ACK

Assuming the 1099 worker was correctly classified as a non-employee, then once he becomes a W2 employee, that is the point at which you start tracking his service for eligibility. So yes, he must wait 12 months from the date he became a W2 employee.

I am curious as to how you are passing ACP test if the owners are the only employees making voluntary contributions? Maybe I am not thinking of something - just curious..

I would be inclined to point out to the participant that his failure to take the REQUIRED distribution will result in a 50% penalty and that he needs to complete a Form 5329 and send the applicable fee to the IRS. That might get his attention and make him decide to cash the check :)

From a purely technical reading of IRS Notice 2016-16, I would say it is not permissible to amend the plan to exclude the owners, since the amendment is prohibited if it narrows the group of employees eligible to receive the safe harbor contributions. There is no exception mentioned for HCEs, etc. However, I doubt the IRS would care that the owners were excluded from the safe harbor and a plan document can certainly be drafted to specifically exclude HCEs or owners from the safe harbor contribution. I would definitely make the amendment prospective though, not effective back to 1/1.

Ray H, yes a participant may apply for hardship if they have not paid anything toward the bill. I would just want to be sure any insurance has been applied first, and the bill is for the remaining amount that is due from the individual.

I would think not. It may depend on how the plan handles forfeitures. If forfeitures are supposed to be reallocated, then the problem with letting the participant keep the extra $900 is that it results in $900 LESS of forfeiture reallocation to the other participants, so it is a cut back to them, which is not permissible. There are only a handful of operational failures that can be corrected via retroactive amendment by SCP - compensation mistakes; hardship/loan failures; and early inclusion of an ineligible employee. Retroactive amendment for vesting failure is NOT a listed permissible option.

This situation is addressed in the EPCRS Rev Proc 2018-52. The employer must take reasonable steps to have the overpayment returned to the plan, with earnings from the date of distribution. To the extent it is not repaid, the Employer must make the plan whole. The employer should notify the participant that the overpayment is not eligible for favorable tax treatment (not eligible for rollover).

Pensionmaven, At the 2017 NIPA conference, the speaker said that this type of amendment should be accomplished by amending on the prototype document (assuming that is what the plan uses), NOT as a stand-alone amendment, although I have seen it done both ways. If amending the prototype document, you would just use your document software to create an amendment to write in a one-time entry date for the specific affected individuals.

My own research on this is in line with Doc Ument's comments. No pro-ration for 415 limit; compensation limit is pro-rated for the short plan year. We use the ASC document. I will usually try to make the plan effective back to 1/1 to avoid this issue, (with a later effective date just for the deferral/Safe Harbor contributions) unless the employer just wasn't in existence then.

How is this person not already fully vested? Typically plans fully vest at NRA (?)

This type of amendment can be effective at any future date, even if it has the effect of "booting out" employees who have already entered the plan. So although some posters here think that someone who has already entered the plan cannot be made ineligible by the amendment, in fact they can. Per the ERISA Outline Book (Chapter 2, Section VI, part E) Just because an employee qualifies as a Participant in the plan does not guarantee the employee the right to participate in the plan for the rest of his employment. The anti-cutback rule only protects his accrued benefit, not his future benefits. An employee's status as an active participant can be eliminated by modifying the eligibility requirement in a way that the employee is not longer satisfying the requirement for participation. The employee will not accrue additional benefits until he or she re-establishes the right to participate under the modified eligibility requirements.

To 401_noob's point, a plan can be written to exclude service prior to the effective date of the plan. However, I have never seen a plan add this provision after the plan was already implemented, only when it is first drafted. Since this individual was rehired in August 2018, and the plan did not already contain this rule (I assume), I don't think that amending the plan now to add it will work because the individual in question was credited with his prior service under the terms of the plan at the time he was hired, so I would view that as a protected benefit that can't be reduced by any sort of amendment that occurs after his hire date.

EPCRS allows self correction by plan amendment with respect to the early inclusion of otherwise ineligible employees. (Section 2.07 of Appendix B). SCP allows correction any time for insignificant errors, or by the end of the 2nd year after the year of failure for significant errors.

Goal00 - assuming, according to your post, that you have 100 seasonal workers who work at least 1,000 hours, then they must at least be offered the plan. If they choose not to participate, that might be OK, as long as the plan only allows deferrals and matching contributions. In that case, there is no 410(b) coverage issue. The next hurdle will be the ADP test, because with those numbers, any HCE will be severely limited on being able to contribute to the plan, unless the plan uses a safe harbor formula. But if you have a safe harbor plan, and truly have 100 employees who have chosen not to participate (after having been offered the plan) and the only contributions in the plan are deferrals and match, then you are OK. Although, as someone mentioned, you may have enough eligible employees that you are thrown into the requirement to need an audited 5500 each year. BTW, 401k participation cannot require a 2-year employment condition. That can only be applied for Employer contributions, not 401k contributions.

I think part of the determination of reasonableness has to include a consideration of what is the typical or average fee that is charged for that service in the market place. So, based on that criteria, I think it would be easy for participants to claim that they are being charged an unreasonable fee for this service. 3% is pretty steep and not what I typically see in the market.

