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Message Boards Digest

April 3, 2019

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

EBECatty created a topic in Nonqualified Deferred Compensation

Reporting of previously taxed 457(f) distributions

Cross-posting from 457 plans: Quick question on reporting 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 4.72.19.27 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. Thanks in advance.
Number of replies posted  1 reply      Number of times viewed  26 views      Add Reply

Patricia Neal Jensen created a topic in 401(k) Plans

Controlled Group with varying Matches

Question concerning a controlled group with matches which vary by division. I know ACP is required but assume there must be more testing (benefits rights and features?). What would the testing be which must be performed in addition to ACP? Thanks! Patricia
Number of replies posted  2 replies      Number of times viewed  43 views      Add Reply

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

Operational Violation?

When the plan document election requires a $500 minimum on distributions, both termination & in-service would a recurring distribution of an amount less than $500, e.g. $150/mo be considered to violate that and create an operational violation?
Number of replies posted  0 replies      Number of times viewed  32 views      Add Reply

Rai401k created a topic in 401(k) Plans

Testing requirements for a controlled group with separate plans

We're having a little trouble trying to figure this out. We have 3 separate plans for 3 different companies that are considered a controlled group. All plans have exactly the same provisions (in short they all fund a 3% safe harbor and 50% up to 6% match). We just found out they had a 4th company that they never told us about. The 4th company has it's own plan as well. However it has different benefits. The plan has 183 employees 180 are NHCEs 3 are HCEs. Let's just say the 3 other plans have 1300 participants combined 300 are HCEs and 1000 are non-hces. How do we determine what testing has to pass in order for this 4th company to stand on it's own with different benefits?
Number of replies posted  1 reply      Number of times viewed  32 views      Add Reply

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

Too Much Taken From Account

We have a participant in a 401(k) plan that took a plan loan in 2017 and two (2) hardship distributions two months apart in 2018. He is repaying the loan, and now wants another hardship distribution, which he does not qualify for. The total sum taken from his account is over $200,000. Question, if the plan were to be audited, would not the IRS consider this a breach of fiduciary duty to have signed off on these distributions?
Number of replies posted  3 replies      Number of times viewed  46 views      Add Reply

dmwe created a topic in 401(k) Plans

EACA Mid-year Amendment

I'm working with an EACA calendar year Plan. They'd like to do an re-enrollment on June 1st to increase anyone under 4% up to a 4% deferral rate. Plus also turning on deferral acceleration to auto increase each June 1st by 1% up to 6%. Are there any Annual Notice issues since this would preclude us from making this amendment mid-year? We plan on providing a Plan amendment notice to everyone and send out multiple communication pieces. Thanks for your help.
Number of replies posted  0 replies      Number of times viewed  12 views      Add Reply

Tom Poje created a topic in Retirement Plans in General

Secure Act passes House

They seem to think this Bill has a chance to pass the Senate as well. A couple of the provisions are: One of the differences between the House and Senate bills is when participants will be required to begin taking distributions from their retirement plans. The House bill increases the required minimum distribution age to 72 from 70
Number of replies posted  1 reply      Number of times viewed  33 views      Add Reply

hch4cpa created a topic in 401(k) Plans

Deferral / Safe Harbor Match on Bonuses

Plan is 4% safe harbor and definition of compensation is W-2 income with all pre-tax contributions included. Plan does not specify any exclusions from compensation. Plan provides participant the option to elect/amend contribution to defer up to 100% of bonuses. From a practical stand point - Even if the participant does not elect to have a deferral taken from the bonus amount, should a 4% safe harbor match still be made?
Number of replies posted  6 replies      Number of times viewed  59 views      Add Reply

ombskid created a topic in 401(k) Plans

Sponsor is LLC Taxed as Partnership -- Can DB Plan Contribution Create a Loss?

1 active and 1 inactive partner in an LLC that's taxed as partnership. DB plan contribution generally is not supposed to create a loss (I can't find the thread on that subject but I believe there is at least one) to a sole proprietor. Is it also true for a partnership where profit & loss pass through to 1040?
Number of replies posted  0 replies      Number of times viewed  1 view      Add Reply
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