Message Boards Digest

November 19, 2018

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

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bzorc created a topic in Form 5500

Plan Will Benefit Only Daughter-Employee, Not the Parent-Owners: Use Form 5500-EZ or 5500-SF?

I've been asked to propose a 401(k) plan for a business (LLC) that covers a family (father, mother, and child) group. The owner wants to set up the plan solely for the benefit of his daughter, who is an employee of the company and receives compensation that will be reported on a W-2. He and his wife do not anticipate utilizing the plan for themselves. If this plan is set up, does the plan file a Form 5500-EZ or the SF Form? The Form 5500-EZ is for a "Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan." Would the 5500-EZ apply even though the daughter is an owner by attribution? Or, because she's not an actual owner or an actual owner's spouse, is the Form 5500-SF the one to file instead?
Number of replies posted  1 reply      Number of times viewed  33 views      Add Reply

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PensionPro created a topic in 401(k) Plans

Correcting Failed Compensation Test in Safe Harbor 401(k) Plan

Safe harbor match per payroll. Plan excludes bonuses and vacation pay. Plan is projected to fail 414(s) test for 2018. I believe we must amend plan to include some of the excluded pay. Can we amend to include excluded comp for some of the employees -- not all -- under the 11(g) provisions? Any other ideas?
Number of replies posted  2 replies      Number of times viewed  45 views      Add Reply
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linusbeagle created a topic in 401(k) Plans

Withdrawing from 401(k) Penalty-Free at Age 55

It's my understanding that you can withdraw from a 401k penalty-free at 55 if you retire from your job during the year you turn 55. My wife left her job when she was 53, but she will receive bi-weekly severance up until the year she turns 55. Her 401k funds are still with the same plan. Will she be able to collect penalty free in the year she turns 55?
Number of replies posted  3 replies      Number of times viewed  68 views      Add Reply
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Fiduciary Guidance Counsel created a topic in Retirement Plans in General

Does a Plan Administrator Pay on a Small-Estate Affidavit?

To allow a convenience in collecting the assets of a small estate, some state laws permit an affidavit in which one claims she is entitled to the decedent's property. Under a typical law of this kind, one might collect up to $50,000 without any court-supervised proceeding. If a participant dies with no surviving spouse and no other designated beneficiary, some retirement plans provide that the participant's estate is the "default" beneficiary. If a plan you administer or serve is in this situation, is the plan willing to pay a taker based on a small-estate affidavit? If a plan is willing, does the administrator use any extra steps to manage the risk that an affidavit is false (or even innocently incorrect), leaving the plan exposed to claims of the estate's beneficiaries or heirs? Or does a plan refuse to pay on a small-estate affidavit? BenefitsLink people, what are your experiences?
Number of replies posted  8 replies      Number of times viewed  69 views      Add Reply
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TPApril created a topic in Distributions and Loans, Other than QDROs

Reasonable Loan Interest Rate for Loan from One-Person Plan?

One person plan, never hired anyone, no intention to hire anyone, so he is the only participant in his plan. He would like to take out his first loan. I recommended interest rate of prime as reasonable. He wants to know if he can take the loan with zero interest. Is that possible? If not, I've never used a rate below prime, is there something, e.g., prime minus 1?
Number of replies posted  6 replies      Number of times viewed  66 views      Add Reply
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TPApril created a topic in Form 5500

5500-EZ Mailed in Late, Penalty Letter Arrives, Can Amend?

Form 5500-EZ user-client wants to continue mailing in paper forms. Owner says he mailed it in on 7/31/18, it was not extended. He has received a $250 penalty letter for being late (10 days) and cannot find or remember if he mailed it certified. He did extend his Federal taxes, though. Seeing as he cannot show evidence of mailing it in timely, can he amend as filing under extension to remove the tax penalty? Incidentally I find it odd that if he mailed it in 7/31 as said, that the IRS would mark it 10 days late.
Number of replies posted  1 reply      Number of times viewed  35 views      Add Reply
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austin3515 created a topic in Governmental Plans

Government Money Purchase Plan Subject to Joint-and-Survivor Annuity Rules?

Is a money purchase plan sponsored by a governemnt/government agency subject to the same spousal waiver rules applicable to private money purchase plans? i.e., must the spouse consent to non-annuity payment of benefits?
Number of replies posted  6 replies      Number of times viewed  47 views      Add Reply
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Belgarath created a topic in Cafeteria Plans

Individual Health Insurance Premiums in 125 Plan

Plan has premium conversion account and an FSA. Plan document and plan forms/administration appear to be at odds. No premiums can be paid through the FSA, correct? But premiums for group health insurance offered by the employer, or individual policy premiums for "excepted benefits" such as dental or vision, can be paid through the premium conversion account. Premiums for individual "health" insurance may NOT be paid pre-tax through the cafeteria plan, correct? The document appears to support this interpretation, yet the forms/administration have been allowing pre-tax treatment through the cafeteria plan for individually purchased HEALTH insurance, as long as it isn't purchased through a federal or state exchange. That seems illegal to me.
Number of replies posted  0 replies      Number of times viewed  10 views      Add Reply
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401 Chaos created a topic in 401(k) Plans

Using 'Negative Contributions' to Correct Excess Deferrals

Plan has highly compensated individual who switched jobs earlier this year. He made significant 401(k) elective deferrals at his last job before coming to the new job. He enrolled in the new plan and has been deferring for several months now. Last week he realized he's well over the elective deferral limit for 2018 and is seeking correction from the plan. Because this has been discovered in 2018, the record keeper is proposing to correct through negative contributions within the next payroll runs. Sounds like that's fairly routine (been awhile since I've had one discovered in the same year as the deferral) but I'm curious as to what sort of paperwork/documentation all this generates. Also, still trying to get our arms around potential earnings in the account but assume if he has earnings on the excess that will have to come out too? How does that happen with negative contributions?
Number of replies posted  5 replies      Number of times viewed  53 views      Add Reply
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khn created a topic in Nonqualified Deferred Compensation

Lowering Normal Retirement Age under Non-Qualified Plan

Our NQ plan allows participants to take a lump sum distribution or elect a 10-year payout at a Normal Retirement age of 59‑1/2. Our industry competitors seem to have a Normal Retirement Age of 55 in their NQ plans. We're considering lowering the age but we're concerned about complying with 409A. Does it make any sense to consider lowering the age, or is there too much risk of 409A violations?
Number of replies posted  0 replies      Number of times viewed  10 views      Add Reply, Inc.
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