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Message Boards Digest

March 7, 2018

Here are the most recently added topics on the BenefitsLink Message Boards:

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doombuggy created a topic in Plan Document Amendments

Operational Failure: Bonuses Used for Deferrals Despite Exclusion in Plan Document

We are taking over a client. Their plan document says that for purposes of elective deferrals, compensation does not include bonuses. When asked for bonus data for 2017, the client responded they've never excluded bonus from comp. I don't see a 414(s) test having been performed, in what little we got from the previous administrator. I don't know the details of who got bonuses. The plan has one HCE (who is one of the owners; the other two owners don't "work" there and hence receive no comp). Can the plan sponsor go back and correct prior years through the self-correction process? How?
Number of replies posted  1 reply      Number of times viewed  47 views      Add Reply
 
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CuseFan created a topic in Defined Benefit Plans, Including Cash Balance

Nondiscrimination Testing: Different Measurement Periods?

When doing the general test for nondiscrimination, must the same measurement period (current year versus accrued to date) be used for the rate group determination and for the average benefits percentage? That is, can I determine accrual rates for rate groups on an accrued-to-date basis but calculate my average benefits percentage on a current accrual basis, because I don't have the DC balances, only current year contributions? Or do I need to get balances and use same basis?
Number of replies posted  3 replies      Number of times viewed  47 views      Add Reply
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thepensionmaven created a topic in 401(k) Plans

Late Deposits of Safe Harbor Match

Client received IRS Notice CP-403, no 5500s were filed for 2015-2016. We had been after the client to send the information. Now that the client receives an IRS Notice, he finally sends a spreadsheet with the employee and employer contributions for each year. Upon review, we have determined the safe harbor match was calculated incorrectly for 2015-2016-2017. I know there's a 12 month period after the end of the plan year to make the safe harbor contribution, but what are the ramifications if the corrected contributions are made after the 12 month period?
Number of replies posted  0 replies      Number of times viewed  28 views      Add Reply
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30Rock created a topic in 401(k) Plans

Missed Deferrals and Confirmation of Corrections

I have a calendar year plan with auto enrollment that missed auto enrolling certain new hires in 2016, 2017, 2018. The plan has 3 month eligibility for deferrals and match. The auto enrollment percentage is 5%.

I have reviewed Rev. Proc 2015-28 and the IRS Fix It Guide and there are a couple of variations. I want to make sure all the facts are in order. For example the Fix Guide mentions fixing the failure promptly and also that in order for the reduced QNEC to apply, the employee cannot be terminated -- if terminated then the 50% QNEC rule applies.

Here are my views and corrections on these missed deferrals and match based on this guidance:

1. 2016 failures -- they did not get corrected by 10/15/17 (9-1/2 months after the end of the plan year in which the failure occurred) so the QNEC is 25% of the 5% missed deferrals to date(?), plus earnings, and 100% of the full 5% match. The deferrals will get started by 3/9 the next payroll period, the notice will go out within the next week. The corrective contributions and earnings (through date of correction) will be calculated and posted as soon as possible. Did I miss anything?

2. 2017 failures -- as illustrated in the IRS Fix It Guide Example 2, no QNEC is due for the missed contributions during 2017. And for 2018, no QNEC is due for missed deferrals, since we are in the first 3 months. However the missed match is due plus earnings. The deferrals will now be started at 5% by 3/9 the next payroll period, and they will get a notice within the next week.

3. 2018 failures -- no QNEC is due since we are in the first 3 months, but any missed match is due. The notice will go out and deferrals will start on the 3/9 payroll. For any terminated employee, if a QNEC is due for missed deferrals is it 50%? What about for 2018 during the first 3 months, do we get a pass? Example 4 in the Fix It guide has illustration for a terminated employee -- a 50% QNEC is due since none of the safe harbors apply.

Sorry for the lengthy fact pattern, hopefully it reads quickly! Thank you for any help!

Rev. Proc. 2015-28: https://benefitslink.com/boards/applications/core/interface/file/attachment.php?id=1371

401(k) Plan Fix-It Guide: https://benefitslink.com/boards/applications/core/interface/file/attachment.php?id=1370

Number of replies posted  0 replies      Number of times viewed  28 views      Add Reply
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frank1971 created a topic in SEP, SARSEP and SIMPLE Plans

Can Employer Skip SIMPLE Match for a Particular Former Employee?

I suspect the answer is "No" but employer has a SIMPLE IRA with 100% matching up to 3% of compensation and their match is deposited in a lump-sum after the year concludes. They would prefer to not add matching dollars to one former employee's account. The former employee was terminated for cause and has violated his non-compete. Is there any way for the employer to not add matching for this one former employee where hard feelings still persist?
Number of replies posted  1 reply      Number of times viewed  26 views      Add Reply
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