Message Boards Digest

April 5, 2019

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

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

LLC partner can DB plan contribution create a loss?

I active and 1 inactive partner in an LLC 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 to a partnership where profit & loss pass through to 1040?
Number of replies posted  2 replies      Number of times viewed  59 views      Add Reply

MTWeeks created a topic in 401(k) Plans

One Company Leaving a Controlled Group

I have a group of three companies all previously owned by the same family (three brothers, owning all three companies jointly), that have operated a single 401(k) Plan as a controlled group. Now they have sold 49% of one of these companies to an unrelated individual. They are asking if they now have the option to kick the 51% owned company out of the Plan. I believe they can, but also think the successor plan rule would apply since they maintained the 401(k) after the acquisition. Does anyone here have any thoughts?
Number of replies posted  0 replies      Number of times viewed  18 views      Add Reply

Tracy created a topic in 401(k) Plans

Consider Catch-Up Contributions to be Non-Catch-Up Contributions?

I recently started a new job as benefits manager. Our recordkeeper (a public company) says their testing department typically reclassifies regular (non-catch-up) contributions AS catch-up contributions in order to help our test results. Anyone ever seen/heard of this?
Number of replies posted  2 replies      Number of times viewed  27 views      Add Reply

Belgarath created a topic in Employee Stock Ownership Plans (ESOPs)

Transferring from ESOP Account to Non-ESOP Account to Avoid a 409(p) Failure: Tax Implications?

Suppose an S-corp ESOP has what I would consider to be fairly standard language to permit the transfer of shares from the ESOP account to a "non-ESOP" account within the plan, in order to avoid a potential 409(p) failure. Are there any tax implications to this, other than the fact that the shares so transferred will be subject to UBTI on their pro-rata share of the S-corp earnings?
Number of replies posted  0 replies      Number of times viewed  17 views      Add Reply

BenefitsRUs21 created a topic in Defined Benefit Plans, Including Cash Balance

Participant Won't Accept a Required Minimum Distribution ... Now What?

A participant in the cash balance plan refuses to cash his RMD. He even sent the check back to the plan. How to proceed? I know the IRS has issued guidance about missing participants with respect to uncashed RMDs, but in this case the participant simply refuses to cash his check.
Number of replies posted  7 replies      Number of times viewed  138 views      Add Reply

AS TPA created a topic in 401(k) Plans

K-1 Shows No Earnings from SE but Includes W-2 Compensation

I received a Schedule K-1 (Form 1120S) for the owner and sole employee of a corporation. This K-1 shows nothing in Box 14a. It does however include Box 17 code W, which has an amount of $50,000. I'm waiting on a response from the client as to when exactly during the year he earned this W-2 compensation of $50,000, because one normally wouldn't receive both K-1 and W-2 income. Would this mean that the only compensation that would be taken into consideration for plan purposes would be the $50,000 in Box 17? The plan's definition of comp is W-2 comp.
Number of replies posted  4 replies      Number of times viewed  43 views      Add Reply

JoeBialy created a topic in IRAs and Roth IRAs

Risks of a Mistitled Inherited IRA?

There is plenty of great advice on BenefitsLink and elsewhere on the web about how to properly title an inherited IRA. But what are the risks/consequences if that titling is incorrect? My story: My mother passed away a few years ago and left me a Roth IRA, which I kept at her old brokerage. I have been diligent about RMDs and other legal formalities, but would now like to do a trustee-to-trustee transfer of the Inherited IRA to my current brokerage. Unfortunately, my current brokerage does not seem to be titling their inherited IRAs correctly. They are titling them as "[Client Name] of the Roth IRA of [Deceased Name], Brokerage LLC." For example: "John Smith of the Roth IRA of Sarah Smith, Brokerage LLC." This is sorta close, but still seems out of compliance with what the experts recommend, which derives from IRS Notice 2007-7 and its requirement of a clear specification of beneficiary and decedent: "A-13. The IRA must be established in a manner that identifies it as an IRA with respect to a deceased individual and also identifies the deceased individual and the beneficiary, for example, 'Tom Smith as beneficiary of John Smith.'' Not being a tax lawyer or CPA, I don't know what risks are created if I just accept the new brokerage titling scheme and complete the transfer. Is their titling scheme "close enough," or could it create real headaches? Is the IRS going to blow up my IRA when they see the 1099-R and claim I've lost the stretch rights? The brokerage basically told me they're aware of the issue, but won't be able to fix it anytime soon. Unfortunately I really need to consolidate things at that particular brokerage, so finding a different brokerage is not particularly viable. Thanks for any thoughts!
Number of replies posted  1 reply      Number of times viewed  31 views      Add Reply

ajustice created a topic in 401(k) Plans

Ineligible HCE Deferred Before Entry Date; How to Correct?

I have a highly compensated ineligible participant who deferred into the 401(k) Plan before her entry date. EPCRS and the SCP say you can correct this by a retroactive amendment if the participants are predominately NHCE's. How do I correct it since this is a HCE?
Number of replies posted  3 replies      Number of times viewed  38 views      Add Reply

CBenefits created a topic in 401(k) Plans

May (or Must) a Qualified Plan Allow Incoming Rollovers from Roth IRAs?

A participant is upset that his employer's qualified plan doesn't allow for a Roth IRA to be rolled over into the plan. How to respond?
Number of replies posted  2 replies      Number of times viewed  63 views      Add Reply

Belgarath created a topic in Retirement Plans in General

Permissive Aggregation for Coverage Testing

I'm looking at a situation where an employer has an ESOP and a 401(k) plan. The 401(k) plan provides deferrals and a safe harbor match only. The census/testing results provided for the ESOP are confusing at best, but it APPEARS that the ESOP failed the 70% ratio test for coverage. It further appears that the ESOP was then permissively aggregated with the 401(k) to "allow" it to pass coverage. Under the mandatory disaggregation rule in 1.410(b)-7(c)(2), it would appear that for coverage purposes, an ESOP plan (or portion of plan) can't be permissively aggregated even with another non-ESOP Profit Sharing plan (or portion of plan), other than as provided in 54.4975-11(e), much less with a 401(k) or 401(m). Am I missing something?
Number of replies posted  6 replies      Number of times viewed  30 views      Add Reply, Inc.
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