CJ Allen

I've always been sure to treat the violation as a 'Plan' violation that must be cured in a reasonable manner. In that instance, the plan is owed earnings on the missed opportunity of having the contributions invested more timely. Since participant contributions and loan payments are impacted, it would be reasonable to allocated to participants who had contributions in those payrolls. However, remember the DOL and IRS have found it reasonable to allocate certain amounts to participants who currently have an account balance in the plan. Of course, allocating to participants with account balances may not be reasonable if the plan is undergoing termination and has few accounts remaining (especially if accounts are for HCE/Key EEs).

I agree with you as having dealt with the Big 4 audit firms as well as other firms. However, I've also been privy to many more small auditors who don't necessarily understand all of the requirements and do as they wish. These tend to have very strong assertions, and don't take kindly to corrective responses.

While I would strongly encourage a separate report for each year, if the auditor provides only a comprehensive "package" report of all years, you deal with what you have. I know the "short year" audit deferral rules allow the "short year" 5500 filing to include a statement that the following 5500 filing will include audit reporting for the "short year" as well as the next "full year" plan period. However, that is a regulatory allowance; whereas, this situation seems to be quite a few "full year" periods where a statement may not necessarily be received/reviewed well by the EBSA.

You are correct. My bad. I was thinking too far ahead when typing. I did mean to indicate the $50K limit, but was already thinking about how the participant may eventually hit the 50% limit.

Due to the electronic filing nature of one year at a time, it would be most prudent to file the collective audit for all years to each filing. However, if the audit can audit 'in mass', but provide individual year audit reports, that would be best.

Need to be sure the refinance calculation is taking into account the highest outstanding loan balance in prior 12 months for the 50% determination. As the balance grows, the participant may hit the 50% limit. Also, the plan approver of the loan may need to review the ability to make loan payments with the new loan. I've had loans with payroll deduction requirements rejected by plan authority as the new loan refinance would cause the per payroll deduction to exceed the participants salary each pay period.

and, 402(g) / 401(a)(30) deferral limit as well as the 414(v) catch-up limit are calendar year limits regardless of the plan year.

and, I never like when regulatory guidance uses terms like "reasonable" and "facts & circumstances" as these terms generally end up being defined by the auditor's perceptions rather than that of the plan administrators.

Agreed. No RMD and no RBD if plan uses current rules to apply 401(a)(9). This would, generally, be an eligible rollover distribution unless something other than RMD would cause it to not be an eligible rollover contribution (eg., corrective distribution requirement). The IRA will pick up the 12/31/2018 balance for RMD required in 2019 based on IRA regulations. Leaving the balance in the plan, while actively employed, will defer the RMD RBD until year of actual retirement (if plan document does not employ pre-2002 regulations in the plan document/adoption agreement).

I agree, the RMD wouldn't be applicable until the participant met the RMD requirements of the plan & regulations. The plan still must allow the deferral to retirement (some plans opted to remain under the age 70 1/2 rules regardless of the new rules). If the plan document uses the pre-2002 RMD language, the deferral of RMD until retirement wouldn't apply. One situation I've seen for this type of rollover to IRA is in the instance the only distribution option allowed is a total distribution with no exceptions. I've seen quite a few plan documents with the total distribution option, with no RMD alternative language (some providers still distribute installments not otherwise available under the plan). The participant may want to begin distributions in an annuity option that may not be available under the plan.

Agreed to the train wreck. Especially if the 403(b) is subject to ERISA.

Yes. That is the "catch 22" issue. Check out the IRS webinar regarding 403(b) universal availability https://www.tax.gov/ClarifyingTheUniversalAvailabilityAndOther403bRetirementPlanRequirementsOct272016/ The IRS stance is based on the 'reasonable expectation' of working under 20 hours -- regardless of actual hours. See "Once In, Always In - Q2" (about 36 minutes in, and be selected directly from indexing list) Once eligible to defer, the future actual hours worked are never taken into account again for deferrals, but can be excluded from employer contributions. It also doesn't seem to trigger all less than 20 hour employees to become eligible. However, rehired employees may be able to be treated differently than actively employed employees who go from one status of active employment to a different status. Interestingly, the "once in, always in" rules don't seem to apply to "Student" exclusion. This is based on 'facts & circumstances'.

The person would normally continue to be eligible once eligibility is satisfied. The IRS website https://www.irs.gov/retirement-plans/403b-universal-availability-requirement indicates (italics emphasis added): Analysis With respect to elective deferrals, a 403(b) plan must meet the requirements of IRC 403(b)(12)(A)(ii), also known as the ‘universal availability’ rule. Under this rule, if any employee of the employer maintaining the 403(b) may participate, then all of the employer’s employees must be given the opportunity to participate. Certain employees may be excluded, including: Employees who normally work less than 20 hours per week* Students performing services described in IRC 3121(b)(10)* Non-resident aliens described in IRC 410(b)(3)(C) Employees who are eligible to make elective deferrals under another 401(k), 403(b) or 457(b) plan sponsored by the same employer *For the less than 20 hours per week exclusion and for the student exclusion, if any employee who falls under one of these exclusions has the right to make elective deferrals, then no employee who falls under such exclusion may be prevented from making elective deferrals. The footnote '*' seems to indicate if eligible to participate, it can't be taken away.

