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Found 20 results

  1. We have a failed 2015 ADP test that was not corrected timely. We are now correcting under ECPRS using the one-to-one correction method. Our intention is to allocate the QNEC to employees who were NHCEs in the year of the failure and are also NHCEs in year of the correction. If allocated this way, three NHCEs would receive a QNEC allocation of greater than 5%, while three would not receive a QNEC at all (they are no longer employed). Is this allocation permissible using the one-to-one correction? Any insight is appreciated! Thanks
  2. We have an outside asset company process distributions and prepare 1099-Rs. A lump sum distribution was processed in 2019. Federal withholding submitted. 1099-R generated. February 2020 - Per the participant, a stop payment was placed on the check and the funds were returned to the original plan. Withholding was not returned. Should we be correcting the 1099-R? What should be done with the withholding. It's a large asset provider, so I'm not sure that they will correct to return it. Thank you!
  3. We had a new earnings code used for group of associates on our last payroll that was not setup correctly as 401k eligible. It was caught after 1 payroll and will be corrected on the subsequent run. So while everyone who elected a deferral had their deferral calculate on part of their earnings, there were some whose contribution did not calculate on all of their earnings due to this code. For example, base salary $500, new commission code $100, 10% deferral should have been on $600, but we took on $500.00 Proposed correction method is letting everyone who was affected know that they can increase their deferral to make up for any part on their end, and let our match true up catch anyone who missed a match contribution. (safe harbor plan, match contributions every payroll with true up at year end) Comments? We at first thought we had to do QNEC on match, however, would get double match at true up time.
  4. One person 401(k) plan wanted to move investment companies in 2010, was advised he had to terminate plan and adopt a new plan. Participant was less than 59 1/2 and no distributable event. Assets were rollover over to IRA and never withdrawn, it is still in the IRA, so apparently no tax consequence. The new plan is terminating now in 2018. The owner wants to fix the failure in the first plan. What is the fix at this point? Can he ride the statute of limitations and do nothing? Appreciate any insights! Prior discussion here: https://benefitslink.com/boards/index.php?/topic/56188-successor-401k-plans-correction-thoughts/
  5. We have a plan that has allowed all participants into the plan early for more than 20 years. Both HCEs and NHCEs were allowed in early. If the early inclusion of participants is significant (or assumed to be significant), can we adopt the retroactive amendment under SCP? Does the requirement that significant operational failures be corrected within two years apply to corrections by plan amendments? Assume there is no discrimination issue.
  6. I have a situation in which a church defined benefit pension plan has two participating employers that have been giving participants contributions and have adopted the plan without an official participation agreement. One plan has been operating in the plan since the spring of 2017 and the other since the mid 1980's. I believe SCP might be able to be used for the first issue but VCP for the second. Any thoughts? The employers provide contributions on behalf of participants.
  7. There is a multiple employer plan that has several adopting employers. One of the adopting employers has been operating under the plan without an adoption agreement since the spring of 2017. Can this be corrected with an amendment because it's still within that plan year or does it need to go through a correction program? Also, one of the adopting employers has merged into another adopting employer, does the merged plan need to sign a new participation agreement or should it be terminated?
  8. Due to the use of an incorrect definition of compensation it was determined in late 2016 that several plan participants had made excess contributions to the plan during the 2015 and 2016 plan years. Participants were making salary deferrals on types of compensation that were not eligible compensation under the plan document (i.e commission). A distribution from the plan is the appropriate way to correct for such excess contributions. But would it also be permissible for to refund the excess contributions (adjusted for earnings) to the employees through payroll, particularly if the correction was being made within the same plan year as the error? i.e. If an employee had $100 in excess contributions in 2016, could the $100 plus earnings be returned to the employee as taxable income in the 12/31/2016 paycheck? What about an excess amount from the prior year (2015)?
  9. I have a governmental plan that is individually designed and has not been restated since 2001. If it is a cycle C (I realize that remedial amendment cycles are no longer around), what years should the plan have been restated? In other words, what years did the plan miss a required restatement?
