Message Boards Digest

April 2, 2019

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

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

Terminated Participant's Vested Balance Is More than $200 But Less Than $1,000

A terminated participant has a vested account balance of less than $1,000. Per the terms of the plan, mandatory distributions of account balances are made to terminated participants whose vested account balances are $1,000 or less. The distribution will be made as soon as administratively feasible. The vested amount is >$200, so must the participant sign an election form?
Number of replies posted  3 replies      Number of times viewed  54 views      Add Reply

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gcrechale created a topic in SEP, SARSEP and SIMPLE Plans

Coordination of SEP Arrangement and a Cash Balance Plan

We have an existing SEP (20 HCEs and 1 NHCEs) with 25% employer contribution each year for each participant. Employer wants to add a Cash Balance plan but does not want to leave the SEP arrangement and go with a PS/401(k) plan. So we will have a SEP (not a 5305-SEP) with each participant continuing to receive 25% each year and then certain of the HCEs receiving some amount of allocation/funding into the CB plan. The NHCE will be allocated whatever is necessary. Is this a viable arrangement? What is the tax deduction limits for a setup like this? Can we allocate 25% in the SEP and also what is necessary in the CB and not exceed the tax deduction limits? Are we allowed to consider what is allocated in the SEP for the NHCE when determining what the NHCE must receive in the CB plan just like we normally do when we have a PS/401(k) arrangement alongside a CB plan?
Number of replies posted  3 replies      Number of times viewed  29 views      Add Reply

gcrechale created a topic in SEP, SARSEP and SIMPLE Plans

New SEP Document Needed When Sponsor Adds a Cash Balance Plan

Employer currently has a Model 5305-SEP and wants to add a CB plan. They cannot use a 5305-SEP with a CB plan, so they'll need to establish a new SEP. Once they are able to find a provider to prepare the new SEP, will the new SEP be an amendment to the original 5305-SEP or a brand new employer plan? If it's a new employer plan, will the current participants in the Model 5305-SEP be allowed to roll their money into the new employer SEP plan?
Number of replies posted  1 reply      Number of times viewed  21 views      Add Reply

kmhaab created a topic in Correction of Plan Defects

Correction of Overpayment from Terminated Plan

401(k) plan was terminated in 2018. Due to a recordkeeping error, assets were incorrectly distributed to Employee A instead of Employee B. Plan sponsor needs to correct the overpayment to Employee A and the incorrect distribution (i.e. underpayment) to Employee B. How is this done if the 401(k) plan and trust have been terminated? They can recover the overpayment from Employee A, but how is it formally returned to the plan and distributed to Employee B if the plan has been terminated? Do they need to rescind the termination?
Number of replies posted  0 replies      Number of times viewed  17 views      Add Reply

msmith created a topic in Cross-Tested Plans

New Comparability Plan: Compensation for 401(a)(4) Purposes When Participant Enters Mid-Year

A 401(k) Safe Harbor Non-Elective, with New Comparability PS has different eligibility for the 401(k)/Safe Harbor portion and the PS portion. If someone enters the Plan mid- Plan Year for PS purposes, do I use full year compensation or PS Participation Date compensation for (a)(4) testing purposes?
Number of replies posted  1 reply      Number of times viewed  31 views      Add Reply

Dougsbpc created a topic in Defined Benefit Plans, Including Cash Balance

Excess Assets in DB Plan: Allocating to Participant-Spouse of Business Owner

Have a 3 participant DB that terminated and has excess assets (about $40k). Our document indicates that the excess can be allocated in any non-discriminatory manner. In this case it's a husband and wife plan with one younger employee. The husband and wife are each 70. The wife has participated for over 10 years but has had very small accruals (I think 1% of pay for the past 10 years). The business owner would like to be able to allocate most of the excess to his wife. Would there be any problem with attempting to do that and using accrued to date for 401(a)(4) testing? I would think accrued to date would have the effect of spreading out the excess as though it were additional accrued benefits over all the past years. Perhaps making it so it would have the effect of her earning 2% of pay rather than 1%.
Number of replies posted  2 replies      Number of times viewed  40 views      Add Reply

Purplemandinga created a topic in 401(k) Plans

Owner Fires Himself to Obtain Distribution?

Has anyone run into a situation where a client's accountant demands that a 100% owner of a company be allowed to take a distribution of moneys because the client fired himself? They also revealed that the owner is in dire financial straits. This is a SH plan with no hardships allowed. I'm calling BS, and told them to hire an attorney to write us a letter telling us that the termination would allow the owner to take a distribution of plan money. They could also terminate the plan. Is there another way I should be thinking about this?
Number of replies posted  9 replies      Number of times viewed  68 views      Add Reply

RatherBeGolfing created a topic in Cafeteria Plans

Missed Several Payroll Deductions for Health & Welfare Plans: OK to 'Make Up'?

401(k) client has an issue with its welfare benefits and is asking me to point them in the right direction. I don't do welfare benefits at all so I figured id see with you guys if this sounds like "standard practice". I have a feeling there is fault on more than one party here, but it sounds like everyone involved are just pointing fingers at others. Company offers several different welfare options in addition to health insurance, such as FSA, dental, short term disability, etc.

Starting in mid 2018 (at least) through March 2019, some payroll deductions were never made. For example, one participant did not have their dental and FSA deducted from their paycheck starting in October 2018. It was discovered in March of 2019. Dental benefits were paid for and participant was credited with the elected FSA amount, so I assume that those were paid with company assets since payments exceed deductions.

The proposed solution is to just double up deductions each payroll starting in April 2019 until the participants have "paid" for the benefits they were credited with. Is this a common solution when you are talking about 5-6 months of deductions spread over more than one plan year? It sounds "fair" that the participants should pay for the benefits they received, but the participants also have a higher taxable income in 2018 than they should had everything been done right. Any input would be appreciated.

Number of replies posted  3 replies      Number of times viewed  27 views      Add Reply

Towanda created a topic in Mergers and Acquisitions

Transition Rule Applicable in First Year of Creation of Sponsoring Subsidiary?

A company with an existing 401(k) plan is preparing to create a wholly owned subsidiary. The subsidiary doesn't yet exist. The company wishes to create a separate 401(k) plan for the subsidiary. In the first year the subsidiary is being set up, it may consist of HCEs only. In time they will have rank-and-file employees and combined plan testing should be fine. The first year is my concern. If the subsidiary and its plan do not currently exist, can we take advantage of the transition rule in the first year of the new plan?
Number of replies posted  6 replies      Number of times viewed  34 views      Add Reply

CaliBen created a topic in Health Plans (Including ACA, COBRA, HIPAA)

COBRA: Employee Died / 6 Children / 4 Different Moms

An employee died, had six children on the plan. Employee was divorced. Four different moms. We are not aware of any court orders. We provide subsidized COBRA for 24 months. Questions: To whom do we offer COBRA and and at what rate? Do we offer at the subsidized employee + child(ren) rate (and net out the employee only rate) to each mom?
Number of replies posted  2 replies      Number of times viewed  25 views      Add Reply, Inc.
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