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Found 25 results

  1. Perhaps governmental plans lack the requirement to allow for five (5) consecutive periods of severance/year breaks in service to forfeit amounts where an extinguishing distribution of the accrued benefit or account balance has not occurred. Please provide helpful citations for this inquiry.
  2. My client is a dentist and he wants to reduce vesting hours for a year of vesting credit retroactively to make a couple part time hygienists happier. He will be selling the practice soon and he wants to keep them around until then. Once he sells, he will then make everyone 100% (even terms). When I went to restate the plan to reduce vesting hours from 1000 to 500, I didn't have the option to put in a retroactive effective date. Do you think it is ok to drop hours for vesting and bump up the % for the part timers? This hasn't affected anyone who has been previously paid out in the last 6 years that I am aware of.
  3. Employer entered into a new collective bargaining agreement a couple of years ago that provided additional non-elective contributions and full vesting under the 401(k) plan (more generous than what the plan provides). The Plan was not amended to incorporate these negotiated terms of the CBA. What is the fix? Technically, there is no plan failure. Rev. Proc. 2021-30 states that "VCP provides general procedures for correction of all Qualification Failures: Operational, Plan Document, Demographic, and Employer Eligibility." The plan has been operated in accordance with its terms, so there is no "Operational" failure, and it doesn't violate Section 401(a) by its terms, so there is no "Plan Document" failure. There is no failure to satisfy the requirements of § 401(a)(4), 401(a)(26), or 410(b) ("Demographic" failure) and the employer is eligible to establish a 401(k) plan, so there is no "Employer Eligibility" failure. Thus, I read EPCRS to say that there is no relief available for this scenario. Is that accurate??
  4. To present a hypothetical situation, Myra R----- works at Entity W and enters retirement plan 3. She later transitions to work at Entity T, an entity within the controlled group in which Entity W occurs. Entity T has not endorsed plan 3; she attains normal retirement age while at Entity T. To prevent ambiguity, Myra R----- transitioned from Entity W prior to having attained unequivocal vesting, though with a sufficient balance to thwart § 401(a)(31)(B) distributions. Must she receive full vesting while employed at Entity T?
  5. Company A acquired Company B and each have 401(k) plans. Plans will be merging 12/31/2020. Company A 401(k) Plan (surviving plan) has immediate vesting for all sources. Company B 401(k) Plan (merging plan) has a 6-year graded vesting schedule for match and profit sharing. 1. Can the surviving plan continue the 6-year graded vesting schedule for all of the merging match and profit sharing money (active and terminated participants)? I think this is yes but value opinions. 2. Can the surviving plan continue the 6-year graded vesting schedule for the merging terminated participant accounts while providing 100% immediate vesting for merging active participant accounts? I'm not sure on this one. 3. Can the surviving plan provide immediate 100% vesting for all of the merging match and profit sharing money (active and terminated participants)? I'm not sure why they would, but need to cover all options.
  6. hello! I have a plan that amended the vesting schedule effective 1/1/2018 from an immediate vesting to a 2/20 vesting schedule. I have an employee that was hired 9/2017. She was eligible 1/1/2019 (1 year 1000 hour eligibility with 1/1 & 7/1 entry) Does she fall under the old vesting schedule because of her hire date or does she fall under the new because of her participation date? I appreciate your help. Thank you!
  7. I have an issue that just arose, I was notified by my previous employer plan sponsor that I was overpaid when I left my 401k. I was overpaid roughly $6000 due to an error by the plan administrator back in 2016. I have since rolled those funds into my own personal IRA and now Vanguard is requesting I give those funds back. I dont feel that I am obligated to return those funds as I was not the one who made the mistake and in most lines of work you are held accountable for mistakes and not allowed to pass them off to someone else. Additionally I dont feel I should have to pull those funds from my IRA which would be an early distribution (additional tax consequence) and I would then need to amend my tax return from 2016 which is time and resources spent when that would not be necessary had this error not occurred. I am curious if anyone has insight into what my rights and options are? I can obviously not respond but dont want to have a law suit on my hands and dont want to have this issue come up in 20 years when they claim some crazy thing like I now owe them $50,000 because of inflation and interest.
  8. Prior plan is an non-ERISA 403b effective from 2009 and terminated prior to 2015. They only had employee contributions, never any employer contributions. The new ERISA 403b is effective 1/1/2015. The plan excludes vesting service prior to plan's effective date. Can the new plan exclude vesting prior to 1/1/2015 even though they had another plan during that time?
  9. We have a sponsor and additional adopting employer who are acquiring the assets and employees of numerous companies, who want to credit prior service. Is it permissible to have some sort of catchall language that credits prior service with all companies that will be purchased instead of amending the plan each time and listing out all individual companies? The ERISA books didn't seem to address the situation and the FT William document sections says list each company. Just asking because I think I've seen Relius documents in the past have such a catchall provision. Thanks in advance.