  10. A plan will file a voluntary correction for late RMDs. Some of the late RMDs are due to lost participants. Is the inability to make a payment due to inability to find a participant (despite multiple and varied efforts) a plan error?
  11. An ER incorrectly contributes to a 401(k) plan an amount that is in excess of the amount that the EE elected. This happens once, and the correct amount is withheld and contributed in the next payroll period. The error appears to have been made when the first deferral election on file was not cancelled after a second deferral election was made. What is the best way to make the correction? Should the amount be returned to the EE from the plan (as compensation)? I can find nothing in EPCRS that addresses this situation. There is no excess deferral, just a one-time human (or perhaps computer) error.
  12. Pension plan erroneously made a lump sum distribution to an individual who had never been a participant in the plan or worked for the employer. Do the ECPRS correction procedures for an overpayment apply here or is there something more specific to this situation? The ECPRS definition of overpayment refers to a payment to a "participant or beneficiary" - and this individual was neither. Here's the story - former employee allegedly provides a name and SSN that do not belong to him he was hired. Employee Bill participates in the pension plan under the false name and SSN for a few years but is eventually terminated for providing false employment documents (apx. 2008). In 2016, the individual whose name and SSN were used by the former employee applies for social security and receives a 'Potential Private Pension Benefit Notice' regarding the pension benefit under his name and SSN. He contacts the employer (whom he never worked for), files a claim, and is paid a lump sum distribution of apx. $7,000. He provided a different DOB than what was on file for the former employee but that was not caught at the time. Someone how he learns there is a 401k benefit under his name/SSN as well and while trying to get that paid to him, he discloses to the employer that he had never worked for the employer and was allegedly a victim of identity theft by a cousin. Recipient is refusing to pay the $7,000 distribution back to the plan. I'm clear on the rights of the real former employee to the benefits he earned while working, despite the incorrect SSN, and that he will have to provide a valid SSN or TIN to receive distributions from the qualified plans. But how does the employer correct the $7,000 distribution to other guy? Do the ECPRS overpayment procedures apply? Does the employer have any avenues available for recoupment that they would not have if this was an overpayment to an actual participant (i.e. does this guy have rights under ERISA here)? The employer made the error here, but the recipient also made a claim for benefits from a plan he knows he never participated in. He has acknowledged that the former employee participated in the plan and "earned" the pension benefit using the recipient's SSN. Any thoughts would be appreciated!
  13. I could use some input on how to correct this unique situation please... An employee was deferring pretax $750 per paycheck and submitted a request on 3/15/16 to change the election to $350 pretax and $10 roth. The change was not actually implemented until 10/31/16. The employee confirmed that they would like the contributions returned. Would you return $390 per paycheck and recategorize $10 as roth and have the client fix payroll to add $10 of her pretax as taxable wages since a 1099 will be issued for the $340 being distributed? Any suggestions?
  14. It was discovered that a few participants in a governmental defined benefit plan had compensation over the 401(a)(17) limit. Benefits were within 415 limits. This resulted in an overpayment for a few participants who have retired but also in employer pick up contributions that were higher than they should have been. There seems to be a good amount of guidance (including last year's revenue procedure) and opinion out there on how to correct the overpayment. BUT How can the pickups be corrected? Assume that they involve years prior to 2015. My immediate thought was that the appropriate correction would be to 'forfeit' under the plan - meaning the employee would not have credit for them - which in this case really boils down to whether contributions would be paid out to a beneficiary if the participant died before receiving annuity payments at least equal to his or her contributions. Then the "Employer", in this case the municipality, would need to make the employee whole for the deduction that was taken from pay in error. The payment to the employee would be reported on a revised W-2 for each applicable calendar year, and the employee would need to re-file taxes for those years. Is there a better (easier) answer? Something that doesn't involve re-filing individual income tax returns? Also, could it be possible - consistent with EPCRS principles - to offset the overpayment by the over-contributions? For example, the plan overpaid you $5000, but you overpaid the plan $2000, so you need to pay back $3000 to the plan. Errors are very small relative to the plan size and involve only a few plan years. The intention is to self correct, not to submit under VCP. (It's understood that the plan wouldn't have reliance on the correction method without VCP compliance statement.)
