rr_sphr

I've done payroll for many years (13+ now) along with HR/benefits and I've never heard of a payroll system that can't add a deduction code and a start/stop date. How are they reporting out other deductions (even just 401k employee deferrals)? Honestly someone in payroll needs a boot on their backside on this one.

We went with 6 or 8 rounds and three in-person multiple day visits. Our auditor would forget she asked (and received) certain reports and ask for them again. Ours was small (<100 participants) but unfortunately had a major transition in the year audited (change in recordkeeper AND TPA and changed from a 403b/401a to a 401k). The new TPA at the time had an SME who later left. I came onboard the employer right as the audit started and it took a year! In the end we owed one penalty of $1500. But it was a very very big hassle to deal with two recordkeepers, balances that were combined, etc. So glad it's over!

You might check this post: https://benefitslink.com/boards/index.php?/topic/59567-hardship-withdrawal-for-health-insurance-premium/

I am hoping to be looking soon.....My expectations are a bit higher than theirs obviously.

(we only allow hardship withdrawals from employee deferral and rollover sources of money - yes, we know we can change that but don't really want to and that's not a question in this post ) I am the HR manager in the scenario (and worked in 401k recordkeeping back in the stone age of mainframes and quarterly processing as the recordkeeper and the TPA in one of the top 3 large global HR consulting firms) Is it now common practice to require the employee to fill out all of the hardship distribution paperwork that must be notarized with proof of need prior to the employee (or HR) being able to find out the amount available? I was told our TPA won't tell us the amount upfront before the form is completed by the employee because "We have found that if the maximum amount available is provided, the hardship requested is exactly the amount available. Since the IRS states that the hardship distribution cannot exceed the amount of the hardship, the participant should provide the amount of the financial hardship amount and reason." Does it not stand to reason that an employee is not going to ask for MORE than the amount available if they know that is the maximum they can take and if their need meets or exceeds that amount? And in the end it's the documentation that is going to rule the day on whether it is an approved reason or not and what amount out of the available is going to be given? (In both cases this last week, both employees had LESS available than their need) Just curious if this is SOP... or if this is just that the TPA doesn't want to calculate the amount only for an employee to decide they do not want to take it. In 15 months with this TPA and employer, I haven't had an employee refuse whatever is available even if it was lower than the need. So it is not like I am calling to get "quotes" and then not following through.

I am very old school (record kept 401k plans in the early 1990s) back when we did quarterly valuations and gave "allocation reports" to our clients every quarter along with the participant quarterly statements. With the influx of daily valuations, many recordkeepers stopped the consistent allocation reports, but should be able to provide one out of their transaction based system between any two dates if you ask. We had to get these for our IRS audit and our recordkeeper pulled a "Participatn Aggregate Rollup Statement" on a Cash basis by money source and investment option. The columns were (beginning balance, contributions, exchanges, forfeitures, loans/withdrawals, loan principal repay, loan interest repay, gain/loss, adjustments and ending balance) A payroll report is only going to have contributions/deferrals and loan payments (possibly not split by principal and interest).

Another way if you are already in a posting by that person..you can just click on the name to go to that profile and then click "see their activity" and get there a bit faster... Of course that only works if i am on a post that you are participating in.

our IRS/retirement plan audit lasted 14 months and it wasn't even an ESOP, with a 100 participant plan..... so if it is truly an audit, yes it could take that or even longer....

I suspect it depended on who was processing the actual distribution/forf transactions on any given day. That said, knowing what I know about transaction based systems and needing specific distrib/forf amounts for an IRS audit, i do know that the system should be able to report out transactions by each one. That said, I had to pull a lot of excel spreadsheets together explaining how transactions actually happened and where money was for the auditors. I do agree getting it right correctly the first time is important, but do agree that as long as you can explain it and no one lost funds, AND you are moving to another recordkeeper, I don't see that it is worth it to get them to correct it now especially if paying by the hour. In the end, someone at the plan sponsor should have been watching a bit more closely - I am old school where we used to provide an "allocation report" each month/quarter by participant and then a plan reconciliation. I was surprised when our RK stated that they rarely did either of those any more, because everyone is so used to the daily environment.

