Reputation from Dave Baker - Page 8 - BenefitsLink Message Boards

Dave Baker reacted to EBECatty in 457(f) Substantial Risk of Forfeiture June 10, 2021

I'm hoping to get others' input on the correct standard for the future performance of substantial services under 457(f) for non-elective employer payments. Under section 1.457-12(e)(1)(ii) of the proposed regulations, "the determination of whether an amount of compensation is conditioned on the future performance of substantial services is based on the relevant facts and circumstances, such as whether the hours required to be performed during the relevant period are substantial in relation to the amount of compensation." There is no minimum vesting period in the proposed regulations or preamble.
When adding to current compensation or extending a substantial risk of forfeiture, proposed regulation 1.457-12(e)(2)(iii) requires performance of at least two years of future substantial services.
Under example 1 in proposed regulation 1.457-12(e)(3), a one-year (January to January) vesting period is implemented, which goes unmentioned as the example is aimed at an insubstantial amount of post-termination consulting services. One would think that if a two-year minimum deferral were required to begin with, the example would not need to resort to measuring the amount of work performed during the one-year period (or would use a longer duration). But the general substantial risk of forfeiture rule only looks at the amount of work performed, not the duration of the future services.
I know there has been a general rule of thumb stemming from section 83 that a minimum two-year deferral period is required to validly delay a substantial risk of forfeiture.
While it may be a matter of degree, I'm interested to hear others' takes on the following, all non-elective employer payments, all outside the short-term deferral date if the substantial risk of forfeiture is deemed not to take hold because it's less than two years:
On July 1, 2021, employer awards employee a bonus payable on June 30, 2022, provided they remain employed full-time until the date of payment. On December 1, 2021, employer awards employee a bonus payable on June 30, 2022, provided they remain employed full-time until the date of payment. On December 1, 2021, employer awards employee a bonus payable on June 30, 2023, provided they remain employed full-time until the date of payment. On December 1, 2021, employer awards employee two separate bonuses, one payable on June 30, 2022, and one payable on June 30, 2023, provided they remain employed until each separate payment date. On December 1, 2021, employer awards employee five separate bonuses, one payable on each succeeding June 30, provided they remain employed until each separate payment date. Would anyone argue that some or all of these would immediately vest and be taxed on July 1, 2021, or December 1, 2021, as the case may be?

Dave Baker reacted to Christine Roberts in Coronavirus DIstribution Timing June 8, 2021

Participant submitted the paperwork for a Coronavirus Related Distribution on December 24, 2020. The assets were transferred out of the participant account and plan trust account on December 26th. They were transferred to a paying agent. The paying agent didn’t send out the distribution until January 4, 2021.

The paying agent is refusing to treat this as a coronavirus related distribution because the check wasn’t sent until January 4, 2021. (Past the 12/31 CRD deadline.) They will be issuing a 2021 1099 distribution for the full $100,000. Thus the participant will have to incur immediate tax consequences and penalty for taking this money out.

Has anyone else had any issues like this? We are trying to build a case that because the money left the participant account and the plan’s trust account on December 26th that this should be credited as a 2020 Coronavirus Related Distribution and the paying agent should treat it as such.

Dave Baker reacted to Carol V. Calhoun in Going from ERISA 403(b) status to Non-ERISA 403(b) status June 7, 2021

The old account balances would cause the plan to be an ERISA plan. The only exception dealt with certain pre-2009 403(b) plans that ceased to have employer contributions after that. Field Assistance Bulletin No. 2009-02.

Dave Baker got a reaction from Bill Presson in Correction of Plan Back to 2014 May 25, 2021

Luke Bailey is not far from Ft. Worth

https://benefitslink.com/boards/index.php?/profile/92850-luke-bailey/

Dave Baker reacted to ErnieG in Correction of Plan Back to 2014 May 24, 2021

Thank you.

Dave Baker reacted to CuseFan in SEP IRA 3-Year Eligibility Requirement May 19, 2021

Of course that assumes those individuals were truly independent contractors. If nothing in the relationship changed except the employer "flipped a switch" and presto chango now everyone is magically an employee, then there is certainly some risk that IRS could retroactively reclassify them as employees from the start. Absent one or more of these individuals pursuing/inquiring about this directly with IRS or DOL, the chances of such are probably slim but something of which the employer should be aware I would think.

