Message Boards Digest

April 1, 2019

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

AlwaysLearning created a topic in 401(k) Plans

Client Moved to PEO, Terminated Prior Plan, Moving Out of PEO, Starting New Plan in Less Than 12 Months

Client terminated his existing plan and transferred to a PEO. A final Form 5500 was completed with a short plan year from 1/1/2018 to 6/11/2018. (I'm assuming this is the date all assets were transferred to the PEO plan with the plan number as 001.) The client wants to move out of the PEO and start a new plan sponsored by his company (same EIN as the prior plan) under plan number 002. Because the last distribution date of the terminated plan of the Plan Sponsor is less than 12 months, is there a successor plan issue, if the effective date of the new plan is 1/1/2019? This is not a safe harbor plan. If this is a successor plan issue, is the resolution to have a short plan from 7/1/2019 to 12/31/2019?
Number of replies posted  4 replies      Number of times viewed  41 views      Add Reply

hch4cpa created a topic in Cross-Tested Plans

Cross Tested 401(k)/Profit Sharing Plan: Is the TPA Calculating This Correctly?

I am the CPA for a group of doctors who have a Cross Tested 401(k) & Profit Sharing Plan. In reviewing the Plan valuation report/5500, I'm not sure the TPA is doing this correctly. Details: three Doctors, all are HCEs with income in excess of $275,000. 6 NHCEs (ages anywhere from 20-70, but most younger). All eligible employees are participating, and the doctors are contributing the $18,500 plus catch up. Everyone gets a basic Safe Harbor match -- 100% up to first 3% of wages, 50% of the next 2% -- for a 4% Safe Harbor Match. The HCEs are getting a profit sharing contribution of $25,500 (9.27%) to get them to the max total contribution of $61,000. The NHCEs simply get an across the board 3.09% (1/3 of 9.27%) profit sharing contribution. Is this how the Gateway Allocation test is supposed to work? My information seems to suggest that the Safe Harbor match goes in to the Gateway Allocation percentage... so if the HCEs are getting 13.27% (4.00% + 9.27%), then the NHCE should only get a total of 4.42%. Correct?
Number of replies posted  7 replies      Number of times viewed  91 views      Add Reply

52626 created a topic in 401(k) Plans

Affiliated Service Group Situation: Effect on Testing

Company A and Company D are an Affiliated Service Group. Company B and Company D are an Affiliated Service Group. There is no common ownership between Company A and Company B. I understand Company D is included in the testing for Company A and also for Company B. Question: Do Company A and Company B need to be tested together? Does the ASG between D and these to entities require them to be tested together? Is there an issue if eligibility/benefits under A and B are different? (If I read one more thing about ASGs I think I will scream. Having a root canal is better than figuring out ASG rules!!!)
Number of replies posted  1 reply      Number of times viewed  34 views      Add Reply

Big Question created a topic in Qualified Domestic Relations Orders (QDROs)


Parties divorced and QDRO was prepared, qualified and signed by court. Sent to pension administrator. When distribution is made to participant, nothing was sent to AP. Who's at fault?
Number of replies posted  5 replies      Number of times viewed  76 views      Add Reply

mjf06241972 created a topic in Retirement Plans in General

S Corporation and 2% Shareholder Health Insurance: Comp for Calculation Purposes?

if a business is an S-corp and the owner has 2% shareholder health insurance, is this part of their compensation that can be used for calculation purposes? I don't think so because not subject to SS or Medicare. Correct?
Number of replies posted  4 replies      Number of times viewed  72 views      Add Reply

DABU created a topic in 401(k) Plans

Employer Stock in My Wife's 401(k) Plan: Can We Use an 'Equity Collar' Strategy?

My wife has large percentage of her portfolio in her company/employer stock and we are trying to re-balance the portfolio. We are planning to sell a portion of company stock and transfer the cash to existing self-directed brokerage account within 401(k) and account is with Fidelity. The company's share price is increasing, excellent management, and is a growth stock. My question: Do 401(k) plans allow "Equity collars"? An equity collar is the simultaneous purchase of a "put option" and the writing of a "call option." Most of the 401(k) administrators don't know the nuts and bolts of finances. What is the best way to ask the administrator about equity collars? Could we transfer the shares to 401(k) self-directed brokerage account and use an equity collar? My wife doesn't want to send a wrong signal to her employer by selling a large portion of company stock.
Number of replies posted  5 replies      Number of times viewed  69 views      Add Reply

