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September 20, 2018

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

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K2retire created a topic in Nonqualified Deferred Compensation

Sample Plan Document for Nonqualified COLI Plan?

I am a TPA working at a financial services firm. I do not work on any non qualified plans. My boss seems to think that I should be able to provide him with a sample of boilerplate language for a COLI plan. In the qualified plan area, I can't imagine anyone being willing to share that for free. Is it something that might be available for a non qualified plan?
Number of replies posted  4 replies      Number of times viewed  41 views      Add Reply
 
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HCE created a topic in Defined Benefit Plans, Including Cash Balance

Early Retirement Window - Eligibility Limits

We have an Early Retirement Window for our pension plan going into effect. We crafted the eligibility requirements and are comfortable that they are fine. However, today, we discovered that four people at a key position at the company might want to participate. There are only 4 people in this position company-wide, and having them all leave at the same time would be devastating. Can we state in the eligibility section that, for this specific position, only two can participate, and the people with the longest service at the company have first dibs?
Number of replies posted  0 replies      Number of times viewed  17 views      Add Reply
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TaxLawyer1978 created a topic in Retirement Plans in General

Invoice to Plan Was Paid by Different Plan

Client has 3 plans: a DC plan, DB plan and a TDA plan. They paid legal invoices related to all three plans out of one of the plans' unallocated account. All plans cover same employees. Is this a prohibited transaction?
Number of replies posted  3 replies      Number of times viewed  36 views      Add Reply
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EBECatty created a topic in Distributions and Loans, Other than QDROs

Rollout of Life Insurance -- Tax Impact

A PS plan holds a life insurance policy. The participant was properly taxed on the cost of insurance each year. Cash value is $100,000 and death benefit is $1,000,000. The plan is the beneficiary of the policy. I understand under Internal Code Section 72(m)(3) that if the participant dies the plan gets the $1,000,000 death benefit and pays it to the participant's PS plan beneficiary. The tax-free distribution to the beneficiary is $900,000 ($1,000,000 in proceeds less $100,000 in cash value). If the participant buys the policy from the plan while the participant is alive, and the values are the same as above at the insured's death, does the life insurance beneficiary get all $1,000,000 in proceeds tax-free under 101(a)? Or do you still need to exclude the cash value from the tax-free portion because the policy originally was purchased by a qualified plan? In other words, is the only relevant variable policy ownership at the time of death? The $100,000 of (taxable) cash value within the plan in the first scenario is being "replaced" with the $100,000 of cash the participant uses to buy the policy in the second scenario, so there is still a taxable distribution from the plan of $100,000. But there would only be one "bucket" of $100,000 that is potentially taxable ($100,000 from the plan) instead of two (one of $100,000 in cash value within the plan taxable upon distribution; another separate $100,000 that could have been used to buy the policy and potentially taxable upon death). Estate tax is by no means my strong (or semi-strong) suit, so I may be missing something here, but it seems like you get a slight benefit by buying the policy out of the plan.
Number of replies posted  1 reply      Number of times viewed  22 views      Add Reply
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Belgarath created a topic in 401(k) Plans

BRF Testing Consequences: Amendment of Plan to Use Lower Match Rate for New Employees

The old different match rates conundrum has come up again. Employer wants to keep existing match level for all current employees but use a lower match rate for all new employees. Passes current availability testing just fine (for now) but because current employees include ALL of the HC, I don't see any way for this to pass effective availability. Anyone have any ideas?
Number of replies posted  2 replies      Number of times viewed  35 views      Add Reply
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TaxLawyer1978 created a topic in Retirement Plans in General

Invalidating a 403(b) Plan's Non-ERISA Status

Client had a non-ERISA TDA (403(b)) plan. The plan did not/does not offer loans. The client converted the plan to an ERISA plan in 2009. An employee who is a participant in the plan applied for a loan with MetLife. MetLife sent the client a form to sign as the plan administrator. The form relates to the private loan (outside the plan), which MetLife says it will not approve for the employee if she has a loan in a current plan with the client because she is still employed with them. Can client sign the form as the plan administrator of the current TDA plan and say the employee does not have loans? Or will this invalidate the MOA non-ERISA status?
Number of replies posted  3 replies      Number of times viewed  29 views      Add Reply
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Karoline Curran created a topic in 401(k) Plans

Rollover to Account in Foreign Country

I have a participant in the plan who has moved back to Italy -- he was a resident alien while he was in the USA. He wants to roll his money over to an IRA (or the equivalent) in Italy, or take a lump sum distribution. How would the tax withholding work if he took a cash distribution? He has been gone for a couple of years now.
Number of replies posted  4 replies      Number of times viewed  45 views      Add Reply
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Purplemandinga created a topic in 401(k) Plans

Canadian Citizen Wishes to Participate in 401(k)

A Canadian citizen has a 100% ownership interest in a C-Corp which has a 25% ownership in an LLC (taxed as a partnership). The Canadian citizen does not receive a W-2 from the C-corp for wages performed. The C-Corp and the LLC would most likely be an affiliated service group. Could this Canadian citizen participate in the 401(k) plan offered to employees of the LLC? My thinking is no because Canadian citizen would have no wages to defer. If they somehow received a W-2 from the C-Corp then they might possibly be able to participate. Correct? Would the C-Corp be disregarded and I then would calculate earned income from the LLC earnings to determine eligible compensation?
Number of replies posted  3 replies      Number of times viewed  51 views      Add Reply
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cpc0506 created a topic in 403(b) Plans, Accounts or Annuities

Plan Sponsor Has Two 403(b) Plans: One ERISA and One Non-ERISA

A prospective client is running two 403(b) plans: a non-ERISA plan that is a deferral-only plan and an ERISA plan that holds only the employer contributions. Has anyone ever encountered this before? Does it matter if the employer contributions are non-elective versus matching contributions?
Number of replies posted  2 replies      Number of times viewed  34 views      Add Reply
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CLE401kGuy created a topic in 401(k) Plans

Elective Withholding on Unpaid Vacation

The payroll company was calculating elective withholding including unpaid time off which in turn has caused employees' deferral rates to be off. For example, if a participant worked 32 hours for the week, and then had 8 hours of unpaid vacation. the payroll company was taking 40 hours multiplied by $10 an hour multiplied by 5% to equal $20 of withholding. However, the participant was only paid $320 and correct withholding would have been $16. $20 of $320 of comp is actually 6.25% withheld, not 5%. So the withholding election was technically not followed based on what the person was actually paid. This has been happening since 2014. Since it's unpaid vacation it's not a huge amount of money, but what correction is to be made?
Number of replies posted  0 replies      Number of times viewed  18 views      Add Reply
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Bumppo23 created a topic in Distributions and Loans, Other than QDROs

Determining Vested Account Balance for Loan Limit Deliberations; Add in Outstanding Loan Balances?

Does any only rely on the account balance as of the latest valuation, or does one add in outstanding loans to said amount?
Number of replies posted  1 reply      Number of times viewed  35 views      Add Reply
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L_Ann_F created a topic in Form 5500

Hurricane Florence 5500 Extension for Plans If TPA Not in Affected Area

Does anyone know if the hurricane extension applies to a TPA firm that is preparing the 5500 if they are in the declared disaster area?
Number of replies posted  4 replies      Number of times viewed  64 views      Add Reply
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