calexbraska

We failed coverage testing for our match. We decided to correct by giving QNECs to non-highly compensated employees ("non-HCEs"). Do we need to give QNECs to all the non-HCEs? Can we pick one group to contribute to and leave out another group? What about people who are no longer employees -- do we have to include them? Can we include some but not all of them? We have a group of people that are arguably benefits-ineligible that we'd like to exclude, but there is also an argument that they are eligible, so if we are required to include all the non-HCEs, we may have to give them QNECs as well.

We have a 401(k) Plan that defines Compensation as Section 3401 comp, excluding: 414(s) Safe Harbor Exclusions Differential Wage Payments Stock-related compensation Nonqualified deferred compensation payments We currently have an "award" system, where employees can receive "points" from others for recognition of job well done. They use the points to purchase items from a catalog. My questions are: 1) Is this included in Compensation for the 401(k), or can it be excluded as a "fringe benefit"? 2) If it is included in Compensation, can we amend the plan to exclude it? 3) If we amend the plan, can that be done mid-year? Do we need to send out notices? Any nondiscrimination testing issues?

We have a nonaccount balance plan (i.e. a defined benefit plan) that is a top-hat plan. Under the Plan, a participant is to receive a set amount per month for life, with a 50% survivor benefit to his spouse for her life. It appears we can take FICA into account from the offset, since the amount is readily ascertainable under Code Section 3121(v)(2). I get how that works for the set amount to the employee for life -- we just base FICA on the present value of is benefit. But how do we deal with the survivor benefit? Is the present value of that amount also taken into account for FICA purposes on the employee's tax filings? If so, how does the wife report the payments in the years they are paid? Thank you!

We have a group of eligible employees -- basically workers who work for 6 months or less, but aren't expressly excluded by the plan -- who have not been given the opportunity to defer (match not an issue). We are doing a VCP and considering a retroactive amendment to exclude these people (rather than making QNECs). This group has always understood they are excluded, and the employee handbook excludes them, but the plan document does not. Unfortunately, as you might guess, they are all non-HCE's. Any chance the IRS goes for this? Should I even try? If we don't do a retroactive amendment, we will have to do QNECs. This problem potentially dates back to 2005 -- would we have to correct that far back? Or can we just correct back to 2015, based on the 3-year audit / statute of limitations period?

Yes, you are correct. I meant that company was part of a controlled group, so their plan was historically tested on a controlled group basis. The Company was spun-off, so they are no longer a part of a controlled group. When in the controlled group, no other members of the controlled group participated in the company's plan -- they had their own plans. So.... Company A and Company B are a controlled group. Each company has it's own plan and they are tested on a controlled group basis. 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 B. As of that date, A and B are no longer a controlled group. Each company retains its own plan. Since they were part of the same controlled group for half the year, does Company B have to take that into account when testing, or does Company B just test its plan individually, assuming it is still a stand-alone plan as of 12/31/2018?

We have a plan that was part of a controlled group. As of 6/28 it was spun off and is now a stand-alone plan. How do we do testing for 2018? Do we have to do half the year as controlled group, half as a stand-alone? Or can we just test based on how everything sits as of 12/31/18? Does anyone know a section of the code or regs that deal with this issue? Thank you in advance.

We have applied for QSLOB status. Unfortunately, we were unable to pass the gateway test with respect to matching contributions. Our service provider told us that we can make corrective contributions to Non-HCEs to make us pass the test. We have been told the corrective contributions need to be made by October 15. I know October 15 is the date the QSLOB filing is due, but I can't find any support that corrective contributions to pass the QSLOB gateway test have to be made by October 15. Does anyone know where that date comes from?

We processed a QDRO that asked that the Alternate Payee receive 50% of the account, as of 1/1/2018, including earnings from 1/1/2018 through the date of division. The QDRO was processed and the Alternate Payee too her portion as a lump sum distribution. Now the parties are saying Alternate Payee's portion should not have included earnings. The QDRO clearly said to include earnings, and all parties and their attorneys signed it, so there was no error on our part. But now the parties want to reverse part of the distribution to the Alternate Payee (i.e. they want the AP to return the earnings amount to the Participant's plan account). If the AP had left her portion in a qualified retirement plan, I'd just have the parties execute a new QDRO to transfer the earnings portion from the AP back to the Participant. But, since the AP took the money as cash, this is not an option. Is there any way to reverse the QDRO to get the money back into the Participant's account? Thank you!

You're entirely correct there. Here, the plan is largely funded by employee elective deferrals, so the new management group is unlikely to be OK with the old management group passing on the plan (and the payment obligations thereunder) without also passing on the amounts the old management group withheld from paychecks.

My concern is that the assets have to be subject to the creditors of the company. If the old management company transfers to the new management company, and then the old management company later goes insolvent, there could be an issue if the old management company passed on any assets to the new one.

We have a management company that runs a NQDC plan. The management company is wholly owned by A, and A also wholly owns B. B also participates in the NQDC plan. The management company is going to be removed and replace with a different management company. Under the NQDC plan this does not trigger a change of control payment. But we have employees at B that are participants in the NQDC Plan. We have two options. First is to just start a new plan for the B employees. They will still have their account under the old plan, but now they will have another account at a new plan. Second, and what we'd like to do, is move the accounts for B employees to a new plan, sponsored by either B or A. Is that possible? It would be sort or like a rollover to a new plan. According to the plan, amounts deferred for B employees are already paid out of the general assets of B, and subject to B's creditors, so I don't see the issue with having the money follow B, instead of staying in a plan run by the old management company. Is this something we can do?

My company reached out to me letting me know they failed discrimination testing and, as a result, had to give me additional profit sharing contributions. That makes sense, but they also said I am required to fund it out of pocket. Normally, it would be up to the company to fund this, but I'm a partner at my company. They've already funded it, but they are requesting a reimbursement. Is this correct? Am I required to fund this?

Someone in my office claims to have filed a top hat filing for our top hat plan, but she has no record of it. Is there someplace online I can go to look up the filing? I tried FreeERISA, but the top hat filings seem to be only available if you have a "deluxe" paid subscription.

I think you're right about the DOL statements, which I why I normally file for subsequent plans even though I don't think the regulations require it. However, in this case, I think doing a late filing will cause more problems than taking the position we don't need to file for this new plan.

We did a top hat filing when we established our first top hat plan. The regulations state, "Only one statement need be filed for each employer maintaining one or more of the plans described in paragraph (d) of this section." Based on that language, it appears we do not have to do any additional top hat filings when we establish new top hat plans. Normally we do anyway as best practice, but in this case we didn't and we've already missed the 120 day window to file. Does it make sense to do a late top hat filing? Would that just raise a red flag? Or is it better to just rely on the language from the regulations and take the position that no top hat filings are required for the later-adopted plans?