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Message Boards Digest

December 18, 2018

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

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Nancy D created a topic in Mergers and Acquisitions

Determination of HCEs in Year of Merger of Plans

Company A acquires Company B. Company B's 401(k) plan is merged into Company A's plan as of 1/1/18. In looking at HCEs for the 2018 Plan Year, do 5% owners of company B now employed by Company A with no ownership in Company A count as HCEs? What about employees earnings $120,000 or more in Company B in 2017?
Number of replies posted  3 replies      Number of times viewed  36 views      Add Reply
 
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Maria Ku created a topic in 401(k) Plans

Can Terminated Employee's 401(k) Account Be Rolled Over to an Roth IRA Directly?

My 22-year-old daughter is quitting her job where she had a 401(k). She already has a SEP IRA and a Roth IRA from before. Will she be allowed to roll over her 401(k) balance directly to Roth IRA? (Yes, I understand it'd be a taxable conversion.) If she must roll over to a Traditional IRA first, may it be her SEP IRA, or must she open a separate Traditional IRA just to hold the rollover from her 401(k) for a few days until she converts it to her Roth IRA? Please advise on the simplest legally-allowed way to get her 401(k) balance into the Roth IRA.
Number of replies posted  1 reply      Number of times viewed  40 views      Add Reply
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EBECatty created a topic in Miscellaneous Kinds of Benefits

Grandfathered, Unsecured Split Dollar ILIT Loan Forgiveness

Hoping someone can provide some input on a rather obscure split dollar issue. Employer extended one loan to employee's ILIT to buy second-to-die life insurance policy. Everything occurred before 2002/2003 and arrangement has never been modified. The arrangement was unsecured, i.e., no collateral assignment, just a note from the ILIT to the employer promising to repay with interest. Payment is due upon earlier of [1] sixty years later; or [2] 90 days after death of employee and spouse (both still living). Loan obligation now far exceeds cash value; significant additional premiums would need to be paid in to maintain policy. ILIT has no other assets. It appears that any loan forgiveness by employer would create compensation income to employee. It also seems to me that if the policy lapses (again, no collateral assignment or documentation at insurer), then both employee and spouse die later, the last one to die would have income (or income in respect of a decedent) at some point. Any way to complete a rollout without taxing the unpaid/forgiven loan amount?
Number of replies posted  0 replies      Number of times viewed  20 views      Add Reply
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KaJay created a topic in Retirement Plans in General

Reporting Excess Deferrals with a Loss in Year of Contribution

In a 403(b) plan, we have a participant that exceeded the 2018 402(g) limit by $84. Since the time of the deposit, he has had a loss of $3 on the $84. There is some confusion as to what we send back to him and what is reported on 1099-R. Do we issue a check for $81 and report $81 on the 1099-R? Do we send him $81 and report $84 on the 1099-R? Do we issue a check for $84 and report $84 on the 1099-R since that is the amount he exceeded the limit by? Or something else?
Number of replies posted  2 replies      Number of times viewed  45 views      Add Reply
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JustnERPA created a topic in 401(k) Plans

S-Corp Owner-Only 401(k) Plan: Deadline for Deposit of Deferrals?

The document for a plan sponsored by an S-Corp where the only employee is the 100% shareholder states "If this plan is not subject to ERISA, the Employer shall deposit elective deferrals to the Trust as of such time as is required by the IRS and DOL." The DOL 7-day rule does not apply to a non-ERISA plan, right? So what is the deposit deadline for any withheld deferrals?
Number of replies posted  3 replies      Number of times viewed  34 views      Add Reply
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MichMM created a topic in Defined Benefit Plans, Including Cash Balance

Crediting of Earnings Required for Mandatory Cashout After Required Beginning Date?

Deferred vested participant died after his Required Beginning Date. When calculating his actuarially increased benefit (from normal retirement date to RBD), the lump sum amount is below the Plan's threshold for a mandatory cashout. RBD was 4/1/2010, date of death was 11/6/2017. We've established that his estate is due the mandatory cashout, but would interest need to be applied to that lump sum? If so, from RBD to death or RBD to distribution?
Number of replies posted  0 replies      Number of times viewed  14 views      Add Reply
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M Norton created a topic in SEP, SARSEP and SIMPLE Plans

Physician in Hospital's 401(k) Plan Wants to Adopt SEP for Schedule C Self-Employment Income

Physician works for hospital as W-2 employee and maxes out in the hospital 401(k); same physician also operates small clinic as Schedule C using off-duty nurses (1099 workers) and has SE income from Schedule C. Can physician establish SEP for himself for SE income from Schedule C? if yes, do 1099 workers have to be included in SEP? Is physician limited on SEP contribution due to participation in 401(k) at hospital?
Number of replies posted  1 reply      Number of times viewed  17 views      Add Reply
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JustnERPA created a topic in Retirement Plans in General

Confused About Use of Special Vesting Schedule When Plan Becomes Top-Heavy

A profit sharing plan uses a 6-year graded schedule for its employer allocations. The plan has never been top-heavy, but in a couple of years it will very likely become top-heavy. The adoption agreement has a slot for electing a vesting schedule for top-heavy purposes. That section states for any year the plan is top-heavy, the top-heavy vesting schedule applies to the extent that it is more favorable than the plan's regular vesting schedule. For some reason, the top-heavy vesting schedule is a 5-year graded (0,20,40,60,80,100) -- one year quicker than the 6-year schedule. The employer would like the 6-year schedule to be applied when the plan becomes top-heavy. The document then goes on to say that the top-heavy vesting schedule applies to all benefits within the meaning of 411(a)(7) except those already subject to a schedule that vests at least as rapidly as the schedule above. And only for participants with an hour of service after the plan becomes top-heavy. The plan document spells out some rules for amending the plan's vesting schedule. Because the plan is not top-heavy yet, do those rules for amending the schedule apply to the top-heavy vesting schedule? If they do apply, the plan states employees with at least 3 years of vesting "may elect to have the nonforfeitable percentage computed under the Plan without regard to such amendment." With the plan currently not top-heavy, that election does nothing -- they're still on the 6-year schedule. What choice are they making, for example, between schedule A or B: what would be vesting schedule A vs. what is vesting schedule B that they get to elect from?
Number of replies posted  6 replies      Number of times viewed  44 views      Add Reply
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