As far as the RMD rules are concerned, they are WAY too complicated. It is easy enough if someone is 70 1/2 and has terminated and starts the RMD. The calculation is pretty simple. But the complexities that come into play with deceased participant accounts - how to handle the RMD if the person died before starting the payment vs. if they died after the payment had started; how to calculate the payment if the beneficiary is a spouse vs. if the beneficiary is not a spouse; whether or not the plan uses the 5-year rule for distribution, etc. etc. I would love to see the rules simplified. They are overly complicated for what is trying to be achieved. But it looks like the EO is just addressing the tables used, not the complexities of the calculation rules.

ML68 - the short (and only) answer to your question about whether a document is required is "yes". If you do not have a written document that has been approved by the IRS, then you do NOT have a tax qualified plan (ie, all contributions that have been made to the plan are not eligible for special tax treatment). You need to either set up a Simple Plan or a 401k plan, depending on which best suits your goals.

The bottom line to the electronic disclosure of required notices is that it is very difficult to comply with the current rules. The plan sponsor must be sure that employees have regular access at work to a computer that will let them access the info, or they can get personal email addresses of the employees and email the link to that, but in order to do so the plan sponsor must have their consent and must make sure that the email addresses they have on file are kept current. And then there are terminated employees who still have a balance in the plan who need to receive the notice. As a nonproducing TPA, we do not get in the middle of this melee. We will remind the employer that the notice is available on the vendor's website and needs to be distributed and give some info about what the requirements are for electronic distribution, but I really think the best course of action is for the employer to print off the notice and mail it out/hand it out and keep a copy of it in their plan files that is date stamped as to the date it was distributed.

I think your question is does the fact that company A is crediting prior service with company B somehow prevent the use of the transition period rule for testing purposes. I don't believe so. As long as the plan was meeting the coverage requirements immediately before the merger, and the coverage is not significantly changed during the transition period, then the plan should be able to take advantage of the transition period and the plan will be deemed to satisfy coverage for 2017 and 2018. You can run separate ADP/ACP tests for each company. As far as your question on whether the Company B employees should count for the top paid group determination, there is some lengthy discussion about that in the ERISA Outline Book. The bottom line, however, is that the IRS has not issued formal guidance on this question. The EOB notes that it would be reasonable to apply the top paid group rules separately to each respective workforce, so that a separate 20% is determined for each company.

An Employer can decide how it wants to discharge its prevailing wage obligation, which could include making a matching contribution. What you are describing really doesn't make sense (unless I am misunderstanding) because it will actually serve to discourage deferrals in the plan. The employer has to pay the prevailing wage in some manner. If an employee defers, then his prevailing wage fringe is paid as a "match". I assume, then, that if he doesn't defer then the prevailing wage would be paid to him in cash. If that is the case, many employees will choose not to defer, so that the prevailing wage is paid to them in cash. The only time I see prevailing wage taking the form of a match is when an employer has a match obligation to all participants - either safe harbor or non-safe harbor - and for the prevailing wage employees, the employer uses the prevailing fringe to offset what is due for the matching.

The answer is that you cannot remove this distribution option with respect to accrued benefits. Forms of benefit payments can be eliminated from a plan (for example, you can eliminate annuities and installments). Hardship withdrawals can be eliminated. But what you cannot eliminate is the timing of the payment. In this case, the timing is the ability to take a withdrawal from money that is at least 2 years old or once the participant has been in the plan for at least 5 years. Those distribution options are protected.

Check the language in your plan document. We use the ASC document and the adoption agreement states that "If bonus payments are not excluded from the definition of Plan Compensation under AA §5-3, Employees may defer any amounts out of bonus payments, subject to the Elective Deferral Dollar Limit and the Code §415 Limitation". So you may not have a problem with how this has been handled. But I would say that absent an election to withhold a different amount on the bonus payment, then the default should be that the same withholding on normal wages should be applied to any bonus payments, as well (unless you have clear language in the document otherwise).

Self correction may be used to satisfy the IRS requirements to keep the plan tax-qualified. However, late contributions are also a fiduciary violation under the DOL, and the DOL only allows for correction under the VFCP. The VFCP program ensures the employer is not subjected to civil penalties. These articles reference a civil penalty of 20% of the recovered amount. https://www.truckerhuss.com/2015/12/late-deposits-a-timely-topic-2/ https://fsb-law.com/employee-benefit-plans-and-the-voluntary-fiduciary-correction-program/

Danny CPA - with respect to your question about the difference between the medical bills and student loans bills, the hardship rules with respect to tuition state that the hardship may be taken for fees for the next 12 months. In other words, it is for upcoming educational expenses, not "past" expenses that have already been covered by a student loan. Whereas a medical expense hardship is typically related to expenses that have already occurred.

As the EIN of the purchased company is being changed, my guess is that this was a stock sale and the purchaser is changing the EIN. If it was a stock sale, then the purchaser has assumed the SIMPLE plan and must maintain it until the end of the year. The employees of the acquired company will continue to participate in the SIMPLE and the purchaser must fund the necessary employer contribution until year-end . At that time, the SIMPLE may be terminated and the employees of the acquired business will be eligible for the purchasing company's plan based on the eligibility requirements of that plan. The acquired employees cannot participate in the both the SIMPLE and the purchasing company's plan. Only the employees of the acquired company may participate in the SIMPLE and the termination can only be done as of 12/31.