Message Boards Digest

December 20, 2017

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

Author's photo

ldr created a topic in 401(k) Plans

Distributions: Tax on True Gross, or Tax on Gross Net of Fees?

Assume a termination distribution. The participant has $10,000 and is fully vested. Doesn't want a rollover, wants a taxable distribution. The form he fills out calls for 20% federal withholding taxes and no state withholding taxes. Recordkeeper charges $100 to process the distribution, and our office charges $70. One of us thinks that the 20% federal withholding applies to the full $10,000. The participant has $8,000 after taxes, out of which he pays the fees, and ends up with $7,830 in his pocket. Another of us thinks that the fees come off the top, and the taxable distribution is $9,830. The participant ends up with 80% of $9,830, or $7,864. It matters because we're trying to develop a consistent way of "grossing up" when requesting in-service or hardship distributions. The amount we should request depends upon how the taxes are applied. Thanks in advance for any help you can give!
Number of replies posted  3 replies      Number of times viewed  57 views      Add Reply
Sponsored by
For over 20 years, we've helped employers find the best-informed candidates to fill their benefits job openings -- learn more!
Author's photo

Madison71 created a topic in Distributions and Loans, Other than QDROs

Loan Offset: When in the Form 1099-R Reported?

A quick question on loan offsets in a qualified retirement plan. I understand that typically upon a distributable event (in this case, termination of employment), an outstanding loan becomes immediately due and payable within a certain period of time (60-90 days, based on loan procedures and the promissory note). Failure to repay in full within this time period results in a loan offset with 1099-R reporting. The question is, in what year is the 1099-R reported? I have seen some providers that report it upon the quarter following failure to repay in full and others that do not report it until the entire account is distributed. I understand the administrative ease of reporting it upon distribution of the entire account and it makes sense if it is earlier than the quarter following termination, but it does not make sense if the participant waits years to request a distribution of their account. I've been told it is based on whatever the loan procedures say, but waiting until whatever year the remaining monies are distributed does not make sense.
Number of replies posted  2 replies      Number of times viewed  50 views      Add Reply
Author's photo

KEC79 created a topic in Litigation and Claims

OK to Impose Deadline to File Claims Under Unfunded Severance Plan?

Company sponsors an unfunded severance plan subject to ERISA. They impose a 120-day limit on filing claims. (120 days is calculated from date employee receives notice that he/she won't receive benefit or notice of the amt of his/her benefits.) DOL regulations don't specifically address this, but they do say that the claims procedures can't inhibit or hamper the filing of claims. (The example they give for this is that you can't charge a fee for processing claims.) Is a time limit on filing claims reasonable?
Number of replies posted  3 replies      Number of times viewed  39 views      Add Reply
Author's photo

Bri created a topic in Cross-Tested Plans

LRM 94 Changed: No More Restriction on Number of Allocation Rates in a Cross-Tested Plan?

My opinion is that the restriction on the number of allocation rates in a cross-tested plan was specifically dictated by LRM #94 and was solely applicable to get a prototype document approved during the EGTRRA cycle. This has been removed for the PPA cycle. And nothing in the 401(a)(4) regulations themselves even makes mention of this, thus meaning PPA documents are not limited to the number of groups or rates available, nor are plans operating under them expected to comply with such a restriction when running 401(a)(4) tests. Agree?
Number of replies posted  4 replies      Number of times viewed  66 views      Add Reply
Author's photo

Soconfused created a topic in 401(k) Plans

Was It a Loan or a Disbursement?

In 2014, my husband requested a 401K loan from his company. It was approved, and repayment terms were set. We got the money and payments were held every paycheck until January of this year. During this time, my husband's job title and pay changed often, so we never really paid attention to the changes in pay. After the first of the year, I noticed his loan balance wasn't decreasing, so I attempted to contact his benefits person through email and phone several times with no response. In July we received an envelope with several letters from MassMutual (who has the 401K and loan) stating the checks they sent us were never cashed. I had no checks and no clue what this was about. My husband called and was informed his loan was in default and all checks mailed to them from his company had been returned. Upon further investigation, we learned that a person in the employer's HR department allowed the loan to go into default but continued to mail the payments to MassMutual, which then returned every payment back to the employer. This went on for over a year. We never heard a single thing about it from either party. Between the two, they have "found" about 12 checks (out of approx. 26 checks) and reissued them to us. MassMutual told my husband they knew it wasn't his fault and that they'd would work with us to reinstate repayment. This was 2 months ago. Yesterday, I received a letter stating the loan was basically refinanced, and would be paid off with a monthly payment of $900 (!) for 2 years. It also said we could default, get a 1099-R and basically call it done. First, $900 is ridiculous and absolutely not a possibility. Second, I got a 1099-R and paid taxes on the loan amount on our 2014 taxes. I know we hold some responsibility. Can you provide any advice or information that might help us? If it was in fact a loan, should we have even been given a Form 1099-R? Because we did, can we change it to an early withdrawal and get what money was paid back to the "loan" refunded? Do I need to contact a lawyer, and if so, what specialty?
Number of replies posted  9 replies      Number of times viewed  98 views      Add Reply
Author's photo

Sherrie W created a topic in 401(k) Plans

Plan Mistakenly Accepted After-Tax Contribution by Participant

A plan participant was able to write a check to his plan account on his own. Not deferral, not through payroll, etc. The plan does not allow for post tax contributions. How to correct?
Number of replies posted  1 reply      Number of times viewed  28 views      Add Reply
Author's photo

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

Remove Installment Payment Method If Already in Progress?

Taking over a plan that I see offers installment payments. In an effort to simplify, I recommend that they remove that option, but now I find that one of the owners started taking an installment series in 2017. Does that mean the employer can't remove the provision from the plan?
Number of replies posted  2 replies      Number of times viewed  30 views      Add Reply
Author's photo

Belgarath created a topic in Correction of Plan Defects

VCP Filings Taking Forever!

Filed a very basic VCP on a SIMPLE-IRA plan in June 2017. Received an acknowledgement letter in mid-AUGUST 2017. Recently (December 2017) I called (twice) to check on the status. In spite of the IRS voice mail promising a callback within 2 to 3 business days, it took 7 business days, but at least they did call. I didn't speak to the caller; they left me a voice mail saying it has NOT YET BEEN ASSIGNED TO A REVIEWER. It will be "at least several weeks" before it's even assigned. Just an FYI! Prepare yourself to hurry up and wait.
Number of replies posted  6 replies      Number of times viewed  32 views      Add Reply
Author's photo

austin3515 created a topic in 403(b) Plans, Accounts or Annuities

403(b) Moves from Insurance to Mutual Funds; Preserve Hardship Distributions?

403(b) plan moves from an insurance company to a mutual fund company. There's a ton of money in the non-elective source. Any way I can preserve at least the existing money for hardship distributions?
Number of replies posted  1 reply      Number of times viewed  20 views      Add Reply, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
(407) 644-4146

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

Copyright 2017, Inc. All materials contained in this mailing are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of, Inc., or in the case of third party materials, the owner of those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

Links to web sites other than and are offered as a service to our readers; we were not involved in their production and are not responsible for their content.

Unsubscribe | Privacy Policy