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Message Boards Digest

June 13, 2018

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

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ldr created a topic in Retirement Plans in General

Becoming a Key Employee -- Exactly When?

A plan has two Key employees as identified by our software. They both surprise us in how they were handled. The first was already an HCE in 2016 by virtue of his salary but was not a Key employee. He owns no stock in the company. In 2017 he became the president of the company. The software identifies him as a Key employee in 2017. We thought it would be 2018 before he would be considered a Key employee. The second employee was Key already but died in 2017 and his account balance was distributed before 12/31/2017. The software put his distribution in the account balance column as a negative number and subtracted it from the President's account balance to get a net difference for the Key employees' balances for the year. To be clear: President has, let's say, $200,000 which is considered a Key employee's balance to our surprise, and the deceased person's distribution of his $10,000 account balance is picked up as a negative number in the test, so the net Key balances on the Top Heavy Test are $190,000. Does this seem normal to any of you?
Number of replies posted  3 replies      Number of times viewed  64 views      Add Reply
 
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ErisaGooroo created a topic in Correction of Plan Defects

Using VFCP to Address Excessive Fees Charged to Participants and Plan Sponsor

VFCP filing will be prepared for overcharged participant fees to participants and overcharged fees to plan sponsor as a result of systematic error. Once the principal amount and lost earnings are restored to the plan, does the plan sponsor also have to amend the Form 5500 for prior years? Overcharged fees are approximately $50,000 and the error goes back to 2014.
Number of replies posted  1 reply      Number of times viewed  41 views      Add Reply
Author's photo

jim241 created a topic in 401(k) Plans

Removing a Roth Deferral Option from a 401(k) Plan

Are they any issues with removing a Roth elective deferral option from a 401k plan?
Number of replies posted  1 reply      Number of times viewed  55 views      Add Reply
Author's photo

KCA created a topic in 401(k) Plans

Required Aggregation of Two Plans for Top-Heavy Testing

Employer sponsors two plans. One is a cross-tested profit sharing plan with a 1-year service requirement; the other plan is a 401(k) plan with immediate entry. Each plan can pass coverage testing independently and the profit sharing plan can pass 401(a)(4) testing with and without including deferrals. The PS plan is top-heavy with key employees participating. The 401(k) plan is not top-heavy since key employees do not make deferrals and do not have account balances in the plan; but the key employees are not specifically excluded from participation. Because the 401(k) plan doesn't specifically exclude key employees from participation, must the plans be aggregated for top-heavy purposes thus requiring top-heavy/minimum gateway contributions for employees with less than one year of service? If so, would amending the 401(k) plan to exclude keys employees from participation change the answer?
Number of replies posted  3 replies      Number of times viewed  59 views      Add Reply
Author's photo

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

Changing a 415 Limitation Year

415 Limits:

"(e) Limitation year for individuals on whose behalf section 403(b) annuity contracts have been purchased. The limitation year of an individual on whose behalf a section 403(b) annuity contract has been purchased by an employer is determined in the following manner.

"(1) If the individual is not in control of any employer (within the meaning of Section 1.415(f)-1(f)(2)(ii)), the limitation year is the calendar year. However, the individual may elect to change the limitation year to another twelve-month period. To do this, the individual must attach a statement to his or her income tax return filed for the taxable year in which the change is made."

Has anyone ever filed such a statement?

Number of replies posted  4 replies      Number of times viewed  28 views      Add Reply
Author's photo

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

Wrong Interest Rate Used for Participant Loans

We have two loans that were taken with an incorrect interest rate, the plan uses the prime rate plus 1%. The prime rate had changed but the loans were taken at the old loan rate. I am looking for a correction procedure to fix the loans in question but cannot find one. Do we need to re-amortize these loans at the correct rate?
Number of replies posted  5 replies      Number of times viewed  61 views      Add Reply
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