  10. Can this be done? Plan A and Plan B are not a control group, but there is common ownership. The Employers would like the service from either plan to count for both plans. So Bob in plan A is hired and terminated with 2 years of service. Goes to work for Plan B, has a year of service. So his vesting in Plan A and Plan B would be 3 years of service. Oversimplification perhaps, but this is the scenario. Yes? No? Thoughts? If yes, have would you write the language in the plans?
  11. I have a client that would like to change the hours required for a "year of service" for both eligibility and vesting from 1,000 hours to 750 hours. For eligibility - I believe that, as of the effective date of this change, we will need to allow all employees to enter the plan if they have worked at least 750 hours in a year, even if it was a long time ago. For vesting, do we need to adjust vesting based upon prior years of service during which an employee worked 750 hours (even if they were not in plan and/or did not work 1,000 hours)? I would think not. I would prefer that the reduction in hours for a year of vesting service is applied on a prospective basis. Thank you!
  12. I have received a DRO for a participant who is only partially vested in a 401(k) plan. The DRO instructs that we value the vested and unvested portion of account as of a specific date in the past. And then if/as the Participant vests in the future, the AP will receive a proportionate share of that vesting. If the Participant doesn't vest, the AP doesn't receive any further funds. I am accustomed to qualifying the DRO and immediately segregating the assets, but I cannot give the AP unvested assets and then allow the AP to attain them as the Participant vests. And I cannot imagine trying to keep track and move half of the newly vested portion over each year as the Participant vests further. The risk of a recordkeeping error seems high. This feels like a problematic situation. The participant will not pay out from the vested portion and attorney indicates no other options. Would appreciate feedback as the only other DRO's I"ve dealt with were fully vested.
  13. ERISA Section 105 requires benefit statement to include a statement of "vested percentage of such benefits (or the earliest date on which benefits will become vested)". Do you agree that the "earliest date" is the date on which a participant becomes partial vested? That is, on a 2/20 vesting schedule, does a participant "become vested" when they become 20% vested or when they become 100% vested? Thanks
  14. A profit sharing plan currently requires 2 years of service for eligibility for an employee to become a participant. Thus, the plan has 100% immediate vesting. The plan only covers non-highly compensated employees. The plan sponsor wants to lower the eligibility to 1 year of service and introduce a 6-year graded vesting schedule. All existing Participants will remain 100% vested. How will this be handled for existing employees? Some employees have been held out already over 1 year (some almost 2 years). However, they have not yet entered the plan and thus have no rights as a participant. Must they be 100% vested when the plan is amended to lower the eligibility, or can they be placed onto the 6-year schedule? How about those with under a year, would they be treated any differently?
  15. A participant was hired at a time when the Plan was immediate vesting. The participant was gone for 20 years and rehired after a vesting change to a 2-25. Participant left money in the plan and is the funds are 100% vested. The question and debate is whether the employee is subjected to the new schedule of 2-25, OR, because she was originally hired under the Immediate, she is subjected to the immediate schedule. We know her existing funds are 100% vested. No issue there. I lean that she is under the old Immediate schedule.... What say you?
  16. Can an employer amend their tiered-vesting match to give immediate 100% vesting to only actively employed participants' balances? Put another way, can an employer make all match balances for only active employees 100% vested, while keeping termed participants on the existing tiered vesting schedule? Note this full vesting would be on existing balances as well as future match contributions for active employees. I'm a bit rusty on protected benefits but don't immediately see where any accrued non-forfeitable benefits are being reduced in any way. Any insights and guidance are most appreciated, as always!! Thanks!
  17. A plan needs 11g to pass testing (401a26, 401a4, whatever). The regulation clearly states that providing additional accruals to terminated nonvested participants through 11g is not permitted. But you can do this if you vest those terminated nonvested participants as part of the 11g amendment. Is giving them 20% vesting OK? Less OK? Whatever vesting percentage is given, must it apply to the entire accrued benefit or just the additional accrual being granted under the amendment? Is there anything that specifically addresses this?
  18. Someone is pitching to our CEO a 162 bonus with restrictive endorsement. CEO is all excited about this. But details presented by broker are somewhat lacking so I have some concerns. I understand the endorsement limits access to policy values etc. But: 1. Broker indicated that we can include a vesting schedule, and made it sound like we can still take a current tax deduction. Is that correct? With a vesting schedule, does the employee have current taxable income, or only when vested? What about payroll tax? 2. It seems clean enough if the employee stays until restrictive endorsement is lifted, but what if they don't and have to repay the company? Do we (the company) have taxable income for amount of repayment? If the employee paid tax all along, are they just SOL or can they deduct the amount repaid? If so, I assume the are out the payroll taxes, if those were paid all along? What about company - are we also out the payroll taxes? 3. This seems to be moving pretty fast in our C-Suite and I also have concerns about administration. Broker is a small 3 or 4 employee company. Our CEO is considering this plan for 100-150 employees. What kind of administrative support will we need from the broker? This seems like a long term plan and putting it in the hands of a small mom/pop company concerns me. Thank you
  19. I am designing a new 401(k) profit sharing plan. I have a terminated participant who is young and has low compensation. They enter the plan and then terminate in the middle of the year. I want to use this participant to pass 401(a)(4) as it would be the cheapest option. I end up having to give him about 90% of his compensation. If i design the plan so that there is no hour requirement or last day requirement for discretionary profit sharing, I believe I can give him this large amount. But how should I handle vesting? Does he need to be 100% vested as I am using him so heavily to pass testing? Could he be only 20% vested? Or could I even leave him at 0% vested? How would you handle the vesting if he needed to be 100% vested, but you didnt want any other employees to be automatically 100% vested?
