Message Boards Digest

April 4, 2018

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

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Patricia Neal Jensen created a topic in 403(b) Plans, Accounts or Annuities

Failure to File 8955-SSA; Should We Pay Penalties Up Front?

A new (to our TPA firm) 403(b) client has not filed 8955-SSA in the past due to confusing "instructions" from a vendor supposedly doing the administration. Our firm is filing for the 2017 year (the first year for which we're responsible). The client is anxious about possible penalties. I've heard some people say "don't self-file" on the penalty payment ("According to the IRS website, you should not voluntarily mail in any payment of penalties. If they decide to assess a penalty, they will contact you directly with details."). Please share any experience with this.
Number of replies posted  1 reply      Number of times viewed  41 views      Add Reply

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thepensionmaven created a topic in Retirement Plans in General

'Benefits, Rights and Features' Aspects of Fixing Misallocation Among Participants' Accounts

We've got a SP dentist who sponsors a SHM 401K. He contributed for 2017 as well as 2018 in 2018 toward the employer match. Of course the fund-holder directed the funds to the proper participant accounts. Now that the employer has learned he contributed too much, he wants to either have the excess removed and a check cut back to him or to have the funds transferred to his own account. We explained he "no-can-do," that the money already has been deposited into the participants' accounts and can't be removed merely by saying it was a contribution made in error. As far as removing and re-depositing into his own account, we cited the 401(a)(4) rule (regarding benefits, rights and features). He wants to know why he can't contribute to his account now and to the employees' either later in the year, or by tax filing deadline for 2018. Need a cite, please.
Number of replies posted  3 replies      Number of times viewed  47 views      Add Reply
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EBECatty created a topic in Form 5500

Timing of Acquired Company's Final 5500 Due to Health Plan Termination

Say a fully insured group health plan covers 100+ participants. The company (plan sponsor) is sold during 2017 and the group health plan ends. The policy expires on December 31, 2017. The employees are hired by the acquirer effective January 1, 2018. The 5500 instructions say not to check "final return" if "the plan is still liable to pay benefits for claims that were incurred prior to the termination date, but not yet paid." Two questions: [1] Is 2017 the final return, or does the fact that the insurance company may still receive and pay claims require another 5500 for 2018? [2] If the answer above is yes, presumably the active participants at the end of the plan year would be 0, even though the policy ended at 11:59 p.m. on December 31, 2017, correct? One can't file a final return with a participant count >0, so this seems logical.
Number of replies posted  0 replies      Number of times viewed  25 views      Add Reply
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Buckoosier created a topic in Defined Benefit Plans, Including Cash Balance

Life Insurance Purchased from Plan

A participant bought a life insurance policy from a plan several years ago. During the time the policy was in the plan, he paid income tax against the "PS 58 cost" portion of the premium each year. Several years later he cashed out the policy, and there is now gain (relative to the original exchange price) that will now be taxed. For purposes of determing the gain, is the participant's cost basis the exchange price, or is it the exchange price plus the sum of the PS 58 costs?
Number of replies posted  1 reply      Number of times viewed  34 views      Add Reply
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Logan401 created a topic in Cross-Tested Plans

OK to Provide No Allocation to HCE in New Comparability Plan?

If in a New Comparability plan where each participant is in their own allocation group, is it permissible to provide an HCE with no allocation?
Number of replies posted  12 replies      Number of times viewed  147 views      Add Reply
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CLKent23 created a topic in 401(k) Plans

Filing Forms 1099R Late

I just received an email from a client regarding distributions that were made from their plan in December 2017, so the Forms 1099R need to be issued. This is a plan that has the investments via brokerage accounts, which we (TPA) provide the recordkeeping for. We also produce the Forms 1099R each year, but the client never told us about these two distributions when we inquired in January. Now they want us to prepare the forms. I see there will be a penalty to the IRS for filing paper copies late ($100?). Can anyone tell me the process for making a late filing? Is there an additional form to file with the penalty (etc.)?
Number of replies posted  2 replies      Number of times viewed  45 views      Add Reply
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Fiduciary Guidance Counsel created a topic in Retirement Plans in General

