C. B. Zeller

Assuming that the plan document allows the safe harbor definition of hardship found in the regs, the definition of medical hardship under 1.401(k)-1(d)(3)(iii)(B)(1) is "Expenses for (or necessary to obtain) medical care that would be deductible under section 213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income)." 213(d)(1)(A) defines "medical care" as including amounts paid "for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body." So if the procedure "affects any structure of function of the body" (which seems extremely broad) then it seems to me that it would fall within the safe harbor definition of a hardship.

Fair enough! Although the bit you quoted is preceded by the sentence "If it is not feasible to make a reasonable estimate of what the actual investment results would have been, a reasonable interest rate may be used." My take on that is that the "reasonable interest rate" determined by the VFCP calculator may not be used if it is feasible to make a reasonable estimate of the actual investment results.

The DOL calculator is available for calculating lost earnings due to a prohibited transaction corrected under VFCP. The error you are describing would, I believe, be corrected under EPCRS and not VFCP. Therefore you should use the method of calculating earnings described in Rev. Proc. 2016-51, which states: 3.01(3) Earnings Rate. (a) General Rule. For purposes of this section 3, the Earnings rate generally is based on the investment results that would have applied to the corrective contribution or allocation if the failure had not occurred. and then goes on to list permissible simplifying assumptions.

If all of the employees were transferred to other employers, then you have a coverage failure and you can adopt an 11(g) amendment to correct it.

414(b) and (c) state that all organizations which are members of a controlled group are treated as a single employer for the purposes of sections 401, 408(k), 408(p), 410, 411, 415, and 416. So I think that for purposes of annual additions, the compensation from both companies would be included, regardless of whether the second company adopted the plan. For the purposes of the deduction limit, you would only count the compensation in the company that adopted the plan.

The default form of benefit in a DB plan is always QJSA. According to 1.417(e)-1(b)(1), a benefit can be distributed in the form of a QJSA once the participant reaches the later of age 62 or NRA without the consent of the participant or the spouse. Any other form of distribution, such as a lump sum, would require consent.

Assuming the plan was properly amended to provide that QNECs are non-forfeitable at the time they are allocated, then I do not see a problem with this.

Karoline - What you might be thinking of is for a shareholder-employee in an S-corporation, they receive income both from their services as an employee (W-2) and from their investment as a shareholder (K-1). For that scenario you would only use their W-2 compensation. For partnerships, including LLPs, compensation is defined as net earned income, which is calculated in the usual way: K-1 earnings less one half of self-employment taxes, yadda yadda. Be certain to account for the portion of FICA taxes that were paid on their W-2 in order to accurately calculate the self employment taxes.

There were some changes to the hardship provisions in both the House and Senate versions but the final version of the bill made no change to the current law. There is a good comparison chart here: https://www.groom.com/wp-content/uploads/2017/12/Final_Comparison_Chart.pdf

On the K-1, underneath where it says "Schedule K-1" does it say Form 1065 or Form 1120S? 1065 is for partnerships, including LLCs, and 1120S is for an S-corp.

The plan is deemed not top heavy only if the safe harbor matching contribution is the only employer contribution. The minute you add in a dollar of discretionary profit sharing, the top heavy minimum is required. As Tom said, the safe harbor match does count towards the 3% top heavy minimum.

Re-reading the reg I agree that the 30 day period is required regardless of whether the employer is experiencing an economic loss. 1.401(k)-3(g)(1)(i)(A) states: which would seem to imply that the 30 day wait is only required if the reduction or suspension is happening in accordance with a provision in the annual notice. However 1.401(k)-3(g)(1)(i)(C) goes on to say: It seems a little odd that the regulation would specify 30 days in (A)(2) but not (A)(1) even though it applies to both. But such is life.

See reg. 1.401(k)-3(g)(1) An employer may suspend or reduce safe harbor contributions mid-year if the plan is amended during the plan year, and provided they meet certain other conditions. Obviously it is too late to amend for 2016 so the employer will have to make the contributions. EDIT: Next paragraph is incorrect. Disregard. For 2017, if the employer is operating at an economic loss as defined in section 412(c)(2)(A) then they may suspend the safe harbor contribution for the remainder of the year, provided they amend the plan on a timely basis.