Message Boards Digest

October 5, 2018

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

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

Holding a 403(b)(1) Annuity Contract in a 403(b)(7) Custodial Account

Would appreciate thoughts on whether a trust company could have one custodial account agreement for a 403(b) plan that holds both 403(b)(1) annuity contracts and 403(b)(7) custodial accounts. My thought is that the annuity contract has to be held in a separate custodial account (or in no custodial account at all) or the tax-exempt status of the 403(b)(7) custodial account is at risk. Anything I'm missing? Treas. Reg. 1.403(b)-8(d) seems clear on this point. Would a master custodial account work that held the b7 assets in a subaccount separate from the b1 annuity contract? Also, I'd appreciate thoughts on whether a 403(b)(7) custodial account agreement must have what I call "quasi-plan language" in it, i.e., language that states deferrals won't exceed 402(g), distributions won't be made at impermissible times, etc. The large 403(b) vendors' agreements all seem to contain this language, but is it necessary if the plan document has the requisite language? Does it depend on whether the custodial account agreement incorporates the provisions of the plan?
Number of replies posted  0 replies      Number of times viewed  12 views      Add Reply
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Mr Bagwell created a topic in 401(k) Plans

Semi-annual Entry vs. Annual Entry: Which Is Best in This Scenario?

Plan has 1 year, 1000 hours, semi entry. IMO, this is a good design for the plan because the employer is keeping out the maximum number of employees to contain cost. There are enough part-timers to warrant it. The plan is safe harbor match 100% of 5%. The employer is looking for a yearly entry, still keeping out the maximum he can. I told him the yearly entry is a problem because some employees that wouldn't make the 1 year, semi entry, would likely to come into the plan. He would like to steer clear of semi-entry because he missed an employee at 7/1 and had to make up some deferrals and safe harbor match. I get it, he's tight, but that's his choice and he's following the rules. I'd do the same. I'm stumped, because I think the 1 year, 1000 hours, semi-entry makes the most sense. Got any good scenarios?
Number of replies posted  3 replies      Number of times viewed  49 views      Add Reply
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R Vatalaro created a topic in 401(k) Plans

Handling Forfeiture of Matching Contribution When Nobody Makes Salary Deferrals

Small 401k plan. Assume that all employees voluntarily choose to not salary defer for 2018 so there are no contributions for 2018 (no deferral" situation will not be persisting into the next year). Former employee withdraws, and forfeits unvested match during 2018. Plan document states that unvested match forfeiture will be used to reduce the employer's matching contribution. Plan document allocation formula for matching contributions is "either a percent of deferrals or a flat amount per participant to be allocated in a non discriminatory manner." The provision does not state that the employee has to actually salary defer to receive a match (although I would assume that is implied?). The match is discretionary, and optional per plan document provisions. Question: for 2018, can the employer declare a match in the amount of the forfeiture by way of board resolution, and then allocate it as flat amount per participant? The client would rather dispose of the match forfeiture as a 2018 allocation to the participants than amend the document to allow the match forfeiture to be used to pay plan fees (which would seem to be the only other feasible option under the plan document).
Number of replies posted  2 replies      Number of times viewed  46 views      Add Reply
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Belgarath created a topic in 401(k) Plans

415 Violation under Sole Proprietor's 401(k) Plan: Make Refund to Participant, or to the Plan Sponsor?

Acme Sports is a sole proprietorship. John Q. Owner defers on a draw throughout the year. Contributes $24,000. After end of year, taxes get done, and it turns out he has zero earned income. So there's a 415 excess to be refunded. Should the check be made out to Acme Sports, or John Q. Owner? or does it not make any difference? Because he had no income from which to defer, it seems that it should go to Acme Sports -- but then how would one report it on a 1099? It's probably easier to refund directly to John Q. Owner, report it on a 1099, and withhold 10% (unless he elects out of withholding).
Number of replies posted  6 replies      Number of times viewed  55 views      Add Reply
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Karoline Curran created a topic in 401(k) Plans

Late 402(g) Refund

A participant exceeded the 402(g) limit in 2017 by $98.18. What's the fix now, given that so much time has gone by?
Number of replies posted  3 replies      Number of times viewed  40 views      Add Reply
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Good401(k) created a topic in 401(k) Plans

24 vs. 26 Pay Periods: OK to Withhold Deferrals on Only 24?

Client has 26 pay periods per year, resulting in two months (March and August) having three pay dates. The client's payroll system is unable to process voluntary benefits, including 401(k) deferrals on a 26 pay period basis (not sure why, just what I've been told). So, although there are 26 pay periods per year, deferrals for the retirement plan are pulled from only 24. This fact has been widely communicated and is standard knowledge to employees. Has anyone seen anything in the Internal Revenue Code that would prohibit this arrangement? I'm concerned for those employees who specify a percentage deferral, because their total deferrals for the year will be slightly less than the percentage they've selected due to the two additional pay periods not having any deferrals withheld.
Number of replies posted  6 replies      Number of times viewed  52 views      Add Reply, Inc.
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