We sent a terminated 401(k) Participant a letter stating we would roll their account into an IRA if they did not return a distribution form. At the time their account balance was less than $5,000. Now, 45 days later, we have not heard back, but their account balance has increased to be more than $5,000. Can they still be forced out of the plan?

This is a case where I was SO sure I knew the rules and it appears that I do not! A client has a Top Heavy 401(k) plan with deferrals, Safe Harbor enhanced 4% match, and integrated profit sharing. They use all of it -- maxing out the doctor/owner via the profit sharing contribution and contributing whatever is required for the rank and file. The profit sharing has a last day and 1000 hour requirement. One participant worked less than 1000 hours every year except for 2014. That one and only year, she got her 1000 hours, met eligibility for the first time and got into the plan. For 2015, she did not defer and of course did not get a match, but she got the 3% TH minimum. In 2016 she began deferring 4% of pay and got the SH match but NO profit sharing. In 2017, same thing. I was working on 2018, noticed that once again, she deferred and got the SH match but no profit sharing at all.

I thought we had made a mistake in 2016 and 2017 and were about to make a mistake in 2018 by not giving her the TH minimum 3% in addition to her SH match. I knew that if a plan had ONLY SH Match and no profit sharing at all, then the Top Heavy requirements were deemed to be satisfied. But I believed that from the moment you gave the HCEs 3% or more in profit sharing, you had to be sure that all of the NHCE participants got at least 3%, even those who didn't work 1000 hours.

I questioned the software vendor as to why the under 1000 hours participant did not receive a 3% TH minimum for 2016-2018 and I was told that the employer doesn't have to give her a TH minimum 3% profit sharing contribution because she got 4% in SH Match and that takes care of it.

So if there had been 4 under 1000 hours participants in the plan, and 2 deferred 4% of pay and 2 deferred nothing, the 2 who deferred and got the SH match get NO profit sharing, and the 2 who didn't defer anything would get the Top Heavy minimum 3%? That hardly seems fair or right, but what do I know.... I just want to run this up the flag pole and be sure that others agree. If this is really right, so be it -- what do you say?

TP currently uses a Nanny payroll provider that isn't doing a good job, and we need a new provider. They run a single member S Corp with payroll for themselves as officer, and have a boilerplate 401(k) plan (Solo/off the shelf). Using a new 'Nanny specific' payroll firm (reporting on the Schedule H) not only is more costly, but adds a little more complexity than using one service. Perhaps most importantly though, running the wage through the S Corp's payroll provider will force frequent remittance of tax, rather than building a liability that may be overlooked until tax filing day ... and a sudden bill appears. I see no issue in terms of a controlled group between the S Corp owner and the Nanny if paid via a third party payroll provider 'dedicated to Nanny tax' but wonder if bringing the Nanny onto the S Corp's payroll may cause an issue with ERISA in regards to there being an 'employee on the payroll that is not covered by the plan'. I've not seen a way to specifically exclude a household employee, but also am not sure if the Nanny is considered an employee of the S Corp simply if paid via the S Corp? Naturally, would carve out costs of payroll so that the Nanny wages and taxes are not deducted to the business. Thoughts?

Included in the regulations entitled Section 1.401(k)-1. Certain cash or deferred arrangements is this text:

(ii) Special rules for direct rollovers. A direct rollover from a designated Roth account under a qualified cash or deferred arrangement may only be made to another designated Roth account under an applicable retirement plan described in section 402A(e)(1) or to a Roth IRA described in section 408A, and only to the extent the rollover is permitted under the rules of section 402(c). Moreover, a participant's designated Roth account and the participant's other accounts under a plan are treated as accounts held under two separate plans (within the meaning of section 414(l)) for purposes of applying the automatic rollover rules for mandatory distributions under section 401(a)(31)(B)(i)(I) and the special rules in A-9 through A-11 of Section 1.401(a)(31)-1.

One infers perhaps that while the deliberation for the less than $1K threshold entails parsing and correlating the Roth account(s) and the remaining accounts of a participant, the less than $5K threshold includes the Roth account(s) and the remaining accounts of a participant together. So: Roth accounts of $800 and other accounts of $200; involuntary distribution of a check. Conversely: Roth accounts of $2,500 and other accounts of $2,600; one lacks the option of an involuntary distribution, entailing amongst others an involuntary rollover

Can a plan pay the expenses of a trustee even if it is a self-trusteed plan? Sounds like a PT but because the Owner is wearing the Trustee hat at that moment is it OK?

When changing advisors for a 401(k) plan, is it common to have a blackout period, even if the funds are staying at the same recordkeeper?

CPA has a plan with Morgan Stanley -- a 401k/PS pooled account. He's allocating earnings based on salary (individual salary/total salary multiplied by gain or loss). This gives someone who is eligible, but not participating, a share of the gain or loss. Is this correct?

I recently took over administration of a Cash Balance Plan that was effective in 2016. When I reviewed the document I was a little concerned that under the Eligibility Section there was an exclusion for anyone other than Direct Owners, Spouses of Direct Owners and other HCE's. I just assumed that the document was written in error or that they purposely did this to be able to add back in sufficient NHCE's to pass 401(a)(26) and 410(b). Based on the print-outs in the Actuarial Valuation Reports, the Valuation Reports were run through Relius. The 410(b) and 401(a)(4) tests all show "Pass" for 2016 and 2017. But when I reviewed the census information it appears that 8 employees out of 12 were coded as ineligible. All 12 met the eligibility requirement of 1 YOS and age 21. I believe the 8 "ineligible" participants should have been coded as Active with a $0 benefit. Correct?