is likely to be aware of, it's the 402(g) limit. It could be a tough conversation when they get an email from their tax advisor, or see on the internet that "You can contribute up to $19,000 to your 401(k) in 2019" but it turns out, sorry, in your plan you are actually limited to $7,600. Re-auto enrolling anyone contributing less than 3% every 3 years is probably a good idea. If they want my opinion I would change it to say "no less often than every 3 years" to give the employer more flexibility.