There's a lot of unknowns here, but I tend to agree with David R & Eve S. The Plan Administrator has responsibility for making sure the match is set up accurately on the payroll systems. I've had quite a few "match" issues resolved between sponsors & payroll systems once the sponsor set up a limit on the payroll system. However, from a compliance testing provider standpoint, even though not responsible for calculating the pay period match, there should be certain reports showing non-compliance with plan or regulatory limits. In a similar manner to checking for 402(g) limit and compensation limit, an ACP deficiency should be noted by the TPA (qualified TPA like BG5150) for excess dollar amount based on maximum available per 401(a)(17) limits as well as reporting deficiency based on ACP %. While certain plans may not require ACP testing, there should be reporting available to determine if the % is exceeded. True-up match after yearend -- provided by the TPA -- would seem to bring to light the negative true-up contributions as well. Although, that has drawbacks as well.

Ah, yes, I knew I forgot something -- and why I didn't allow rollovers back into plans after rollover to another institution had been completed. Based on the regulations, even though the account was rolled over, the 1099-R tax reporting was adjusted to show a taxable RMD payment and the remainder as a non-taxable rollover. A letter was sent to the participant -- and rollover institution at times -- to indicate the amount that was not eligible for rollover. This would allow the participant to obtain the distribution from the rollover institution. The bad part of that is not being able to control if the rollover institution coded the withdrawal of ineligible rollover amounts as a taxable distribution.

I see I'm late to the party on this one. The regulations indicate that the plan sponsor is responsible for ensuring the RMD is paid in the year attaining age 70 1/2 or in year retiring if later (for non-5% owners). The first year requirement may be delayed until 4/1 of the following year; however, full payment from the plan should satisfy regulatory corrections (known at the time) or a RMD. The premise for this is because the plan sponsor is the only party knowing the prior year-end balance to calculate the RMD, and knowing if the RMD has already been satisfied for the year. The IRS recognized if the sponsor did not distribute the RMD (plan document qualification requirement) with the May 2018 distribution, the IRA RMD program wouldn't pick up the RMD requirement until the 2019 payment was due as the only year-end balance in the IRA would be the 12/31/2018 balance. The sponsor, pursuant to the plan's 401(a)(9) document language should be sure to obtain confirmation of the RMD payment or have agreement with IRA to make the payment for corrective purposes. Otherwise, the sponsor could petition the IRA for return of an ineligible rollover and process the RMD.

Since the IRS did not specifically include "termination for cause" as an exclusion for partial plan termination determination, I would agree with Luke that the argument may be to try to define those workers (or a certain set of those workers) having effectively quit their employment by reason of "cause". This would be best accomplished by filing Form 5300 and document the facts and circumstances of the "cause" being egregious enough to warrant exclusion. For example, falsifying timesheets or other items counted toward "Compensation" for benefit purposes would probably hold more weight than showing up 5 minutes late on several occasions.

I would agree that 0 participants should be OK if forfeitures are used to defray remaining expenses of the plan. However, if the forfeitures are an accrued benefit to participants, I'd be hesitant to indicate 0. It would seem more appropriate to determine the number of participants requiring allocation of forfeitures under whatever method is to be applied for allocation purposes.

In many Trust documents I've reviewed, assets are usually delineated in the Trust. This is usually because personal items and certain accounts are kept outside of the Trust for distribution, as opposed to defining "all estate assets" as Trust assets. However, I'll defer to the situation at hand. I agree, that it's a definite maybe, and -- both -- the estate executor/attorney and the Trust attorney must agree on treatment. Even if the attorney's agree, it is most important to check with the Custodian of the IRA to see if they have a set procedure or precedence. My only concern would be a "double pass through" from estate to Trust to pass-through beneficiaries. The general rules discuss Trusts as beneficiaries, but not necessarily Trust as a pass-through of an estate.

In certain instances, where a participant is required to receive a corrective distribution, but has already taken distribution of the account, the distribution made contains the corrective distribution. In the instance the distribution was rolled over, the participant must be notified of the portion of the distribution that was not eligible for rollover as a corrective distribution. The 1099-R issued in January of the following year would show any rollover distribution separate from the non-rollover distribution -- even though the entire amount may have been rolled over. There would be no tax withholding from the plan distribution if rolled over directly, but that's a reporting issue mostly.

I agree with Tom. When you re-test ADP after QNEC, you'll want the test to show a refund to HCE(s) that will qualify for the catch-up treatment (up to $6,000). It seems the HCE's in your example may be limiting their contributions to try to pass ADP. If not, you'll need to be wary of any HCE's who have already contributed catch-up in excess of the $18,000 limit (2017). If failure and QNEC is frequent, the sponsor may want to consider a safe harbor type of plan (?!)

Yes. In many states, payroll deductions may cease by written directive at any time unless legally protected (eg., garnishments). I've never really advertised participant rights in the matter, and the loan would be immediately in default if requiring payroll deduction.

In administering loans, it's important to understand loan deductions are not pre-empted by federal law. So, a loan repayment agreement entered into by a participant, in many states, is a matter of state payroll law and is voluntary. Voluntary stopping of loan repayments is even allowed in many states as a voluntary deduction. Of course, this action would cause the loan to immediately default if no alternative to make repayments outside of payroll deduction. The deemed distributed loan would continue to require repayment, but the employer/sponsor would not be allowed to force repayments be made from payroll. The deemed distributed loan would be considered an outstanding loan for any plan with a maximum number of loans outstanding. So, a plan allowing only 1 outstanding loan would count the unpaid deemed distributed loan.

Reverse/reissue the loan from other sources available for loan is a great way to provide funding in the 401k source, if available. Also, waiting for loan payments to be posted to the 401k source in an amount to cover the ADP required distribution is another option -- with potential for excise tax due to payment after the 2 1/2 month deadline (or 6 months for certain auto-enrollment plans).

Many prototype and volume submitter based plan documents contain a "hierarchy" for purposes of defining beneficiary where a designation was not affirmatively elected by the participant.