Message Boards Digest

October 8, 2018

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

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John Feldt ERPA CPC QPA created a topic in Defined Benefit Plans, Including Cash Balance

Minimum Funding Deadline for Florence Disaster Areas?

If a plan sponsor with a calendar year DB plan is located in a covered disaster area for Hurricane Florence, their 5500 filing deadline is January 31, 2019. Is the minimum funding deadline also extended past September 15, 2018?
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SoCalActuary created a topic in Retirement Plans in General

IRS Agent Wants 5500, Not 5500-EZ -- Unreasonable?

An IRS agent wants an EZ filer to change to full 5500 filing with schedules, because sole participant takes RMD and has non-standard asset (private loan). I don't see that in the instructions for 5500EZ. Any authority for this request?
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ERISA-Bubs created a topic in Miscellaneous Kinds of Benefits

Annual Bonus Plans for Managers in Public Company

We have two issues with our annual bonus plan for management: First, the bonuses are going to be lower than they would have been due to the negative, unexpected impact of tax reform. We want to calculate bonuses without taking into account his impact.

Second, we have individual and project objectives, because people have been focusing on project objectives, their individual objectives are going to be down. We want them focusing on project objectives, so we don't want them to be punished and would just like to pay out individual objectives at 100%.

I'm worried about three things, and would like to know if you have any thoughts/concerns on my worries or any other thoughts and concerns. [1] The plan doesn't give us the ability to adjust for tax reform (we have built in ability to adjust for other things, just not for this). [2] ISS doesn't like discretionary awards. [3] We're worried backing out the negative impact of taxes will blow 162(m) for one employee.

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Luke Bailey created a topic in 401(k) Plans

Supplemental Bonuses Only for Executives Deferring Under 401(k) Plan: Contingent Benefit Rule Violation?

401(k) plan sponsor has bonus plan that says to execs: Every year, if you make more than $275k, I will give you a bonus equal to your Box 1 W-2, without any limit, times 6%, minus the 402(g) limit, and then all that multiplied by $.50. So if I make $400k, my bonus is $2,750, which is $24,000 (6% of $400k), minus $18,500, or $5,500, times $.50. The intent is basically to make up for the missed match based on the statutory limits, which it does not do perfectly, but anyway, that's what they do.

But then they also say that to get the bonus you have to have deferred into the plan, at least something. They do not penalize execs who defer less than the limit (e.g., defer $10,000), but they do exclude you if you deferred $0.

This violates the anti-conditioning rule of Treas. Reg. 1.401(k)-1(e)(6)(ii), right? And the result would be the same if instead of only excluding those who did $0, they reduced the product of 6% times comp (e.g., the $24,000 in my example) by the sum of the 402(g) limit and the difference between the 402(g) limit and what the exec actually contributed (but not to where your bonus was negative, obviously), which would seem more rational than just basing it on whether the exec did or did not defer at all.

If this is a violation of the anticonditioning rule, what is the fix under EPCRS other than stopping it? Seems hard to believe the IRS would say you have to go back to all the folks you excluded and pay them the bonus they would have received if the employer had not conditioned payment of it on 401(k) participation, which is the only correction I can think of that would put folks in the position they would have been in but for the violation.

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