Message Boards Digest

February 25, 2019

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

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Fiduciary Guidance Counsel created a topic in Distributions and Loans, Other than QDROs

For minimum distribution, when is an employee retired?

If designed to require no more than IRC 401(a)(9) requires, a retirement plan (other than an IRA) need not compel a distribution to a participant who is not a 5% owner until after "the employee retires." Lacking a detailed rule about when for 401(a)(9) purposes an individual-account plan's participant "retires", many administrators treat severance-from-employment as the dividing line. But is there any range in which someone who remains on the employer's roster as an employee works so little that she should be treated as retired to invoke a required beginning date? For some examples, how about an employee who works: 20 days in one month (with no work in the other 11 months)? one day every month? a half-day every month? one day each quarter-year? a half-day each quarter-year? (All these describe real situations.) Is it good enough for 401(a)(9) purposes to treat an employee as not retired until a calendar year's W-2 wage report shows zero wages?
Number of replies posted  3 replies      Number of times viewed  44 views      Add Reply

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Michelle Mundell created a topic in Other Kinds of Welfare Benefit Plans

Prevent Further FSA Plan Participation by a Disgruntled Employee?

Can a particular disgruntled employee be prevented from participating in an employer-sponsored FSA plan? A client's employee doesn't understand how a Health Care Spending Account Debit Card works. The plan administrator asked for additional information about a debit card purchase. After four notices were sent out, the card was shut off. The employee now thinks the money is being wrongly delayed, beause he fails to see that he's not following the plan's procedures.
Number of replies posted  3 replies      Number of times viewed  58 views      Add Reply
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DPL created a topic in Employee Stock Ownership Plans (ESOPs)

New ESOP and elapsed time

If effective date of ESOP is 1/1/18 and service for vesting is measured from the effective date forward, how do you calculate the vesting for someone hired 2/9/16 under the elapsed time method? From 2/9/17-2/8/18?
Number of replies posted  2 replies      Number of times viewed  38 views      Add Reply
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Liam created a topic in 401(k) Plans

Effect of Service Contract Act on 401(k) Plan

Our client is about to engage in a contract that covered under SCA and has asked how this will impact the current 401k plan. My understanding is SCA makes an employer pay certain service employees a certain wage rate and fringe benefit (health and welfare payments), and that the employer has an option to pay cash rather than provide the fringe benefits. If the employer pays cash, will it be subject to FICA tax (including the employer's portion)?

I read this elsewhere:

"Two options for paying out H&W to your service employees:

1. Pay H&W in the form of cash. With the changes in ACA, we are hearing from our benefits partners that cash in lieu of benefits can seem as an incentive to not enroll in organizational benefits and contradicts the ACA regulations. It is important to know that if you do pay H&W in the form of cash it must be paid as a separate line item on the pay stub clearly designated as H&W. If you incorporate it into an employee's normal wages it is not considered H&W pay.

2. Contribute H&W to a 401k account. Your organization can contribute the monetary value into a 401k account and remain compliant with the regulations. It is important that your 401k plan document is set up so that H&W contributions can begin immediately through immediate entry into the plan. The immediate entry does not mean the employee can self-contribute to the 401k immediately; it means that they are set up with an individual account on your 401k Plan. In addition, it is recommended that your plan clearly spell out that employer contributions are not eligible for any discretionary matches provided by the organization. Lastly, the employee should be informed of how to access his/her H&W funds."

If the employer pays cash toward the 401k plan, how would it affect vesting?. Will this "employer contribution" 100% vested or based on current vesting schedule (I read somewhere that this is 100 vested)? How this "employer contribution" will affect that employee current 401k deferral? And I don't think this "employer contribution" is subject to any matching? So how the employer knows which fringe benefit to pick including group health insurance, life insurance, and a 401(k) savings plan? Can employer chooses whatever they like? Thank you and I appreciate all the inputs.
Number of replies posted  2 replies      Number of times viewed  46 views      Add Reply
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sarathesmith2 created a topic in 401(k) Plans

Effect of Earlier 401(k) Loan on Maximum Amount of Another Loan

I took out a 401k loan of $20,000 in 2015. I just repaid the remaining balance of $6,700. Does that loan affect the maximum allowable amount because it's old? Or does the balance of that loan at any point in the last 12 months reduce the maximum available amount? Can I take $50,000 or will it be $50,000 minus the balance of that old loan 12 months ago (roughly $10,500), meaning $39,500? My vested balance is more than $100,000.
Number of replies posted  4 replies      Number of times viewed  66 views      Add Reply
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Ray H created a topic in 401(k) Plans

Qualifying for a Distribution Due to Medical Hardship

Can I apply for a medical hardship distribution if I have not paid anything on the outstanding medical bill? Or do I need to pay the bill first?
Number of replies posted  1 reply      Number of times viewed  24 views      Add Reply
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NW529 created a topic in 401(k) Plans

Otherwise Excludable Employees and Maximum Waiting Period

A plan is on a calendar year. Employee is eligible to participate on the date of hire, and the entry date is the first day of the month coinciding with or next following the date of satisfying the eligibility requirements. Employee was hired on 11/25/2015 and is >21 years old. Until what date is the employee still considered otherwise excludable? The group includes participating employees who have not satisfied the IRC Section 410(a)(4) entry date period applicable to them -- in other words, they are treated as otherwise excludable employees until the earlier of the first day of the next plan year after attaining age 21 and completing one year of service or 6 months after satisfying such requirements (the maximum waiting period under the Code).
Number of replies posted  7 replies      Number of times viewed  88 views      Add Reply
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Santo Gold created a topic in Retirement Plans in General

Use 1099-MISC Income as Basis for 401(k) Plan by S Corporation?

An individual establishes an S-Corporation. He's the only owner, no employees. He wants to start a 401(k) plan. His income for 2018 consisted only of 1099-MISC income, coded as nonemployee compensation (Box 7). It was paid to him and reported on the 1099-MISC but was coded using his SS number, not the S-Corp's EIN. Is this income eligible to be used for 401k plan purposes?
Number of replies posted  4 replies      Number of times viewed  40 views      Add Reply
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coleboy created a topic in 401(k) Plans

Effect of Marital Status on HCE Determination

Employee A owns 90% of a company, employees B & C each own 5%. Employee B makes over the compensation amount for an HCE. Employee C does not. However, employees B & C are married. Is employee C considered an HCE even though she does not own ore than 5% and does not meet the HCE compensation requirement?
Number of replies posted  4 replies      Number of times viewed  56 views      Add Reply
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Archimage created a topic in Form 5500

Participants with an Account Balance

In regards to line 6g, if a plan that is filing on a cash basis, should it still include participants that have a receivable at the end of the year? These participants would have a zero balance without the receivable.
Number of replies posted  0 replies      Number of times viewed  21 views      Add Reply, Inc.
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