  15. Client failed testing. Refunds issued and cashed. Discovered bad data was used. Tests rerun and client still failed but refund required for HCEs was less than what was issued? As to issue of refund, can they self correct?
  16. Does anyone know if under Rev. Proc. 2015-28 a correction can be made if the failure comes from a failure to auto-enroll when implementing a new auto-enrollment feature versus failing to enroll a participant in an existing auto-enroll plan? If I implement the feature and miss participants, are the reduced correction fees available?
  17. I have a scenario where I have a safe harbor match of 100% of 4% and for 2012-2014 they didn't have a cap on the match at the annual compensation limit, so some received thousands more in match because their gross income was over $250,000. How do I get participants to return funds if they have already taken distributions? Are there any correction methods for this?
  18. Does anyone have any ideas as to what the proper correction would be under 4980D(f)(3) for credits made to a non-integrated HRA? It is clear from the IRS, DOL, and HHS guidance that a non-integrated HRA will fail to comply with the annual dollar limit prohibition and preventive services requirements. If a plan sponsor (in the multiemployer plan context) makes credits to an HRA account and then later finds out the individual was not enrolled in a group health plan (rendering the HRA account "non-integrated"), what could be done to correct and avoid being slapped with the $100 per day/per individual excise tax penalty? 4980D(f)(3) states that: (3) Correction A failure of a group health plan shall be treated as corrected if— (A)such failure is retroactively undone to the extent possible, and (B)the person to whom the failure relates is placed in a financial position which is as good as such person would have been in had such failure not occurred. My thoughts: 1. The sponsor could "un-credit" the amount credited to the HRA. This addresses subsection (A) regarding the retroactive "undoing" of the failure. But what about (B)? If the plan also has an FSA feature, presumably the employer could "re-credit" the amount to the FSA, which should place the individual in as good a position they would have been under the HRA (no tax recognition, can reimburse eligible medical expenses, potentially a rollover feature). And if the plan doesn't have an FSA option?... 2. The sponsor could un-credit the HRA, turn around and give that amount to the employee after-tax and gross up his or her wages. 3. The noncompliance period under 4980D(b)(2) would run from the date the individual had both credits to his or her HRA account and was not enrolled in a group health plan, and would end on the date the HRA was un-credited and the employee was made whole. 4. The sponsor could potentially take advantage of the reasonable diligence exception under 4980D©(1) if it required employees to fill out an attestation form certifying that they are enrolled in group health plan coverage. If the employee is not enrolled in the sponsor's coverage, what more should the sponsor be expected to do to exercise reasonable diligence in knowing the failure (i.e., not being enrolled in GHP coverage) exists?
  19. If for the past 2 years, a client has been making 401(k) deferral contributions on behalf of an employee on leave out of post-tax payments that are not allowed to be used for 401(k). The employee has no other income from the client to make 401(k), and therefore should not have contributed anything. What is the correction method? Are there multiple ways to correct? Do you have to file anything with the IRS or can you self correct? My experience with excess 401(k) contributions is to refund the money and earnings as ordinary income, but that was for contributions over the $17,500 limit. I am not sure if it is different if all of the 401(k) contributions are disallowed, and if it spans multiple years.
  20. If for the past 2 years, a client has been making 401(k) deferral contributions on behalf of an employee on leave out of post-tax payments that are not allowed to be used for 401(k). The employee has no other income from the client to make 401(k), and therefore should not have contributed anything. What is the correction method? Are there multiple ways to correct? Do you have to file anything with the IRS or can you self correct? My experience with excess 401(k) contributions is to refund the money and earnings as ordinary income, but that was for contributions over the $17,500 limit. I am not sure if it is different if all of the 401(k) contributions are disallowed, and if it spans multiple years.
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