AAS2

The plan administrator inadvertently allows a participant to exceed the plan dollar amount limits when taking out a second loan (second loans are permitted). The plan permits in-service distributions. At the time the loan is taken out, the participant is already 59 and 1/2. The error is found several months later. Because the participant was already 59 and 1/2, I believe that the excess amount over the dollar limit should count as a distribution (as opposed to a deemed distribution) and the payments (principal and interest) that have already been made should be applied to the correct loan amount (i.e., the amount that is left once the excess has been characterized as a distribution). In addition, the employer must issue a 1099-R. No VCP is necessary. Am I missing anything here? Thank you

I am trying to understand the comparability rules for HSAs, particularly as they apply to former employees and have some pretty basic questions. Under the Final Comparability Regulations for HSAs CFR § 54.4980 Section 1-7, employer contributions to an HSA are not subject to comparability testing if the contributions are made through a cafeteria plan “if under the written cafeteria plan, the employees have the right to elect to receive cash or other taxable benefits in lieu of all or a portion of an HSA contribution (meaning that all or a portion of the HSA contributions are available as pre-tax salary reduction amounts), regardless of whether an employee actually elects to contribute any amount to the HSA by salary reduction,” and they are subject to the comparability rules if made outside of a cafeteria plan. (54.4980G-5, Q&A-1) My first question is whether HSAs are ever not offered through a cafeteria plan? This is not the relevant question, but I would like to know if that ever happens. Former employees may receive contributions from their former employers, and former employees are a category that must be tested under the comparability rules if they apply. (a) Categories. The categories of employees for comparability testing are as follows … (3) Former employees (except for former employees with coverage under the employer's HDHP because of an election under a COBRA continuation provision (as defined in section 9832(d)(1)). (54.4980G-3, Q&A-5) Also, “An employer that contributes only to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP is not required to make comparable contributions to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP because of an election under a COBRA continuation provision (as defined in section 9832(d)(1)). (54.4980G-3, Q&A-12). Am I correct that if the HDHP is a retiree plan, the comparability rules apply and if elected through COBRA, they do not apply? So, subject only to discrimination testing, the employer can choose to make HSA contributions of differing amounts or only to some but not all former employees under COBRA? Finally, is there any limit as to how long employers can continue to make contributions to former employees, either under COBRA or the comparability rules?

If participant elects different form for late RMDs before participant receives any payments, okay to go from default to election?

This is a db plan and we really have participants who disappear and cannot be found despite diligent efforts. I have another question. If participants do not elect form of distribution, may plan pay out in default fashion and then change the form and of payout if participant later makes an election in the proper form? Individual payment amounts would be adjusted accordingly.

A plan will file a voluntary correction for late RMDs. Some of the late RMDs are due to lost participants. Is the inability to make a payment due to inability to find a participant (despite multiple and varied efforts) a plan error?

A frozen plan provides for a suspension of benefits upon re-employment. Plan Administrator never sent notice, and over a year has passed. 1) Can Plan Administrator stop payments and restart them upon subsequent "second" retirement? 2) If the Plan Administrator can do so, is it required to give actuarial equivalence of benefits upon second retirement because it did not provide notice of suspension of benefits? 3) If Plan is required to give actuarial equivalence to this retiree, does it need to treat all future rehired retirees the same way, i.e., not suspend benefits or provide actuarial equivalence at subsequent retirement? Thank you

I think that "Two Cents'" answer is relevant. This participant took a single life annuity that presumably should not be paid out during the period of re-employment. He is receiving assets that belong to the plan. Isn't this an overpayment?

The plan was frozen in the year in which participant terminated employment (2004). Began to take early retirement benefits immediately. Eleven years later was rehired. Has been working over a year and is now over NRD but under 70.5. Is this just an overpayment issue that can be resolved through EPCRS and return to plan trust of distributions either by participant (if possible) or employer (or other third party)?

The plan requires both suspension and notice. The plan is frozen. The period between separation from service and the date of rehire was ten years.

A participant in pay status returns to employer. There is no suspension of benefits nor is a notice of suspension sent out. Must plan recoup benefits that should not have been made, or can it provide notice, suspend future benefits until subsequent retirement and actuarially set off the benefits against future benefits?

A DB participant terminates employment before RBD and dies at least 15 years before first RMD is due. Surviving spouse does not answer correspondence for years and is not found until well after RMD date, more or less ten years (facts are a little murky as to how often plan administrator reached out to surviving spouse - spouse has been living both in and out of US for years, but there have been numerous attempts - although first one may have been several years after first RMD was due). Surviving spouse never made election regarding form of benefit. 1) I believe surviving spouse should receive first payment that represents actuarial equivalent of missing RMDs. Anyone disagree? 2) Q&A 4 of CFR 1.401(a)(9) says that when participant is deceased, and a spouse fails to consent to a distribution, the plan may distribute in the form of a QPSA and 411(a)(11) and 417(e) will be deemed satisfied if plan has made reasonable efforts to obtain consent and the distribution otherwise meets the requirements of 417. Is there any reason that spouse should be given opportunity to choose another form of benefit? It may be that plan administrator's first attempt to reach spouse was late, but there were many attempts afterward. Spouse's son has responded to plan administrator's queries from time to time so plan administrator knows that documents went to right house. Thank you

Thank you for your responses. Austin, yes, the only amount deposited came from one participant's paycheck. RatherBeGolfing, not sure how the mess up occurred but it was almost as though the two deferrals passed each other in the mail. There was a small percentage change. Not sure about the numbers, but the EE changed the election so that the sum of the two elections came out. Example, the EE changed the election from 5 to 7 and 12 was taken out. The deferral percentage was way below the deferral percentage that the plan permits. This happened for one pay period only. Thank you for your additional thoughts.

An ER incorrectly contributes to a 401(k) plan an amount that is in excess of the amount that the EE elected. This happens once, and the correct amount is withheld and contributed in the next payroll period. The error appears to have been made when the first deferral election on file was not cancelled after a second deferral election was made. What is the best way to make the correction? Should the amount be returned to the EE from the plan (as compensation)? I can find nothing in EPCRS that addresses this situation. There is no excess deferral, just a one-time human (or perhaps computer) error.