CJ Allen

Not a substantive difference, but EACA must comply with QDIA requirement; however, that wouldn't seem to be a big deal-breaker.

From the brief description, it seems the PEO is filing as a qualifying single plan and each employer is adopting the PEO MEP under the MEP's EIN & PN. If so, the employer plan would begin a new plan effective with the ending of participation in the PEO MEP. Assets transferred therein would be reported as a merger of the PEO MEP assets. The new plan would have the employer's EIN and a PN based on any other plans (001, 002, 003, etc) that may exist or have existed previously under the EIN. That is, as hr for me indicates, you shouldn't reuse a previously used PN for the same EIN. Your plan effective date on the new single employer plan shouldn't be dependent upon when assets transfer -- the effective date may be earlier.

retroactive amendment or payment of lowest balance loan -- leaving 2 loans -- as corrective measure.

Loan is a special asset of the plan as is the cash account for receiving contributions, disbursing participant withdrawals, and processing transfers between plan investments. If you go to the balance transfer/reallocation screen, I doubt "loan" comes up as an investment option of the plan for asset transfer -- just as "cash" is not an investment option. Also, you can't transfer a loan note to another investment as there is no $$$ to transfer. Even if you wanted to pay off the loan, you'd have to take a withdrawal of other investments to repay the loan -- you couldn't just transfer funds from investment to pay the loan. However, since loan systems are usually integrated with the record keeping system, the repayments are deposited as withdrawn. It would seem you'd have to refinance the loan to change the sourcing of the withdrawal and repayments to options available under the plan at the time of refinance.

My concern is the $250 deposit to the plan would have needed an allocation allowance in the plan document for contribution to the tax exempt trust. Absent an allocation methodology, the $250 would be considered an invalid contribution needing to be returned. Documentation regarding the plan expense becoming an employer expense when plan assets went to $0 would be necessary to disclose why the returned contribution is less than the original contribution, plus earnings/losses.

Generally, compensation includes all earnings while eligible in the controlled group. In this instance, 1 W-2 would mean 1 employer and 1 compensation including all divisions. However, if the Plan Administrator interprets the compensation definition to exclude division C, the plan excludes division C compensation for all participants, and the plan allows & passes the compensation ratio test -- you should be OK.

I agree with Luke & JackS. The waiver of a death benefit to go to the children is separate from a distribution election. In a distribution situation, the beneficiary form to identify a Designated Beneficiary upon the employee's death is of no consequence. The distribution election not only involves funds potentially not going to the beneficiaries, it creates a single sum distribution option that could affect the spouse and the named heirs negatively.

That's possible, but not all companies will allow the money back to the plan. However, if the receiving institution understands it's an excess contribution / ineligible rollover to be sending back, there's a very good chance they will distribute as a non-deductible excess contribution with no taxation.

The IRS, generally, considers the distribution from the plan as satisfying the RMD requirement, except the RMD was erroneously rolled over. The distributing plan needs to show the RMD distribution separate from the rollover distribution, and communicate to the participant the necessary information to remove the ineligible rollover from the receiving firm. There may be difficulty if the distributing IRA wants to, additionally, tax the distribution.

If using current year testing method, and plan allows, there could be a QNEC option that gets rid of the distribution excise tax.

It would be fine for prospective employees, but I'd be rather cautious under "Universal Availability," as it doesn't follow the same type of rules as 401k type coverage requirements. In the Notice, there's clarification in ".02 Part-time exclusion" that concerns me from a literal standpoint. Specifically "The effect of the OIAI exclusion condition is that once an employee does not meet the part-time exclusion conditions, whether in the initial year of employment or for any exclusion year, the employee may no longer be excluded from making elective deferrals under the part-time exclusion." I would take a position that for the part-time exclusion to omit an employee under the terms of the Notice and that of Section 1.403(b)-5(b)(4)(iii)(B), the plan would have needed to exclude part-time employees during the times specified as excludable in the Notice and Regs. In this, I agree with the rest of you that this is fraught with risks from any misstep.

That seems to have been the point with the IRS notice, and support for our original claims that once eligible, always eligible for purposes of part-time employees.

The participant would be allowed to request any information regarding his specific account. However, there would be no extension of rights on another participant's (alternate payee or otherwise) balance or information. The only recourse would seem to be the participant requesting the information from the ex-spouse/alternate payee.

New Notice 2018-95 may be applicable here. https://www.irs.gov/pub/irs-drop/n-18-95.pdf

If the employee left for other employment and is being "brought back" after termination, it would seem to be a more supportable argument as opposed to someone being "on call" and having no other employment. Whether this arrangement is truly a separation/severance of service or could be considered a 'sham' [non-paid vacation] to obtain qualified retirement plan funds should carry a heavy consideration due to tax consequences of disqualification or penalties/sanctions. As indicated, all facts & circumstances are to be considered by the Plan Administrator and all risks should be contemplated in terms of how this transaction may be viewed by the IRS. I've been involved with a distribution rejection letter where the Plan Sponsor openly indicated the plan participant's only recourse to obtain plan funds was to terminate and be rehired after the distribution.

