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Message Boards Digest

February 20, 2019

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

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austin3515 created a topic in 401(k) Plans

Hardship Distribution to Pay Medical Debt for Procedure Two Years Ago?

Participant had a medical procedure 2 years ago and financed the procedure. The participant now wants to take a hardship to pay off the loan. It is clear that the financing was for the medical treatment. My initial response was "two years ago was just too long." Anyone have a different thought? So for example, what bills has she prioritized over this one? Did she pay off credit cards ahead of this? In other words at what point does it convert from a medical expense to a decision regarding cash flow and personal financial management?
Number of replies posted  4 replies      Number of times viewed  49 views      Add Reply
 
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B21 created a topic in 401(k) Plans

Splitting a 401(k) Plan -- How to Handle Assets for Spun-Off Plan

Our client is considering splitting their existing 401k plan into two separate plans through a spin-off to avoid a Form 5500 audit requirement on the existing single plan. To effectuate a spin-off, does the plan assets for the spun-off plan have to be physically transferred to a separate custodial account or can the accounts remain where they are if the custodian is able to segregate the accounts among the two plans within the single contract? My inclination is no, that the plan assets have to be transferred to a new account under the new plan name and number.
Number of replies posted  2 replies      Number of times viewed  40 views      Add Reply
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Zoey created a topic in 401(k) Plans

2 Owners, 3 Companies, 3 Plans

Two dentists each have corporations. They formed a third jointly owned LLC. The corps own the LLC 50/50. Profits flow through to the corps. The dentists pay themselves through the corps. LLC will have a 401(k). Can a dentist have a SEP? Would there be any limitations? If the profits flow through to the corps, and the dentists are paid through the corps, where is the income from the LLC (to even have a 401(k))? But assuming there is income from the LLC, my quick response would be "yes" that the dentist(s) could have separate SEPs for the corps. But would the combined limit apply? Again, my quick response would have been "yes" (since each have ownership in both). Then I thought, why would they want to? The only reason I can think of, for having a SEP in addition to the 401(k), would be to have a deductible contribution for one company (a corp), but not the other (LLC). I don't know if they have employees, or if it would matter, but I would assume that they do.
Number of replies posted  6 replies      Number of times viewed  53 views      Add Reply
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PensionPro created a topic in 401(k) Plans

Are Wages Exempt from Section 3401(a) Definition of Compensation?

401(k) plan defines compensation as compensation under section 3401(a). An employee claimed exemption from withholding on Form W-4. The box 1 of their W-2 shows zero, and the amounts listed under box 14 for informational purpose. These amounts are wages paid for services performed by the employee. Are these amounts considered plan compensation?
Number of replies posted  0 replies      Number of times viewed  17 views      Add Reply
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Towanda created a topic in Correction of Plan Defects

Loan Repayment Failures - Relief from Reporting Loans as Deemed Distributions

The plan sponsor failed to start loan payments timely because it didn't understand the process at a new financial institution. The financial institution said they would refinance the loans if the client filed the loan failures under VCP. The VCP filing is 99% complete, but I have one question. Plan loan interest rate is Prime + 2%. When the original loans were issued, the loans were amortized with a 6.5% interest rate. Under refinance, the interest rate is 7.5%. In addition to covering the cost of unpaid accrued interest during the non-payment period, should the employer also be responsible for covering the difference in the dollar value of the loan interest had the loans been paid timely vs. the higher interest rate?
Number of replies posted  0 replies      Number of times viewed  21 views      Add Reply
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