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Message Boards Digest

August 10, 2018

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

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Clare created a topic in 401(k) Plans

Auto Enrollment Failure -- Is Retroactive Opt-Out Permitted?

The 401(k) plan has auto enrollment. Apparently a few years ago, three participants were not auto enrolled and it was discovered on audit. HR spoke with these employees and they all indicated they would have opted out from the start if they had been provided with an opt out form. If we have them sign a document indicating they would have opted out, will that save us from having to make corrective contributions on their behalf? Of course that would save us money and make our lives much easier, but it somehow doesn't seem quite right to me. While the employees are willing to execute such a document, I could see the IRS arguing that employees could be pressured into signing such types of documents to please their employers, etc.
Number of replies posted  1 reply      Number of times viewed  44 views      Add Reply
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AlbanyConsultant created a topic in Distributions and Loans, Other than QDROs

Participant-Husband's Stock Sold on January 1, 2018, But Is Participant-Wife Still a '5% Owner' in 2019?

So, the 5% owner hits age 70.5 in January 2017, and we do his 2017 RMD in 2017. No one blinks. Now we find out that he sold his portion of the business "one second after the stroke of midnight" (who knew lawyers could be poets?; I find it hard to believe that that's what they were doing while singing "Auld Lang Syne) into 2018 to avoid taxes in 2017, and he is arguing that he doesn't need a 2018 RMD. I explain that, at least in this instance, once he is in RMD pay status, that's where he stays. Grudgingly accepted. Here's the question -- his wife turns 70.5 in 2019. Is she off the hook because the stock was sold before the calendar year in which she turns 70.5? If she is still employed in 2019, do I go to the definition of HCE, which has a lookback year and because her husband owned more than 5% of stock for a second in 2018, she has to take a 2019 RMD? Or do I go to the definition of "5% owner", which does not includes a lookback year? Personally, I'm hoping she terminates and takes her entire balance before the end of 2018!
Number of replies posted  2 replies      Number of times viewed  31 views      Add Reply
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imchipbrown created a topic in Retirement Plans in General

Include Only One of Many Union Employees in a PS/401(k) Plan?

Employer is asking if he can include Union Office Manager in his 401k/PS Plan. Knee-jerk reaction is NO! I think he has 20+ other Union plumbers.
Number of replies posted  2 replies      Number of times viewed  37 views      Add Reply
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Gilmore created a topic in 401(k) Plans

2018 Becomes a Short Plan Year Due to Recent Plan Termination -- Pro Rata Limitations Causing Trouble

Calendar year 401(k) plan. Company is sold in March, 2018. Company terminates 401(k) plan effective 3/18/2018. A participant had already earned over the annual comp limit, deferred the max, and received the max match based on the annual limit, prior to plan term. Due to the short plan year, do we now have to prorate limits, including the comp limit? If that's correct, the participant's match deposited exceeds the allowable amount using the pro rata comp limit. Would it be acceptable to treat the overage as a mistake of fact, given that the match was calculated using an incorrect compensation amount, and return the overage to the employer? Or must the overage be moved to the forfeiture account?
Number of replies posted  1 reply      Number of times viewed  27 views      Add Reply
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coleboy created a topic in Health Plans (Including ACA, COBRA, HIPAA)

COBRA Cancelled, Terminated Employee Says Late Payment Warning Should Have Been Given

We are a TPA firm that does some COBRA administration. Received a call from a distraught person because his COBRA was stopped due to non-payment. He sent a partial payment to cover May then sent nothing for June & July. He was then notified that coverage was stopped due to lack of payments. His argument was that he never received any payment coupons nor did he receive any "warnings" that coverage was going to end. He had signed off on all of the initial COBRA paperwork which stated the costs, payment of premiums, etc. My question is whether he has any push back.
Number of replies posted  0 replies      Number of times viewed  14 views      Add Reply
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oldman63 created a topic in Distributions and Loans, Other than QDROs

Any Difference in Tax Treatment of Participant Loans Under a Prevailing Wage Plan?

A prevailing wage plan has loan repayments going back into the plan with pre-tax money from the payroll. In addition, the loan repayments are being paid by the "untaxed/pre-taxed" fringe benefit dollars. My understanding is that loan repayments are paid with after-tax dollars. A participant is repaying part of the loan with money that has already been taxed. As you know, one of the benefits of contributing to a 403(b) or 401(k) is the fact that the money is invested pre-tax. When a participant takes out a loan, he/she isn't taxed on the proceeds, but the money used to repay the loan has already been taxed so the additional interest going into the account will effectively be taxed twice -- at the time of contribution and again when eventually withdrawn from the account in retirement. Those rules wouldn't change just because this is a prevailing wage plan, correct?
Number of replies posted  1 reply      Number of times viewed  15 views      Add Reply
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