Message Boards Digest

June 29, 2018

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

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calexbraska created a topic in 409A Issues

Can a NQDC Plan Be Spun Off?

We have a management company that runs a NQDC plan. The management company is wholly owned by A, and A also wholly owns B. B also participates in the NQDC plan. The management company is going to be removed and replace with a different management company. Under the NQDC plan this does not trigger a change of control payment. But we have employees at B that are participants in the NQDC Plan. We have two options. First is to just start a new plan for the B employees. They will still have their account under the old plan, but now they will have another account at a new plan. Second, and what we'd like to do, is move the accounts for B employees to a new plan, sponsored by either B or A. Is that possible? It would be sort or like a rollover to a new plan. According to the plan, amounts deferred for B employees are already paid out of the general assets of B, and subject to B's creditors, so I don't see the issue with having the money follow B, instead of staying in a plan run by the old management company. Is this something we can do?
Number of replies posted  4 replies      Number of times viewed  45 views      Add Reply

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401 Chaos created a topic in Governmental Plans

Can Occupational Licensing Board Set Up a 401(k) Plan?

I am curious how others generally regard state occupational licensing boards. In our state, we have several such boards that are creatures of statute--basically established and set up by specific state law without any other official organizing or corporate documents (i.e., they do not have any articles of incorporation or other formal tax-exempt or non-profit status). Most of the time, they are operated by an appointed Board (appointed by a mix of state legislators and the governor) but the appointed Board and entity really act fairly autonomously on day-to-day operations. While their budget / funds are sort of run through the state, they are all derived by (and thus limited by) the fees raised from the licensed profession / group. Current client has previously-established 401(k) plan but is moving to a new record keeper who is questioning whether the entity is eligible to establish a 401(k) plan as they are arguably an agency or instrumentality of state government. On the other hand, we are aware of other similarly-situated licensing Boards with 401(k) plans who, like our client, apparently were able to set up 401(k) plans without anybody questioning. It's unclear whether others believe they had some basis for claiming they were not an agency or instrumentality. While there are a few items that may weigh in favor of non-agency or non-instrumentality status, taken as a whole the facts and circumstances would seem to point toward such boards being barred from sponsoring 401(k) plans. How are such boards generally classified / addressed in various states. If the Board cannot establish a 401(k) and also seemingly cannot qualify for a 403(b) plan and has been told it is ineligible to participate in the state's grandfathered 401(k) plan, is there some other cash or deferred arrangement typically available?
Number of replies posted  2 replies      Number of times viewed  29 views      Add Reply
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mjf06241972 created a topic in 401(k) Plans

Can Fire District Set Up a 401(k) Plan?

Can a Fire District set up a 401k plan? Or does it have to be 403b or 457? It is a political subdivision of a town and they, as a governmental entity, have the authority to assess taxes. It's not a tax-exempt entity granted exemption from income tax under IRC section 501(c).
Number of replies posted  1 reply      Number of times viewed  24 views      Add Reply
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Dr0713 created a topic in Qualified Domestic Relations Orders (QDROs)

Alternate Payee Accidentally Given Way Too Much Money

A QDRO was submitted and calculated for the time of the marriage for 401k disbursement. The amount due was approximately $26,500, and a "clerical" error was made. The alternate payee was cashed out in the amount of $67,000, more than was the ending balance at the time of separation. Participant was not notified but discovered the error and brought it to the attention of the 401k company. The money was wire transferred into the bank account as cash about 3 weeks ago. What are the ramifications? Can the funds be withdrawn automatically from the bank account and placed back into the participating 401k? What if the funds have been spent and are not paid back? What about lost interest future earning? Is the 401k plan responsible for the error and replacing funds regardless?
Number of replies posted  1 reply      Number of times viewed  37 views      Add Reply
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K2 created a topic in Employee Stock Ownership Plans (ESOPs)

ESOP's Upcoming Liability for Large Distribution

I got an ESOP question from a CPA referral source. Their client's ESOP has a participant with a very large balance. Distribution is in five years. Cash flow is an issue for the company. Does anybody have any good suggestions or familiarity with this issue?
Number of replies posted  5 replies      Number of times viewed  32 views      Add Reply
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401(k)athryn created a topic in 401(k) Plans

404(a)(5) Disclosure in Plan Having Self-Directed Accounts Plus a Pooled Account

A plan has individually directed accounts at American Funds. We provide full fee disclosure relative to those accounts. They also have some profit sharing money pooled in a brokerage account. We've always disclosed a $75 distribution fee on the American Funds disclosure. For the pooled account, we're going to start using Penchecks for the distribution processing, which has a $35 fee that will be charged on top of our $75 fee. The additional fee will apply only if the participant has money in the pooled account. Do I need to include this fee on the 404(a)(5) fee disclosure notice? I think not, because 404(a)(5) rules don't apply to pooled accounts, and yet this plan has individually directed accounts, so I'm not sure.
Number of replies posted  1 reply      Number of times viewed  21 views      Add Reply
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austin3515 created a topic in 401(k) Plans

Comp Used for a Safe Harbor Plan

Plan excludes bonuses for purposes of calclulating deferrals, but NOT for purposes of calculating the Safe Harbor Match. Do I need to pass 414(s)?
Number of replies posted  7 replies      Number of times viewed  50 views      Add Reply, Inc.
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