  20. A client established a brand new 401(k) plan effective 1/1/2016. According to this new plan, plan document, · All service with the employer were counted for all purposes · Service crediting methods for all purposes was elapsed time method · Eligibility was 1 month and entry with 1st day of the month following or coinciding for all contributions · 2/20 vesting schedule Six month later, 7/1/2016, this client decided to change the TPA and add a New DB plan. To simplify the combo plan testing, the new TPA changed Service crediting method with ultimately affected the vesting. According to the restated 401(k) plan, plan document · Service from the effective date of the plan were counted for all purposes · Service crediting methods for all purposes become Hours of Methods · Eligibility stays the same for deferral but changed to 1 YOS with dual entry, 1st & 7th month, for Employer contribution · 2/20 vesting schedule The client financial advisor suggested it is ok to go with the restated vesting since this is the new plan. I have hard time to buy client’s financial advisor suggestion in light of IRC §411(d)(6) anti-cutback Regulations. The reason is that 90% of the employees had at least 1 year of service and entered to the plan on the effective date of the plan, 1/1/2016. I would think all full-time employees/plan participant will have at least 20% in their employer contribution by 12/31/2016. Is this not the case?
  21. When is the following participant deemed 100% Vested: DOB 1948 (age 65 in 2013) Entry Date 1/1/2012 Resigned 2014 Plan's NRD is 1/1/2017 "Normal Retirement Age" as elected in the Plan's Corbel Adoption Agreement is the later of the Participants 65th Birthday or the 5th Anniversary of the first day of the Plan Year in which participation began 1.52 "Normal Retirement Age" means the age elected in the Adoption Agreement at which time a Participant's Account shall be nonforfeitable (if the Participant is employed by the Employer on or after that date). Given the above, is this participant 100% vested in 2013, at his/her 65th bday, or as of 1/1/2017? Thank you.
  22. I have a client that fails the ACP test and is required to refund match to two HCEs. One of the HCE is not fully vested in the match contriubution. How is the refund handled in this case - does he still receive the full refund, or is part of it forfeited?
  23. We've had some discussion here in the past regarding what vesting requirements applied to qualified governmental plans. The confusion arises because Code section 411(e)(2) says that governmental plans are required to comply with pre-ERISA section 401(a)(4) and (7), but Code section 401(a)(5)(G) says that 401(a)(4) does not apply to a governmental plan. I've now gotten a copy of an internal IRS directive on the subject, and have posted a copy of it at this link. Essentially, it is applying pre-ERISA section 401(a)(4) to the vesting standards of governmental plans, notwithstanding section 401(a)(5)(G). My analysis of the guidance can be found at this link.
  24. I've just gotten hold of some internal IRS guidance on the application of vesting requirements to plans governed by section 411(e)(2). While the guidance was primarily directed toward governmental plans, it indicates that it would also be applicable to church plans. For anyone who is interested, I've put a copy up at this link.
  25. Initially, our client indicated they were about to be acquired (transaction date TBD in the near future). The client had asked my firm to conduct a "force-out" distribution mailing to thin out the plan before merging it to the Acquirer, and also to give some large-balance terminees an early head's up changes were brewing and to consider moving their retirement assets more directly under their individual control. Thus far into the force-out process, one partially-vested participant voluntarily took a rollover distribution of her net account balance. Now, the decision has been made to Terminate the plan prior to the corporate merger taking place. In my mind, this sort of nullifies the force-out process, and I'm sure the client would be okay, in effect, not forcing anyone out under the original force-out time frame (3/15/2013), and allowing the full vesting and plan termination distributions to occur somewhat later. My question is: Do we make whole the one participant that received a partiallly-vested distribution by reversing the forfeiture and distributing it to her IRA? That seems like the conservative thing to do, given 1. it coincides with the plan termination and would give the appearance of an ill-intended maneuvering of the plan sponsor (not their intent) and 2. people talk and so many other terminees that chose not to do anything will become fully vested it may lead to a complaint. Or, in general, what is the guidance or regulation regarding forcing out partially-vested terminated participants with a pending plan termination? Thanks!
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