ESOP Required No Spousal Consent for Single-Sum Lifetime Distributions, So Surviving Spouse Got No Portion of $2.7 Million Distributed Two Days Before Participant's Death

Because the terms of an ESOP did not require the spouse's consent for a distribution before the participant's death (other than one chosen in the form of a life annuity), the spouse (as the surviving spouse, even though the participant had filed for a divorce) got no portion of the $2.7 million in the participant's account because there were zero dollars left in the account at the date of his death ... the participant's single-sum withdrawal of his account balance was processed on a Friday, and then he died on Sunday. Yikes!
Number of replies posted  6 replies      Number of times viewed  85 views      Add Reply
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Luke Bailey created a topic in 401(k) Plans

Allocation Between Roth and Non-Roth Amounts When Participant Receives Partial Distribution from Plan

Some 401(k) plans have many different types of distributions besides lump sum on termination of employment, e.g. hardship, non-hardship in-service after attainment of age 59-1/2, in-service at any age from rollover account, partial distributions after separation from employment, and RMDs. If the plan also has Roth elective deferrals and an in-plan Roth rollover feature, an employee's accounts for elective deferrals, nonelective, matching, and rollover may all contain both Roth and non-Roth accumulations. So when a distribution of less than 100% of any account is made, you have to determine the portion that is Roth, and the portion that is not Roth. The 401(k) LRMs allow a plan to provide that distributions of excess contributions after failure of ADP test are made first from non-Roth amounts, but aside from that, I can find no guidance from IRS regarding what it thinks is permissible and have come to conclusion that it is up to the plan and that the plan can also let the participant decide in his/her distribution request form. E.g., plan document could permit a participant who qualifies for an age 59-1/2 non-hardship in-service distribution, who wants to receive $50k as distribution, and who has $100k of Roth and $100k of non-Roth spread over elective deferral, matching, and nonelective accounts to elect to take the entire $50k from the non-Roth. Also, plan could provide that RMDs always came first from non-Roth until non-Roth exhausted. Anyone else given this some thought or found guidance on the question that I am unaware of? One major vendor has a distribution form that seems to permit what I describe in prior paragraph (i.e., employee choice), but I did not find a supporting provision in its volume submitter.
Number of replies posted  5 replies      Number of times viewed  69 views      Add Reply
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30Rock created a topic in 401(k) Plans

Safe Harbor Plan with Enhanced Match and Additional Match

Looking for confirmation on this to make sure the ADP safe harbor is not violated subjecting plan to the ADP test. A 401k plan has an enhanced safe harbor match of 100% up to 6% of compensation. Employer is considering adding a discretionary tiered match based on years of service, so that employees with 15-19 years will receive a 100% match up to 1% of pay, employees with 20+ years will receive a 100% match up to 2% of pay. The total match under both formulas for the employees in these higher tiers, for which there will be HCE's, would be 200% up to 1% and 300% up to the first 2%. I believe this creates a higher rate of match scenario and plan has to run ADP, ACP and BRF testing. Or is it just a matter of running ACP and BRF on the discretionary tiered match?
Number of replies posted  2 replies      Number of times viewed  29 views      Add Reply
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thepensionmaven created a topic in 401(k) Plans

Post-Year-End 'Deferrals' by Shareholder of Professional Corporation

We were just notified by a brokerage firm that our client (the sole shareholder of his professional corporation) apparently contributed too much into the elective contribution portion of the 401(k) plan. When reviewing the contribution history from 1/1/2017-12/31/2017, it appears that the balance of his elective contribution was for the prior year. He is not eligible to make catch-ups. I know that sole proprietors have until the due date of the business tax return (including extensions) to contribute to a plan, including the making of employee contributions, but does that apply to shareholders?
Number of replies posted  1 reply      Number of times viewed  29 views      Add Reply, Inc.
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