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PAISBOA
Carroll Consultants, Ltd.Patrick Gallagher, CEBS
Presenters
403(b) Plan Documents WebinarWritten Plan Requirements and Common
Issues
The Written Plan Requirement
Following the Terms of the Plan
Mandatory vs. Optional Provisions
Operational Issues & Common Written Plan Errors
Avoiding Plan Errors
Other IRS Violations
Fix-It Guides – Common Problems, Real Solutions
Types of Plans◦ERISA
◦Church Plans
◦Non-ERISA
The Written Plan Requirement
Types of Documents
◦Prototype
◦Volume Submitter
◦Individually Designed
The Written Plan Requirement
Following the Terms of the Plan
Eligibility
Compensation
Employer Contribution Distrib
ution Option
s
Written Plan
Mandatory
Eligibility
Benefits
LimitationsDistributions
Investments
Mandatory vs. Optional Provisions
Universal availability for employee deferrals
Can exclude: Student Employees Participants in another plan Non-Resident Aliens Employees who normally work less
than 20 Hours per week
Eligibility
o Non-Discrimination requirements
o Definition of Compensation
oYear of Service definition
Benefits
o Employee deferral – 402(g) Limit
o All contributions – 415 Limit
o Compensation – 401(a)(17) Limit
Limitations
Timing of Benefits
Form of Benefits
Distributions
Vendors available
Participant Directed Provisions
Investments
Mandatory vs. Optional Provisions
Optional Automatic Enrollment
Mandatory Employee Deferrals
Roth
In-Service withdrawals
Rollovers & Plan to Plan
Transfers
Catch-up contributions Termination of
the Plan
Hardships
Loans
Employer contributions
Vesting
Advantages Increase ParticipationSolve failing ACP Test
DisadvantagesAnnual NoticesParticipants with small balances
Automatic Enrollment
Condition of employment
Do not count toward 402(g) Limit
Mandatory Employee Deferrals
After-Tax employee deferrals
Earnings grow tax-free
New 1/1/2013 – In Plan Roth Conversion
Roth Elective Deferrals
• Age 59 ½ - earliest date for employee deferrals
• Define Sources Available
In-Service Withdrawals
• Helps employees consolidate and manage retirement investments
• Transfers are difficult to administer
Rollovers and Plan to Plan Transfers
• 15 Years of Service
• Age 50
Catch-Up Contributions
Preserves the Employer’s right to terminate
Termination of the Plan
IRS Safe Harbor Reasons
Can allow for any heavy and immediate financial need
Define Sources Available
Hardship Withdrawals
Define minimum/maximum loan Interest rate charged Number of years to repay Repayment method Number of loans outstanding When loan defaults
Participant Loans
Matching Formula
Non-elective Contribution
Employer Contributions
Most plans 100% immediately
3 year cliff
2-20 schedule
Vesting
Plan not adopted on or before 12/31/2009
Haste in adopting written plan resulted in errors
Operation not following the written plan document
Common Written Plan Errors
• Follow the terms of the plan• Timely transfer of contributions• Conduct periodic reviews• Update for recent law changes• Nondiscrimination Testing• Form 5500 Reporting
Operational Issues
√ Review plan document
√ Compliance testing each year
√ Monitor employee deferral and catch-up limits
Avoiding Plan Errors
Universal Availability Ineligible employers Plan Loans violate IRC 72(p) Hardship distribution failures Late deposit of employee elective deferrals
Plan transfers
IRS and DOL: Audit Focus
Fix-It GuidesCommon Problems Real Solutions
You have not updated your plan document effective 1/1/2009
Adopt plan now and update to prototype during remedial amendment period
Failed to follow plan terms
Apply reasonable correction methodSee Rev. Proc. 2013-12
Definition of compensation was not applied correctly
Corrective contribution or distribution
Missing Employer contributions
Corrective contribution
Fix-It GuidesCommon Problems Real Solutions
Plan failed nondiscrimination tests Make qualified non-elective contributions for the non-highly compensated employees or refund excess contributions to HCEs
A participant exceeded IRS Plan limits
Process an excess deferral distribution
Late deposited employee deferrals Deposit all late deferrals and earnings resulted from late deposit – see DOL lost earnings calculator at www.askebsa.dol.gov/VFCPcalculator/webcalculator.aspx
Fix-It GuidesCommon Problems Real Solutions
Participant loans do not conform to IRC 72p
Modify loan terms or send a corrective payment
Hardship distributions not made properly
Amend plan retroactively to allow hardships or have participant return hardship distribution with earnings
Did not file Form 5500 File all delinquent returns
IRS Fix-It Guide for 403(b) Plans coming soon:
http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Fix-It-Guides---Common-Problems,-Real-Solutions
How Can I Find Out More?
www.irs.gov/epNewsletters, Employee Plans News,
Retirement News for Employers, Governmental Plans Updates
Marcie Carroll 610-225-1210
Tom Giedgowd 610-225-1206
Pat Gallagher 610-225-1217
Buzz Hartsig 610-225-1204
Regulatory Guidance, Fiduciary Education, Investment Provider Analysis and Management, Investment Platform Plan Transition, Year-end Compliance Testing and Form 5500 Reporting, Plan Design Consulting & Employee Communication and Education
www.cclbenefits.com