Yes that is what I have seen used unless the employee is willing to have it all taken at once (very very rare unless an HCE), since it is such a large period of time and amount of $s. But like you stated that by crossing tax years, the employee had unfavorable tax treatment on some 2018 wages and will have more favorable tax treatment in 2019. What one would be able to argue to the IRS should you have an audit is debatable and dependent on the scope and details.... You are looking at "reasonable good faith efforts" on corrections with little guidance beyond that with no standardized corrections like you do have for retirement plans. Their other issue is how are they going to handle any balance owed from someone who terminates (especially with little to no notice) during that repayment period? {Off-topic :Personally I would be doing a full audit of payroll and benefits for all employees if this large of a mistake had not been found in that timeline. Best business practice is to audit/reconcile benefit bills to the benefit election system and then to payroll deductions on a consistent basis. We do the first step monthly (billing to election system) and then the deductions in depth at least once or twice a year (especially after OE/plan year changes) and then by totals monthly (our standard of error is less than $100 or we deep dive audit by employee by bill/plan/deduction). We have a weird situation where some benefits are aggregated against an employer credit and that amount can't be negative, so we have to check it even more often and more in depth than 1-to-1 elections vs deductions. }

You would need to offer it to all spouses/dependents (qualified beneficiaries) currently on the plan. I suggest reading through IRS Rev Ruling 96-8 Here is just an excerpt, but there are also examples: "The applicable premium is defined in § 4980B(f)(4)(A) of the Code, with respect to any period of continuation coverage of qualified beneficiaries, as the cost to the plan for that period of the coverage for similarly situated beneficiaries with respect to whom a qualifying event has not occurred (without regard to whether the cost is paid by the employer or the employee). Under § 4980B(f)(4)(C), the applicable premium is required to be determined for a period of 12 months, and the determination must be made before the beginning of that period.....Under § 4980B(f)(5)(B) of the Code, if there is a choice among types of coverage under the plan, each qualified beneficiary is entitled to make a separate election among the types of coverage. H.R. Conf. Rep. No. 841, 99th Cong., 2d Sess. II-859 (1986) clarifies that each qualified beneficiary is entitled to a separate election of continuation coverage, and that a spouse or dependent child can elect continuation coverage even when the employee does not." It is my understanding that you would need to use the current single rate (only one child) or the multi-rates (more than one child with the same mom)

what you need to be asking is if she can transfer the shares directly (which is one of your questions) and then what she can do in the self-directed brokerage account. Because I have never seen a 401k plan with employer shares that would allow what you are asking in a regular stock fund investment. 401k recordkeeping systems are not setup to do these type of trades/investments. The average employee with employer stock knows much less about it than it seems you might. And in the end, like ESOP Guy said, you might still be told no. It could be that the plan doesn't allow the shares to move to the self-directed account at all since the stock is already in the plan's fund lineup. The purpose of self directed is more to pick investments outside of that fund lineup. They may or may not have a provision that states how many shares can be liquidated in a specific period of time. Her best bet is to speak with the plan administrator and get a copy of the SPD and plan document to see what is allowed. One basic thing to check is whether she would be allowed to take a distribution of shares if she terminated employment (might have a higher chance if so). And then, if so, to speak with the brokerage account on the other side about the equity collar. I truly doubt the plan admin will have much knowledge beyond the basics.

agree with RBG.....it could be the employee thought they had the $s elsewhere for the difference and then ended up not having it.... As long as the sum of the two don't add up to be more than the proof, I'd be okay with that documentation.

are you saying the employer switched recordkeepers? Why did some of the assets move, but not all? Why did they not move the loan balance? Is payroll going to be sending loan repayments to both every payroll (- that's a payroll and recordkeeping nightmare)? The situation as you pose it is a bit odd. The only time I have seen money stay is when it is possibly in an investment that has withdrawal stipulations (we had some money that had to stay at TIAA due to that), but a loan balance would not be that. Based on what you have provided, it's still the same plan and the limits are on the plan, not on where the money is stored. So I would say yes, the 50k limit would apply. Maybe someone else will correct me if I am wrong, but I am the only one that thinks this setup to be very odd?

I would to be on the safe side. It's better to give it and be wrong than to not give it and be right.

