Message Boards Digest

October 9, 2018

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

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Belgarath created a topic in Cafeteria Plans

'Change in Status' Event under a Cafeteria Plan

If a legitimate "change in status" takes place during the plan year, is there a specific timeframe by which the employee must make a change in election? I'm looking at a document that was done in 2008, and it doesn't specifically address this question. I presume it must be prospective only, and can't be retroactive? As an aside, does a new union contract effective during the plan year constitute a "change in status"? Seems like it should if it changes the level of benefits/reimbursement with regard to health insurance, and maybe this is contemplated under 1.125-4(f), but it isn't specifically listed under 1.125-4(c)... and could a health FSA election be changed in this circumstance? I'm thinking I saw somewhere that it can't.
Number of replies posted  3 replies      Number of times viewed  32 views      Add Reply

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PJF414 created a topic in Correction of Plan Defects

Participants' Elections to Lower Deferrals: Oops, Not Implemented

Plan recently discovered 5 or 6 people who had requested deferral percentage reductions that were never implemented. Most are short term, but others go back several years. None of the participants has noticed the error. Client wants to notify the participants and ask them if they want to take the money out of the plan (including match and income) or leave it in. Not sure that this is permissible. Haven't run into this particular failure before, and cannot find anything terribly helpful in EPCRS. My inclination would be to forfeit all if they want to correct, and pay the lost salary outside of the plan.
Number of replies posted  2 replies      Number of times viewed  29 views      Add Reply
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401(k)athryn created a topic in 401(k) Plans

Contribution to Plan of 'Lost Earnings' - How to Report on Form 5500-SF?

An employer has late deferral deposits in 2016 and deposits the lost earnings on all late 2016 deposits in 2017. I am reporting the total of late deferrals on the 2016 & 2017 Form 5500-SF on line 10a. Question: Do you show the "lost earnings" deposit in 2017 as earnings on the Form 5500-SF, OR do you show it as an employer contribution? I have always shown as an employer contribution because it is a deductible contribution; however, I have reason to question this method.
Number of replies posted  4 replies      Number of times viewed  32 views      Add Reply
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OneOfSeven created a topic in Employee Stock Ownership Plans (ESOPs)

Leveraged ESOP -- OK to Halt All Distributions Until Loan Repaid in Full?

Our company's leveraged ESOP was created in 2013. There are 21 months left until the final loan payment, giving employees 100% of shares. A couple of years ago, the plan administrator had all ESOP participants sign a memo stating that they understand [1] no distribution will be made for any reason until the loan is paid in full, and [2] after that, distributions will only be made "after all company operating expenses have been paid." There are seven participants in the ESOP. One was laid off, subsequently retired, and is now 66 years old. One was laid off, with no plans to call back. Of the remaining five, one is 71 years old, and one is rapidly approaching 70‑1/2. My admittedly limited understanding is that specific events, i.e., retirement at normal retirement age, death, disability, or turning 70‑1/2 and owning >5% of shares, override the exemption from distribution before the loan has been paid. Also, statement #2 in the memo implies to me that the administrator is creating a fallback position in advance, to avoid making funds available when distributions are due. No preparation has been made to date to meet repurchase obligations other than waiting for three years, then using cash flow that's currently being used to repay the acquisition loan. Is this ESOP in trouble, specifically regarding ERISA rules?
Number of replies posted  6 replies      Number of times viewed  42 views      Add Reply
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TaxLawyer1978 created a topic in Retirement Plans in General

What Documents Needed to Replace Recordkeeper/Trustee?

My client is replacing their current plan recordkeeper/trustee, in order to switch to another company. What documents do I need to prepare to effectuate that? Just resolutions regarding the plan? Do all participants have to approve it?
Number of replies posted  7 replies      Number of times viewed  56 views      Add Reply
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doombuggy created a topic in Plan Document Amendments

Adding Participating Employer to a 401(k) Safe Harbor Plan for 2018: Too Late Now?

I have an established 401k plan with a per-payroll safe harbor match. The owner has a controlled group of five companies, of which the largest/main company is the adopting employer. The other four don't participate but we use their census for testing. We've been asked to add one of the other companies as an adopting employer ASAP. Because this is a safe harbor plan, is that prohibited for 2018 because we're already past October 1? (It's a calendar year plan.)
Number of replies posted  0 replies      Number of times viewed  11 views      Add Reply
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Madison71 created a topic in 401(k) Plans

Overpayments and Other Plan Errors: Can TPA Make Plan Whole?

Participant received an overpayment from his account. It was from his vested account, but it was an impermissible distribution due to his age. Attempts have been made to get the funds back from the participant, but he claims to be unable to repay. I understand from reading the appropriate sections of EPCRS that the Plan Sponsor or another person must contribute the amount back to the plan. I know in some cases, another person is a person acting on behalf of the Plan Sponsor. Who is another person in this case? The TPA has offered to make the plan whole, because they approved the distribution. Can the TPA cut a check to the Plan for the overpayment plus earnings? Is there ever an issue with the TPA or recordkeeper correcting an operational failure where the correction method is making the plan whole (assuming the TPA and/or recordkeeper clearly caused the error)?
Number of replies posted  2 replies      Number of times viewed  33 views      Add Reply
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kdubinski created a topic in 401(k) Plans

Retroactive Amendment to Provide Safe Harbor Match Eligibility?

401(k) plan uses safe harbor matching contributions. Prior to 1/1/2018, the eligibility for all contribution sources was date of hire. The plan's entry dates prior to 1/1/2018 were date of hire. Highly compensated employees are excluded from receiving a safe harbor matching contribution. Effective 1/1/2018, the eligibility for safe harbor match was amended to 1 Year of Service. The entry dates were amended to 1/1 and 7/1. Unfortunately, it has been discovered the client has continued to use date of hire for eligibility and entry date purposes for the safe harbor matching contribution. Can an amendment be done now to take the safe harbor matching contribution eligibility back to date of hire and the entry date back to date of hire for 2018? For 2019, the plan would move forward with the 1 Year of Service requirement and dual entry dates. The plan does have a discretionary profit sharing contribution component. The eligibility is date of hire and the entry date is date of hire. Vesting is 100% immediate for all contribution types. The ineligible safe harbor matching contributions could be recharacterized.
Number of replies posted  0 replies      Number of times viewed  17 views      Add Reply
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WCC created a topic in 403(b) Plans, Accounts or Annuities

Controlled Group Always Occurs with Single Board of Directors for Two Plan Sponsors?

Two tax-exempt organizations create an affiliation (in their words) by combining service offerings. As part of the affiliation, they created a single board of directors which governs both organizations. The board is comprised of an equal number of members from each organization. I have reviewed the controlled group rules relating to control of directors/trustees and will make a referral to an attorney. However, I am curious if this is a straightforward issue. Because there is a single board, is it clear that a controlled group exists? They are telling me that since half the board is selected from each entity, neither organization has control over the the other. Therefore, they say the 80% control and/or common representation of directors/trustees is not applicable.
Number of replies posted  0 replies      Number of times viewed  21 views      Add Reply, Inc.
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