M Norton created a topic in IRAs and Roth IRAs

IRA Beneficiary Dies While Taking RMDs

IRA owner dies at age 64, beneficiary is his older brother, age 69-70; beneficiary then dies at age 73 (presume he was taking RMDs). HIS beneficiary is his wife, age 67. Does she treat the IRA the same as if it had originally belonged to her late husband or are there special rules because she is the second beneficiary of the same IRA? What are her options?
Number of replies posted  3 replies      Number of times viewed  26 views      Add Reply

mjf06241972 created a topic in 401(k) Plans

Compensation for Mid-Year Entrant in Safe Harbor Plan

Plan Document says compensation used only when a participant. For a calendar year plan, the participant enters plan on 7/1. They are 3% non-elective safe harbor and profit sharing. Do you use compensation from 7/1 to 12/31 for both sources to determine contribution?
Number of replies posted  2 replies      Number of times viewed  33 views      Add Reply

Puffinator created a topic in 401(k) Plans

SEP IRA, SIMPLE IRA, and a Potential 401(k) Plan

Hypothetical planning scenario: SEP IRA, Simple IRA, and a potential 401(k) plan -- Lions and tigers and bears... Oh, my! A financial advisor called looking for some help. He said his clients [Drs. Husband & Wife] are trying to maximize their pre-tax retirement savings due to the fact that their combined income is in excess of $1M annually. I disclaimed this one is beyond my scope.


  • Physician -- ER
  • Paid as 1099 independent contractor (no employees)
  • SEP IRA in place, currently registered under Husabnd's name (Sole Prop) and maxed to IRS limit annually.
  • Physician -- General Surgery
  • Owns practice (and has employees)
  • Receives W-2 compensation from the practice (so, I am assuming tax entity is a form of corporation or files as one.)
  • SIMPLE IRA in place for her & her employees with a 3% elective match.
  • Financial advisor recently became aware that his clients established an LLC (no other employees, likely only the husband & wife);
  • The clients' tax advisor (an EA, not CPA -- not that it matters, just more info) is suggesting the husband continues to fund his SEP IRA, BUT through this LLC. (FYI: Per financial advisor, Husband's SEP is currently registered under Husband's name as a Sole Prop.)
  • Further, EA is suggesting Husband pays Wife a salary through the LLC so she may also fund SEP IRA contributions to herself... Again, her practice currently maintains a SIMPLE IRA for the benefit of her employees and herself with a 3% elective match. This was the EA's suggestion -- NOT currently in practice. >> The advisor is concerned about the EA's suggestion to do this. He understands that any comp paid to Husband and/or Wife by LLC is a result of actual services performed for the LLC. The advisor is committed to making sure everything is on the up and up here.
If the LLC were to sponsor a 401(k) plan (and we assume the LLC will have bona fide earnings/comp to Drs. Husband & Wife), then per this IRS FAQ about SEP plans, I believe Husband might be able to continue his SEP for self-employment income and also contribute as an employee to a 401(k). However, I believe Wife cannot contribute to her SIMPLE IRA and to a 401(k) in the same year if the two plans' sponsors are under common control, correct? Regardless, I am sure there is a whole host of potential nondiscrimination concerns to navigate RE: shared ownership w/ the LLC and her practice.

What are the optimal circumstances for his clients in order for both Husband & Wife to save the most advantageous IRS maximum permitted each year? For this hypothetical, let us assume the clients are willing to make any necessary changes to meet the optimum.

Number of replies posted  2 replies      Number of times viewed  32 views      Add Reply

EBECatty created a topic in 457 Plans

Reporting of Previously Taxed 457(f) Distributions

Say you have a 457(f) plan that vests in a fixed amount (say $500,000) in one year but is paid in installments (say 5 years at $100,000 starting the year after vesting). Setting aside for the moment the issue of present value, the employer would report all $500,000 as taxable wages on a W-2 in the first year. Later distributions would be subject to tax under section 72, which would require no further taxation upon distribution. In the installment years, do the $100,000 non-taxable distributions get reported anywhere?

Section of the IRM says the following, but it's not clear what the employer reporting requirements are (if any):

For any amounts previously taxed, but not distributed from a 457(b) or 457(f) plan, the participant will have "basis" on that amount and is not required to pay tax again at the time of distribution. It is the individual's responsibility to report this on Form 1040 for the year distributed. See IRC 72 for additional guidance on basis.
Number of replies posted  1 reply      Number of times viewed  15 views      Add Reply, Inc.
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