Liam

I understand this is a complicated topic regarding Service Contract Act. Our client about to engage in a contract that covered under SCA and asked us how this will impact the current 401k My understanding is SCA makes employer to pay certain wage rate and fringe benefit ( health and welfare payments) to certain service employees. And the employer has 2 options: either to pay cash or contribute to fringe benefit. If they pay cash, it will be subject to FICA tax and employer has to pay their portion?? "Two options for paying out H&W to your service employees: 1. Pay H&W in the form of cash. With the changes in ACA, we are hearing from our benefits partners that cash in lieu of benefits can seem as an incentive to not enroll in organizational benefits and contradicts the ACA regulations. It is important to know that if you do pay H&W in the form of cash it must be paid as a separate line item on the pay stub clearly designated as H&W. If you incorporate it into an employee’s normal wages it is not considered H&W pay. 2. Contribute H&W to a 401k account. Your organization can contribute the monetary value into a 401k account and remain compliant with the regulations. It is important that your 401k plan document is set up so that H&W contributions can begin immediately through immediate entry into the plan. The immediate entry does not mean the employee can self-contribute to the 401k immediately; it means that they are set up with an individual account on your 401k Plan. In addition, it is recommended that your plan clearly spell out that employer contributions are not eligible for any discretionary matches provided by the organization. Lastly, the employee should be informed of how to access his/her H&W funds. " If they pay cash: My questions are if they pay cash toward 401k plan, then how this will affect vesting?. Will this "employer contribution" 100% vested or based on current vesting schedule (I read somewhere that this is 100 vested)? How this "employer contribution" will affect that employee current 401k deferral? And I don't think this "employer contribution" is subject to any matching? So how the employer knows which fringe benefit to pick including group health insurance, life insurance, and a 401(k) savings plan? Can employer chooses whatever they like? Thank you and I appreciate all the inputs.

Well. What we were thinking was - The company overmatched $18 and the employee already cashed out . So the employee owes the plan $18. 401_noob - The company couldn't contact him. So as JackS said we think that what if the company go ahead and pay $18 back to the plan and never get reimbursed back $18. We just want to have some research backing this deminimis. Can the company go ahead and pay back to the plan $18 and call it even.

Hi, Our client had an excess matching of $18 to an employee and couldn't contact with him to resolve this problem. The plan admin proposes the following fix. "The guiding principle is to make the plan whole. You have three options here: Recover the assets from the participant to make the plan whole (let me know if you go this direction and I will provide some assistance with the mechanics) Make the plan whole from corporate assets and recover the assets from the participants to make the corporation whole Declare this to be a deminimis amount, taking no action to make the plan whole, and take your chances on audit with the IRS/DOL that they agree with you that this amount is deminimis" We really want to treat this as deminimis since it would be troublesome and not cost effective to resolve such small amount. I just want to find some research or guideline from IRS/DOL to back this deminimis. I did some research and only found Rev. Proc. 2016–51. section 6.02(5)(b) "(b) Delivery of small benefits. If the total corrective distribution due a participant or beneficiary is $75 or less, the Plan Sponsor is not required to make the corrective distribution if the reasonable direct costs of processing and delivering the distribution to the participant or beneficiary would exceed the amount of the distribution. This section 6.02(5)(b) does not apply to corrective contributions. Corrective contributions are required to be made with respect to a participant with an account under the plan." But this only applied to corrective distribution. In this case, the employee owes the plan back $18. Would some of yall run in to this situation before and have any guideline on this or research regarding how to treat this. ? Thank you!

Bird I also hate to further dig in deep down for this $50. But Kristina got a good point of that is in fact not a distribution. But on the 5500, there was no other line to show the refund of a over payment of loan. Corrective distribution and certain deemed distributions lines on 5500 definitely cannot be used for this $50. So y'all right about that any auditor would have understand about this if ever needs to explain. All I can say is Form 5500 should have had some lines to show any unusual situation like that. And if they nit-picking $50 then I think they should spend the resource somewhere else. Close this thread and appreciate for all y'all input.

Appreciate for your responses. Bird, you was right about there was an error and it should be corrected in 2016 but get carry over to 2017 and show an adjustment of $50 out of participant account. Basically, it was a refund of $50. Well, it's from one of the big TPA so we wouldn't have known this. For small amount like this, we will just stick it somewhere in distribution on 5500 since if put a negative amount in other income will make the presentation looks weird.

Hi yall, I'm working on a 2017 Form 500 for a plan and have a small issue There was one participant got refund of $50 loan principal overpayment in 2017 for a 2016 loan. How can i characterize this refund on 5500? I was thinking about putting that $50 as negative ($50) in other income or $50 in the Benefit payment - directly to participants. I looked into 5500 instruction Line 2c. Other income. Enter all other plan income for the plan year. Do not include transfers from other plans that are reported on line 2l. Other income received and/or receivable would include: 1. Interest on investments (including money market accounts, sweep accounts, STIF accounts, etc.). 2. Dividends. (Accrual basis plans should include dividends declared for all stock held by the plan even if the dividends have not been received as of the end of the plan year.) 3. Rents from income-producing property owned by the plan. 4. Royalties. 5. Net gain or loss from the sale of assets. 6. Other income, such as unrealized appreciation (depreciation) in plan assets. To compute this amount subtract the current value of all assets at the beginning of the year plus the cost of any assets acquired during the plan year from the current value of all assets at the end of the year minus assets disposed of during the plan year. Line 2e(1) Directly to participant. payments made (and for accrual basis filers) payments due to or on behalf of participants or beneficiaries in cash, securities, or other property (including rollovers of an individual’s accrued benefit or account balance). Include all eligible rollover distributions as defined in Code section 401(a)(31)(D) paid at the participant’s election to an eligible retirement plan (including an IRA within the meaning of Code section 401(a)(31)(E)); How do yall think this should be in the 5500? I'm leaning more on the Benefit payments directly to participant. This is a new situation for me. I appreciate all the inputs. Thank you.