I'd probably have the plan administrator broach it with the employee as part of the interactive process. If they claim ignorance, they should at least be told that the GFM exists. As to whether the employee pulls their request? If there is solid documentation, I agree that I doubt the IRS will dig that far even in an audit

Would you all feel it odd to have a hardship distribution go to the TPA end of last week and the TPA come back with what I would call a "heavy handed" email about how now is the time to amend the plan to allowed the participant to take as much $ as possible (including earnings and employer money that is not currently allowed to be touched)? My response is that we just amended the plan late 2018- for other reasons- and had to pass those amendments by the Finance Committee of our Board of Directors and I didn't see that I could get another amendment through that quickly to benefit this one employee's hardship need. Then the TPA pushed again?!? Are many of your clients already amending to allow for the relaxed law/rules? And as consultants and TPAs are you suggesting to clients that they make an amendment quickly for this? I just haven't heard much chatter and from my perspective, isnt' this still just proposed?

I agree with the "no" answer

From my compensation/payroll days, this pay is generally considered hours NOT worked under FLSA -- this would be considered more as a bonus than wages per hour. It would need to be added into overtime calculations but not minimum wage. Does the 401k plan compensation currently exclude bonuses?

yes, you can change vendors (do you mean vendor or broker?). [We thought about it but ending up switching vendors at the end of this last calendar year. Even by doing so we had "rolling" balances that had to be transferred. The biggest issue was the blackout/shutdown of the prior vendor's transactions so that we weren't paying for two vendors for multiple months - we didn't want to leave that money at the old vendor since they were holding close to $14k of our money (prior forfeitures, etc). This was easier at year end since the employees got their new balances and cards pretty quickly. Mid-year, your blackout period might need to be longer as no matter what time you change, there will be pending claims and transactions that have to clear.] Our broker facilitated the move and we moved to another vendor that we already had a relationship with (they do our COBRA outsourcing). eta: I am not sure it would be as easy to switch brokers and stay with the same vendor as they might deserve any commissions for the full year. I'd guess I would ask what is the broker not doing well?

just finishing up a 401(a) 2015 IRS audit (linked to a 403b plan). It was tough. There were quite a few issues and in the end we've ended up in CAP for 2 issues...haven't heard what the fines will be. 2015 was the year my predecessors changed recordkeepers and then combined the 401a, 403b and 403b TDA into a 401k at the start of 2016. I suspect the disconnect between $s of distributions on the 5500 vs the 1099s kicked ours off, but the IRS auditor claimed it was just a random audit. Personally I don't think they are ever totally random. Hopefully you all have great documentation on the clean up project -- make sure all your signed amendments are in order from the past - even if the new plan document takes them into account. I was a bit surprised at the history that was wanted there. We eventually had to take a hard stance with the auditor....it sucked and has been almost a year to get to this point....and it's not totally closed yet.

Per our TPA for COBRA, the IRS states that you may only be able to pass along a rate increase to your COBRA continuees once in a 12 month (determination) period. Now I dont' have a link or cite for this, but if the employer increased in in 9/18 going forward, i wonder if the $1100 would be a 2nd increase in a 12 month determination period. Was there also an increase for 17-18 that got it to $1000? It would be interesting to know the timeline of increases, not just one or two years.

SItting by Kevin C -- to me this is more a failure on the side of HR/payroll than the 401k administrator/recordkeeper (depending on what your contract is with them). We internally watch our loans each and every payroll cycle and know exactly when to stop a deduction. I do know under our plan and loan procedures and for our recordkeeper that they will accept any amount of overpayment by payroll cycle through the payroll feed without question. They will only flag an underpayment. But the employee has to go through HR/payroll to change any deduction amount such that we know about it internally. I have found over the years that vendors are doing less and less checking at any data entry points (in balance forward we had a whole list of checks and error reports and those mostly disappeared with daily recordkeeping unless it is very very obvious - like a blank file feed)

I'd make sure this is covered well on the participant election form...so that they understand and are authorizing a smaller deferral (and possibly employer matching) amount should their net wages not be enough to cover the full deferral that they have elected. are your new hires immediately eligible to contribute? Because having done both payroll and benefits, it would be some crazy programming and data transfer between the fuel card and payroll and possibly the 401k elections/recordkeeper and I doubt the fuel card provider is able to deal with a situation such as this. (I personally hate wage advances because of all the issues that they bring, but do understand in some industries that they are "normal")

If you are a plaintiff trying to go after an employer, it might just be after hearing the details/case information that none of the attorneys think that you have any type of case to pursue, such that it isn't worth their time. And therefore they ignore you or don't call back. Often advice is given on another legal board that I am on that if you can't find an attorney to take the case it's because it's not winnable... Do you might posting the overall details on how you think they breached their fiduciary duty? Just to see if anyone out here can tell you whether your details would be viable?