Dave Baker reacted to Stash026 in Employer Contribution Due Date May 17, 2021

Thanks! The concern was that they had filed their tax return prior to making the contribution. That clearly isn't an issue, so thanks!

Dave Baker reacted to Belgarath in Loan default correction May 11, 2021

Sorry, apparently I submitted this twice. Once is enough!!!

Dave Baker reacted to Brian Gilmore in COBRA for Former Employee May 10, 2021

I would take the position that the former employee is still a QB eligible for COBRA under the Outbreak Period rules.
The rules state COBRA can terminate early if the qualified beneficiary first becomes covered under another group health plan after electing COBRA. The enrollment in the other group health plan must occur after the qualified beneficiary elected COBRA to cause early termination.
The timing piece means that a qualified beneficiary who enrolled in another group health plan prior to electing COBRA will not be subject to early termination of COBRA because of that other group health plan enrollment.
In this case, the former employee has not yet elected COBRA under the employer at issue. So any other group health plan enrollment during the interim will not cut short the QB's COBRA rules under the Outbreak Period rules that will provide up to a year to make the election.
Here's a longer summary: https://www.theabdteam.com/blog/early-termination-of-cobra-upon-enrollment-in-other-group-health-plan-or-medicare/
Here's the relevant cite:
Treas. Reg. §54.4980B-7, Q/A-2:
Q-2. When may a plan terminate a qualified beneficiary’s COBRA continuation coverage due to coverage under another group health plan?
A-2. (a) If a qualified beneficiary first becomes covered under another group health plan (including for this purpose any group health plan of a governmental employer or employee organization) after the date on which COBRA continuation coverage is elected for the qualified beneficiary and the other coverage satisfies the requirements of paragraphs (b), (c), and (d) of this Q&A-2, then the plan may terminate the qualified beneficiary’s COBRA continuation coverage upon the date on which the qualified beneficiary first becomes covered under the other group health plan (even if the other coverage is less valuable to the qualified beneficiary). By contrast, if a qualified beneficiary first becomes covered under another group health plan on or before the date on which COBRA continuation coverage is elected, then the other coverage cannot be a basis for terminating the qualified beneficiary’s COBRA continuation coverage.
(b) The requirement of this paragraph (b) is satisfied if the qualified beneficiary is actually covered, rather than merely eligible to be covered, under the other group health plan.

Dave Baker reacted to Barry Levy in Required Restatement for Terminated 401(k) Plan May 7, 2021

The plan must be up to date in writing as of 12/31/2019. another issue is that assets should be paid out within 1 year of the effective date of plan termination. The plan may now be considered "ongoing" due to not timely being paid out. At minimum at this point it would be a good faith best practice to amend and restate.

Dave Baker reacted to ldr in Excess deferrals in a tribal non-ERISA 401(k) plan May 5, 2021

Question withdrawn. I was given incorrect information by the person who asked the question. In fact, a refund was processed for 2019 and one is in progress for 2020 as well.

Dave Baker got a reaction from R Griffith in RFC: Allowing members to post a "commercial" about themselves or their firm April 30, 2021

Sometimes they're kinda cranky about not being able to take a real vacation for a couple of decades (without toting along a computer to put together a daily email newsletter). Still, they just paid off the mortgage, the boy was able to go to a good college, and there's money set aside in connection with this retirement concept that one hears about. Plus there couldn't be a finer group of subscribers and message board users, and in some sense our intrepid Internet pioneers have helped the cause of retirement security as well as helping people find good jobs and do their jobs more easily and effectively. So it's all good!
Here's our "amendment and restatement" in a work photo (Gymboree in pinstripes, doncha know) that dad took and fiddled with in 1995, when this world-wide web thingie got started. Joey will be 27 in a couple of months. He has no interest in employee benefits, though, and the former Floridian prefers to work as a snowboard instructor and maintenance engineer at a ski resort near Mt. Hood in Oregon.