Message Boards Digest

March 13, 2019

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

Author's photo

Gilmore created a topic in Distributions and Loans, Other than QDROs

Refunds Required Due to ADP Test Failure: Use of IRS Form W-4P

For the past 20 years of ADP testing, when refunds are necessary, we provide the client with a form to give to the HCEs that explains the reason behind the refund, and a place for the HCE to make a withholding election. The form offers them the choice of [1] normal 10%, [2] a percentage or dollar amount over 10%, or [3] no withholding. The form also comes with a W-4P and option 3 includes instructions that if no withholding applies then the W-4P must be completed in addition to our form. We then use this information to complete the recordkeeper's refund distribution form for the client. We now have a recordkeeper that is insisting that for ANY withholding amount that is not 10%, they want a signed W-4P. Additionally, if the participant wants, for example, 20% withholding, they want the participant to change the $ sign on line three to a% sign and indicate 10%, as that would be 10% additional to the normal 10% -- notwithstanding how confusing that would be for the participant. They are insisting that the IRS requires W-4P not just to elect to be exempt, but for anything other than 10%. I do not see anything in the instructions on the W-4P that requires the form to be used if a participant elects, say, 20% withholding, and do not see why our election form would not satisfy that purpose, especially since our form is much clearer in the instructions for the participant. Do others require a W-4P in all situations? I do not mind changing our procedures if we are not doing it correctly, but just want to be certain first that we actually aren't doing it correctly.
Number of replies posted  2 replies      Number of times viewed  47 views      Add Reply
Author's photo

khn created a topic in 401(k) Plans

Amending a 30-Day Fee Disclosure

Plan sponsor sends out a fee disclosure because they are switching to a fixed recordkeeping fee. After the notice is distributed, it's realized that the fee is actually going to be less than what's reflected on the notice. Can a revised notice be sent out with less than 30 days notice, given that it's a benefit to participants?
Number of replies posted  0 replies      Number of times viewed  22 views      Add Reply
Author's photo

jsample created a topic in 401(k) Plans

Zero W-2 Wages But Deferrals of $9,000

We have a client whose business was taxed as a sole proprietor until 12/31/2017. Effective 1/1/2018 he elected to become an S-Corp. The owner was under the impression that he could defer as if he were still self-employed, and then max out after year-end. He also assumed that his shareholder dividend could be used as compensation. His 2018 W-2 wages were $0. I'm not sure how he actually deferred throughout the year without compensation, I think he took what he considered draws and contributed them into the plan. Now we have a plan where an owner with $0 W-2 wages thinks that he deferred $9,000. [1] How would this 'deferral' be corrected? Should it be returned to the owner as a 415 excess? This would generate a 1099. This was my original thought for correction, but how could someone get money returned when technically they didn't have it to defer to begin with? [2] Should the money revert back into the company somehow, as an operational error (possibly failure to follow the terms of the plan, with no 1099 issued to the owner)?[3] As a side question, I thought an owner had to take reasonable compensation in an S-Corporation.
Number of replies posted  1 reply      Number of times viewed  40 views      Add Reply
Author's photo

ERISA-SOS created a topic in Form 5500

Final Form 5500 Needed for Health & Welfare Plan? Small Plan Exemption Satisfied Years Ago

A company filed their first (and only) Form 5500 return for their H&W plan in 2013. The BOY count that year was > 100, with the EOY count dipping below 100 participants. Thus, they stopped filing because they satisfied the small plan exemption. They also did not use the 4R code. In 2018 the company was purchased by another company, and will now be under that new company's H&W plan. Question: Because that single Form 5500 was previously filed, should a final Form 5500 be filed to inform the DOL/IRS the plan no longer exists? There is a 5 year gap because they only had to file in 2013.
Number of replies posted  0 replies      Number of times viewed  19 views      Add Reply
Author's photo

Ryan L created a topic in 401(k) Plans

Year-End True-Up: Percentage of Total Match

We are implementing a 401k match with year-end true-up next year. What percentage of overall match happens during the year vs. the year-end true-up? I realize this will vary from company to company but I'm looking for some general numbers.
Number of replies posted  6 replies      Number of times viewed  61 views      Add Reply
Author's photo

PensionPro created a topic in 401(k) Plans

Nonqualified Plan Distribution and Eligible 401(k) Compensation

Executive terminates 12/31/17 and is paid a 2018 W-2 for $800,000 distribution from a nonqualified plan for payment in Feb 2018. Plan defines comp as W-2. For 401(k) deferral purposes is this eligible comp based on the 2-1/2 months post-severance rules or is it severance pay that is not eligible comp?
Number of replies posted  1 reply      Number of times viewed  23 views      Add Reply
Author's photo

CupidMe created a topic in Retirement Plans in General

Sticky Affiliated Service Group Issue: Earned Income from Equity Holding Comany

Potential client has ownership interests in a few management companies. Each company was set up to manage one operating company that has employees. Each management company receives 100% of its business from the operating company it manages. Client has no ownership of operating companies and management companies have no employees. Each pairing is a management affiliated service group. Payments from the operating company pass through its management company to an equity holding company. Equity holding provides client with K-1 self-employment income. This income is reflected on Form 1040 SE. The management companies are disregarded where the client has self employment income with regard to the management companies per Section 301.7701-2.

Tracing the income to a company within an affiliated service group, does that designation attach to the income, precluding client from adopting a 1-person DB plan in the sole proprietorship with the net earnings? Or would the client sole proprietorship fall outside the affiliated service group, because the income comes from enough operating companies that the 50% management business is not met?

Number of replies posted  0 replies      Number of times viewed  20 views      Add Reply
Author's photo

cripp12 created a topic in Miscellaneous Kinds of Benefits

PTO Charge-Back and PTO Buy-Up

We are looking to implement PTO charge back and PTO buy up but we're looking for numbers to present to the board for approval. Anyone know where I can find any sort of statistics with numbers -- something we can define? We're a manufacturing and technology group. It would help to know what level of employees use this kind of benefit.
Number of replies posted  1 reply      Number of times viewed  22 views      Add Reply, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
(407) 644-4146

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

Copyright 2019, Inc. All materials contained in this mailing are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of, Inc., or in the case of third party materials, the owner of those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

Links to web sites other than and are offered as a service to our readers; we were not involved in their production and are not responsible for their content.

Unsubscribe | Privacy Policy