Interest accrues up to date of actual deemed distribution. Thereafter, the interest is non-taxable accrual used to determine future maximum loan amount. In similar takeover issues, there's been a dependency on the naming convention or other sourcing of the loan as "deemed"; however, I've experienced a split in terms of loans that actually were deemed, and those that were not. There must be good records going back 12 years on this plan, so that seems to be a "plus".

Correcting through negative payroll, without voiding erroneous pay could cause other compliance issues for the sponsor since there was a deferral agreement to support the deferrals made. The participant needs to suspend contributions or provide the sponsor with the YTD deferrals from the other employer if the payroll system allows a YTD deferral override. Many times, it is easier for the employee to suspend until 2019. Provided all deferral proof is provided to allow the plan to distribute excess deferrals, plus earnings, it is also probably best to have the amount distributed by 12/31/2018 so the deferral & earnings are taxable in 2018. Otherwise, if distributed after 2018, the deferral is taxable in 2018, but the earnings are taxable in 2019 (assuming earnings in this volatile market). Because hired in the current year, the participant wouldn't be a HCE until the following year (given the look-back year) unless a 5% owner. Also, my understanding of the 401(a)(30) regulations is that the excess deferral amount is still tested in ADP for non-highly compensated employees as it's not an excess deferral with the same employer (i.e., 402(g)).

Yes, you may contribution to your Roth (based on meeting compensation limits), even if you have a rollover contribution from an employer qualified retirement plan to an IRA. Trustee-to-Trustee transfers and Rollovers do not count as actual contributions for the IRA contribution limits.

Correct. The state tax is with regard to the state currently domiciled, which is not in the U.S., and there's no "state" tax requirement for withholding outside of a U.S. province.

I have to tend to agree with Larry since the term "employee" would seem to define a single person (i.e., SSN) rolling from one plan of the employer to another for the same employee. In this situation, the deceased spouse is the "employee" whose account is being distributed. The "employee" distribution is not creating another account under the plan for the same employee. Rather, it's the "beneficiary" who is rolling over the funds. Thus, the employee rolling over funds has not transacted an eligible distribution from an account in his/her SSN based on the definition of related rollover as evidenced by treasury regulations.

Interesting. Based on certain lines of thought in the discussion thread: 1) Why would a Collective Investment Trust be named a 'fund'? 2) Why would a pooled separate account be named a 'fund'? If unallocated general account Stable Value would have other investors, would it be more comfortable to be named a 'fund'? Would the plan change the name as other investors invest or leave Stable Value? IMHO, if participants would perceive the term 'funds' as the differing options to invest in the plan to earn income, then let it be called 'fund'. Otherwise, there is a chance the term shouldn't be used at all and changed to "investment". "The plan has 30 investments available with which to diversify" as opposed to "The plan has 29 funds and 1 account/investment with which to diversify".

The definition of Compensation in the plan document would be the deciding factor. Also, if omitting any type of irregular compensation, it's important to note that a 414(s) definition still must be used for ADP/ACP, and a compensation ratio test may be needed for other employer contributions. 3rd payrolls in each of 2 months per year is a revolving period, so I'd be concerned about any bonuses or special payments at quarter end or yearend that may impact rank & file employees more than HCE's.

I haven't seen the FT Williams document for some time now, but I thought the Adoption Agreement had a section for "Allocation Times for Matching Contributions" as well as whether a maximum matching limit ($ or %) is applied on a payroll basis or an plan year basis -- may apply only where there's a maximum noted(?!). Otherwise, if the document is flexible and based upon interpretation, you may want to be sure to review any precedence setting allocations made previously. If this is the first year, or the employer wants to begin allocating on a plan year basis, the sponsor may want to document the interpretation and communicate it to the TPA in writing so as to be clear for allocation calculation purposes & testing safe harbor match is accurate.

We used to deliver and forfeit RMD checks, but I modified the forfeiture to a deposit back to the account since it seemed you'd either have to forfeit the entire participant balance or give the money back to the participant account to sustain the integrity of the participant account balance. Then, with legal oversight, the process modified to any participant that could not be located didn't have a RMD processed (as a lesser of 2 evils). Technically, the regulations require distribution; however, it was determined the IRS would prefer the preservation of the account more. Documentation of all amounts forfeited for each participant (and for each RMD payment) and attempts to locate the participants is of utmost importance regardless of the method of operation chosen. Reasonableness and consistency are powerful responses to any IRS inquiry regarding the matter.

I respect all of the arguments, and all are plausible. From doing very many of these for independent audits, IRS audits and DOL complaint resolution, it really comes down to the actual plan and situation at hand. Regardless of what tends to be common sense, the funds are plan assets and there's no real prohibited transaction except the plan loan to the sponsor. There's been situations where going back 3 years and over 150 payrolls, it was allowed to be allocated on all contributions during the years in question for all participants currently in the plan as 'reasonable'. I don't necessarily opt for one process over another as long as reasonable. In my last RK firm, accounts under $5 for terminated individuals were forfeited each year due to administrative expenses exceeding the benefit to the participant (i.e., distribution fees). In this instance, any plan with forfeitures used to reduce employer contributions, could be inuring to the benefit of the employer indirectly. Additionally, if the RK charges a per participant fee, the fee for each newly reopened account could far exceed the earnings allocated.