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Message Boards Digest

December 1, 2017

Here are the most recently added topics on the BenefitsLink Message Boards:

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Vlad401k created a topic in Distributions and Loans, Other than QDROs

Participant Changes Mind About Rollover

Let's say a participant is terminated earlier in the year. He elects a rollover distribution, but later (after the check is issued), decides to put the funds back in the original 401k account. Is that permitted? I would think that it wouldn't be because he's no longer an employee of the original 401k plan.
Number of replies posted  9 replies      Number of times viewed  108 views      Add Reply
 
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dmb created a topic in Retirement Plans in General

Calculation of Deduction Limit Includes Comp of Participant Who Terminated Before Year-End?

For DC plan deductible limit, in a plan with a last day requirement, does eligible compensation include compensation of participant who terminated before the end of the plan year?
Number of replies posted  11 replies      Number of times viewed  129 views      Add Reply
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LisaS created a topic in Multiemployer Plans

Safe Harbor Plans Leaving and Joining MEPs

I have two separate situations with a safe harbor plans: one that is trying to join the MEP and one that abruptly left and went to a large national payroll company. The first plan is a safe harbor plan that is being administered by a national payroll/benefits company. They were informed that the plan was leaving and stopped accepting payroll contributions in November. I am trying to contact the payroll company conversion specialists and ask if this is a fact. Because this is a safe harbor plan I thought we should merge the plans effective 1/1/2018 but the advisor wanted to start the plan 12/1/2017 because of this situation. Should we make a quick amendment to allow contributions to trustee directed (i.e. pooled) and set up a checking account in the name of the plan so we have somewhere to hold the assets? The other safe harbor left the MEP abruptly in November 2017. I have contacted the client and asked if the payroll company he went to had provided any consulting about the impact on the safe harbor but have had not response.
Number of replies posted  0 replies      Number of times viewed  25 views      Add Reply
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austin3515 created a topic in 401(k) Plans

Worrying About Effect of Tax Reform on Pass-Through Income

I'm worried about the proposed reduction of pass-through income taxes to 20%. Would 100% of pass-through income be subject to just 20%? In other words, does that include Guaranteed Payments and the allocation of ordinary income? ASPPA has brought up the issue that if clients only get a deduction for 20% when the money goes in and then the money is taxed as ordinary income when it's distributed, the client likely will be paying MORE tax on the way out, creating a huge disincentive to save.
Number of replies posted  2 replies      Number of times viewed  75 views      Add Reply
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Ted Munice created a topic in Defined Benefit Plans, Including Cash Balance

PBGC Coverage Continues If Non-Owner Terminates But Isn't Paid Out?

Plan covers owner and sister. Hence covered by PBGC because sister does not have ownership. That's good; it allows 25% deduction for DC plan. Sister terminates. If she is not paid her benefit and her benefit remains in plan as terminated vested, is the plan still covered by PBGC, such that we still have a 25% DC deduction?
Number of replies posted  3 replies      Number of times viewed  58 views      Add Reply
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Kudos26 created a topic in Retirement Plans in General

Discounted Rate for Provision of Fiduciary Services by Existing Service-Provider: Prohibited Transaction?

X provided health and insurance services to its client. X offered that client a discounted rate for providing fiduciary services to that client for its retirement plan. The retirement plan received a discount of 15% on the stated fee for the retirement plan because of the bundled services. A prohibited transaction?
Number of replies posted  3 replies      Number of times viewed  47 views      Add Reply
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Chippy created a topic in 401(k) Plans

The Rule of Parity: Any Limit to How Long the Former Employee Can Be Away?

Plan uses Rule of Parity. Exclude eligibility service before a period of 5 consecutive one year breaks in service if an employee does not have any nonforfeitable right to the account balance derived from Employer contributions. Does not have a one year holdout provision. An employee is eligible to enter the plan on his rehire date if vested when terminated. Employee is terminated in February 2005 and was 60% vested. He is rehired in 2014, so he was gone for 9 years. Is there a limit as to the number of years an employee is gone from the company so that the prior service will not count for eligibility? Can an employee be rehired after 20 years and will that prior service count?
Number of replies posted  3 replies      Number of times viewed  35 views      Add Reply
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ndj2377 created a topic in Defined Benefit Plans, Including Cash Balance

Trouble Purchasing Annuities at Termination of Relatively Small Plan

Plan sponsor will be finalizing the termination process during the 1st quarter of 2018. They have 40 annuitants. Expected liability for these annuitants is approximately $350,000. We are having a hard time finding firms to bid on the annuities due to the overall size. Does anyone have firms that they have had success with smaller plans? Thanks.
Number of replies posted  1 reply      Number of times viewed  21 views      Add Reply
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IhrtERISA created a topic in 401(k) Plans

Requesting "Minor" Modification of Compliance Statement

Would appreciate any feedback on experiences with requesting a "minor" modification of a VCP Compliance Statement. Are such attempts typically successful? If request is denied, are there negative consequences? Applicant discovered some additional corrections needed to be made within the 150 day period after receiving Compliance Statement. These corrections all related to the SAME underlying failures included in the VCP. At question is whether the corrections below could be considered "minor": 1. Three (3) participants were included in original VCP as "Overpaid" (not being fully vested at time of termination). However, it was later discovered that they were not in fact overpaid (were age 65 at time of termination thus fully vested). Overpayment letters were sent to participants and then later retracted upon the discovery. 2. Due to missing payroll records, Applicant listed certain assumptions in the VCP submission as a result of missing data. This data was later discovered, and it was determined that this assumption was not correct for 24 participants. The result was that the OVERPAYMENT to these participants had been originally calculated to be greater than it actually was. Thus, OVERPAYMENT amount decreased. 3. Due to multiple record payments, two (2) participants believed to have received OVERPAYMENTS had in fact received a slight UNDERPAYMENT Does IRS take into consideration the ratio of the corrections made under the original VCP submission to the number of modifications required in determining "minor"? Any input is greatly appreciated. Thank you! -
Number of replies posted  0 replies      Number of times viewed  16 views      Add Reply
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Gilmore created a topic in 401(k) Plans

Amendment to Eligibility Rules When Plan Year's Almost Over (Dec. 1) -- Too Aggressive?

An existing 3% safe harbor nonelective 401k plan has the calendar year as its plan year. It has a One Year Wait for eligibility. The plan sponsor would like to amend the plan today, 12/1/2017, to permit anyone employed as of 12/1/2017 immediate eligibility. This would bring in 2 HCEs and 6 NHCEs. It seems that expanding the eligible employees is allowed mid-year, but this timing seems aggressive because the new entrants have only one month to defer. What do you think?
Number of replies posted  5 replies      Number of times viewed  60 views      Add Reply
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