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August 7, 2018

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Madison71 created a topic in 401(k) Plans

Reporting of Payment Outside of Plan by Recordkeeper to TPA

Recordkeeper provides a one-time payment to its TPA partners based on a new plan that comes over (based on asset size). For example, in 2018, one new plan is placed with the recordkeeper. Based on the asset size, the one-time payment to the TPA totals $6,000. It is paid out of the general assets of the recordkeeper. This amount is not paid by the plan, participants or investments held in the plan. Does this need to be reported on the Schedule C of the Form 5500 as indirect compensation to the TPA? Does this need to be reported on the 408(b)(2) disclosure?
Number of replies posted  0 replies      Number of times viewed  18 views      Add Reply
 
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jpm56 created a topic in Defined Benefit Plans, Including Cash Balance

Non-PBGC Plan Termination with Surplus Assets

Situation: Small Medical Practice Non-PBGC Plan Term with Asset Surplus. As of DOPT just the owner/participant had an accrued benefit. They also have 7 non-excludable employees that have been excluded from benefiting in the plan. Not as familiar with Non-PBGC Plan Terms and I'm trying to re-allocate the excess in a non-discriminatory manner.

Benefits and Participation frozen on 4/30/12; Amended excess assets to be re-allocated to participants eff 8/30/17; Non-PBGC Plan Termination eff 8/31/17. The document is a prototype with standard language on excess assets if a plan is not covered by the PBGC. States '... if elected in the Adoption Agreement, excess assets shall be reallocated to the Participants on the basis of their Present Value of Accrued Benefit....'

To allocate the excess, I used a safe harbor formula covering the owner and three other employees. (Three of the non-excludable, excluded employees) I came up with .62% x HI3 Comp resulting in accruals that produce a large enough total in PVABs for all four participants to cover the Excess Assets. (Still have four excluded employees) Note that 415 is not an issue for the owner. So, the excess ends up being allocated on a pro-rata on the PV of that .62% x Hi3. [1] What are your thoughts on this excess allocation method?

This formula satisfies 401(a)(26) and is a safe harbor formula satisfying 401(a)(4)/410(b). The plan was frozen and met top-heavy requirements before and after the freeze. Granted this accrual can be considered anew allocation. [2] What are your thoughts on T-H requirements?

On a side note, Rev. Rul. 80-229, Paragraph 2 of SEC. [3] ASSETS NOT LESS THAN PRESENT VALUE OF ACCRUED BENEFIT states:

If the assets as of the date of termination exceed the present value of the accrued benefits (whether or not nonforfeitable) as of such date, the plan will not be considered discriminatory if such excess reverts to the employer or is applied to increase benefits in a nondiscriminatory manner. One method of applying the assets to increase benefits in a non-discriminatory manner is to amend the plan to provide a new benefit structure such that (1) the benefit structure would not be discriminatory if the plan were not terminated and (2) the present value of the revised accrued benefits (whether or not nonforfeitable) as of the date of termination equals the value of plan assets, and to distribute assets equal to the present value of the revised accrued benefits. The new benefit structure must satisfy other requirements of the law such as sections 411(d)(6) and 415 of the Code."
[3] Do you think an amendment explaining how the excess is allocated, along with the formula, and included participants would work in this situation?
Number of replies posted  0 replies      Number of times viewed  20 views      Add Reply
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kgrant created a topic in 401(k) Plans

Combining a Safe Harbor Match with Discretionary Match for HCEs

401k plan is considering a safe harbor match formula of 100% of the first 4% that would apply only to NHCEs. The plan allows for a discretionary match. The plan sponsor wants to fund HCEs with a similar 4% discretionary match but apply the vesting schedule to HCEs as well as a last day employment condition. [1] Permissible Safe Harbor as match for NHCE is 4% and overall match for all is 4%? [2] Is the discretionary match subject to ADP (which it would fail, obviously)?
Number of replies posted  3 replies      Number of times viewed  40 views      Add Reply
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Newbie created a topic in Defined Benefit Plans, Including Cash Balance

After Divorced Participant Commits Suicide, Judge Decides He Wasn't Divorced After All

I am a plan administration committee for a defined benefit plan. A decree of divorce was entered ending the marriage between Employee X and spouse. The next day, Employee X committed suicide. Weeks later, spouse applied for and obtained a QDRO for 1/2 of X's benefits. For the plan, the committee denied the QDRO. Our denial was based on the advice of our ERISA attorney and actuary. They explained that the entire benefit "died with X" because he died single and before the plan received or even knew a QDRO might be coming. The spouse has applied to the divorce judge who decided to vacate the decree of divorce, restoring X and the ex-spouse to married status, due to the "unique and compelling circumstances," including that the decree had not even been delivered to either X or the spouse by the time of X's suicide. It's obvious that the motivation for the divorce judge vacating the decree of divorce and pronouncing them married at the time of X's death is to obtain for the spouse a part of the benefits. Our ERISA attorney and actuary have never heard of an attempt by a divorce court to manipulate a pension benefit in this way, or whether it would be effective to do so. What say you?
Number of replies posted  5 replies      Number of times viewed  71 views      Add Reply
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Justin created a topic in SEP, SARSEP and SIMPLE Plans

Calculation of SEP-IRA Contribution Deductions; Sponsor Has Non-Calendar Fiscal Year

I have a client with a SEP-IRA plan maintained on a calendar year basis, but the client has a September 30 fiscal year end. How do I calculate the client's contribution deduction on his tax return? Do I deduct a percentage of his annual contributions (e.g. 75% of 2018 contributions)? Or do I simply deduct his annual 2018 contributions, regardless of the difference in fiscal year and SEP plan year?
Number of replies posted  1 reply      Number of times viewed  15 views      Add Reply
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mming created a topic in 401(k) Plans

Quarterly Participant Notice for Self-Directed 401(k) Plans as to Multiple Statements Involved?

Is there a requirement that participants must receive a notice every quarter that states that info regarding their account may be provided to them via multiple statements (e.g., a statement from the investment company and one from the TPA)?
Number of replies posted  2 replies      Number of times viewed  36 views      Add Reply
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Jim Chad created a topic in 401(k) Plans

Reporting Requirements for a Merged Plan

I have not been able to figure out what happened to a company but it seems to have gone out of business and its assets apparently were acquired by a bigger company. Old company's plan was merged into the acquiring company's plan. Is the acquirer responsible for the Final 5500, etc. of the small company's plan?
Number of replies posted  2 replies      Number of times viewed  34 views      Add Reply
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RWPHoenix created a topic in 401(k) Plans

IRS Form 6088 Must Accompany IRS Form 5310?

Is a Form 6088 still required to be filed with the Form 5310 for a terminating 401(k) Plan?
Number of replies posted  1 reply      Number of times viewed  21 views      Add Reply
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