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Message Boards Digest

January 10, 2019

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

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PMZJohn created a topic in 401(k) Plans

Exclude one LLC Partner from Permitted Disparity

I don't do a lot of these plans, so I'm looking for some guidance. I've got an LLC with 4 partners, all active, and 3 rank and file employees. HCEs are excluded from Safe Harbor, Using permitted disparity because all rank and file are older than 2 of the partners. The oldest partner is retiring, and doesn't want to fund anything for himself. The other 3 partners all want to do the maximum. Is there a way to accommodate this, or is it an all or nothing situation?
Number of replies posted  6 replies      Number of times viewed  46 views      Add Reply
 
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SCSFAM03 created a topic in 401(k) Plans

Top Heavy but no NHCE Employees

I have a plan who 2018 is the first top Heavy Year. The docs say to allocated TH Minimum to All. However, the only 2 NHCE EE"s termed during the year so are not eligible for a Top Heavy. However if I allocate the TH to just the 3 HCE then I fail coverage, and have to bring in those 2 NHCE. Also the Plan is terminated 12/31/2018. Thoughts?
Number of replies posted  5 replies      Number of times viewed  53 views      Add Reply
Author's photo

Belgarath created a topic in Employee Stock Ownership Plans (ESOPs)

S-corp distribution dividend payment

S-corp is paying a dividend payment to the ESOP. As I understand it, this can be used towards the repayment of the exempt loan. According to IRC 4975(f)(7), this isn't a prohibited transaction. Agree? If so, another question - for tax purposes, they S-corp is apparently considering this dividend as 2018. But, it is being contributed to the ESOP within a few days. Is this considered an ESOP contribution for 2018, or 2019, or can they choose either? Thanks!
Number of replies posted  5 replies      Number of times viewed  32 views      Add Reply
Author's photo

cpc0506 created a topic in Employee Stock Ownership Plans (ESOPs)

Compensation for ABT - combo ESOP and k plan

We have a client who sponsors both an ESOP and a 401k plan. ESOP owns 100% of company. Client is looking to split the 401k plan into 2 separate plans - one a safe harbor plan and one a tested plan. We know that we will have to run the ABT for the plans as the coverage test will not pass the 70% threshold. Right now the ESOP and the 401k plan use different definitions of compensation. It seems that the same definition of compensation must be used to run the ABT. Can the plans still apply 2 different definitions of compensation for allocation purposes and just use the same definition for testing purposes? Or do both documents need to specify the same definition of compensation? The ESOP currently excluded commissions in excess of $150,000 (and yes, there are a handful of employees for whom this exclusion does apply.)
Number of replies posted  3 replies      Number of times viewed  17 views      Add Reply
Author's photo

ESI2015 created a topic in 401(k) Plans

Discretionary match in addition to 3% SHNE

Our client has a 401k plan with the 3% SHNE contribution and discretionary cross tested profit sharing with no allocation conditions. They are interested in making a matching contribution for the first time. However, they have presented a unique matching formula to us that I have not encountered before and am looking for guidance on if this is allowable and what all testing needs to be considered. They only want to match employees contributions if they defer more than 3%. If I only defer 3% I will not receive a match. If I defer 4% I would receive a 1% match. If I defer 5% I would receive a 2% match. Thus, if I contribute at 5% or more I receive a total 5% employer contribution - 3% in SHNE and 2% in match. If I do not defer or only defer 3% or less, I only receive the 3% SHNE. Should we look at PS options through the cross testing to see if this might possibly pass testing each year or is this feasible in a match. I have not ran across a situation like this before and am not exactly sure how to start my research so any guidance would be appreciated. Thank you.
Number of replies posted  0 replies      Number of times viewed  6 views      Add Reply
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