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Found 3 results

  1. Traditional large 401(k) plan (not safe harbor) with 9/30 year end - original effective date 1987. Volume submitter adoption agreement defines compensation as W-2 wages and does not exclude bonuses. This is a new client for us; our firm is doing the audit for the 9/30/2019 plan year end, taking it over from the prior auditor (who recommended us). We see that various bonuses were paid to employees for performance, safety, etc. at year-end. However, the plan sponsor did not calculated or withheld deferrals from bonuses. As far as we can tell, they have never withheld deferrals from bonuses, and did not realize they were supposed to do so. They are restating the plan to give employees the option to elect out of deferring from future bonuses. The question is: what to do about the past? The plan sponsor has been operating in a manner that would have been permissible under law but not in conformity with their plan document. Does their consistency for the past 20+ years show that they never intended to include bonuses in the definition of 401(k) compensation? Will that consistency protect them from penalties and sanctions? If not, what is the fix for this? How far back would they need to go to "make it right"? Do they need to include all plan participants who have deferred or can they elect to exclude the HCEs from the fix? Thanks!
  2. A client maintains a non-safe harbor 401(k) for non-union employees and contributes to an MEP for collective bargaining unit members. In 2015, one of the union members stopped paying dues, even though he remained covered by the collective bargaining unit. As a result, (1) the employer stopped MEP contributions, and (2) the erroneously allowed the ineligible employee to begin deferring and receiving match under the 401(k) plan. The employee has satisfied the matching contribution vesting requirements. The plan has over 350 participants, and this is the only participant affected by the error. The participant has an account balance of around $12,000 and total plan assets are around $9M. QUESTIONS: Is this eligible for self-correction as an insignificant operational error? Can it be considered insignificant even if we have to issue corrected 1099s for 2015, 2016 AND 2017? Are there any correction methods available in this case OTHER THAN returning contributions and issuing 1099-Rs? Thanks in advance for your thoughts.
  3. Discretionary plan amendment for defined contribution plan is adopted after the end of the plan year during which is became operational. Assume it's operational during 2015 (calendar) plan year and adopted July 1, 2016. Amendment says it's effective 1/1/15. What is the effect? Is the amendment entirely void? or Is the amendment deemed effective 1/1/16 (first day of the plan year in which it was adopted), limiting the operational failure to only 2015? Or - is there another possibility?
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