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Message Boards Digest

April 8, 2019

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

mjf06241972 created a topic in 401(k) Plans

Less Than 1000 Hour Employee

I have a new plan for 2018 that is a safe harbor match. Owners spouse contributed to 401k but worked only 300 hours. The plan is based on a full year with an effective date of 1/1/18. If they want to do profit sharing, can they exclude her to keep the other non-key employees who worked less than 1000 hours from getting psp?
Number of replies posted  6 replies      Number of times viewed  75 views      Add Reply

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

Suspense Account Considered for Top Heavy Purposes?

So say an S-corp has a leveraged ESOP. Total value of shares is 1 million. $200,000 has been allocated to participants, the remaining $800,000 is in the suspense account. When determining if the plan is top heavy, do you include the suspense account when determining the 60% figure? Or, is determined solely on the assets that have been allocated, and the suspense account is ignored?
Number of replies posted  1 reply      Number of times viewed  30 views      Add Reply

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

Plan Sponsor Wants to Pay a Participant's Loan

Good morning to all, Here's a new one for us. A client called this morning to say that she (owner of the company sponsoring the plan) wants the company to pay off an existing participant loan. The participant happens to be her son who of course is Key and HCE by virtue of his relationship to his parents, the owners. He is currently making payroll deducted payments but "the company" wants to pay his loan off for him in 4 quarterly installments beginning now. She had already called John Hancock to find out if this was feasible and they told her to call us as the TPA. Our first inclination is to say "Sure, why not?" but then we started wondering if this could somehow be construed by an auditor to be a contribution that went only to this one employee and was therefore discriminatory, or whether there is some other problem associated with it. We have no idea how the company would eventually treat this for tax purposes. It's not supposed to be a contribution to the plan of course. It might be additional pay for the son, from which it appears that he's making the payments? This is an issue they have to work out with their CPA. At a minimum, we should run a new amortization schedule for them to correspond to the payments they actually intend to make. Any thoughts on how this could somehow get the client in trouble? Thanks as always for your advice, thoughts, help.
Number of replies posted  9 replies      Number of times viewed  81 views      Add Reply

Cobras59 created a topic in 401(k) Plans

Merged MP to PS and In-Service Withdrawals

Can a money purchase plan that has merged into a PS plan be allowed as part of an in-service withdrawal?
Number of replies posted  3 replies      Number of times viewed  30 views      Add Reply

ldr created a topic in Retirement Plans in General

Who Is Key? Company Sold Mid-Year

Hi to all, I am researching the elements that went into a top heavy test for a client for calendar 2018. Two doctors, A and B, owned Happy Feet PA up until 08/12/2018, and maintained the Happy Feet PA 401(k) Plan.. They sold their practice in an asset sale to Better Feet, P.A. owned entirely by Dr. C. Doctors A and B continue to be employed by Better Feet for the remainder of 2018. Better Feet took over as the plan sponsor on the sale date, the plan was re-named Better Feet, P.A. 401(k) Plan, and Dr. C became the Trustee of the plan. Because Better Feet already had a SIMPLE plan in 2018 for the Better Feet employees, with the advice of a local ERISA attorney, we amended and restated the Happy Feet plan such that only the former employees of the Happy Feet PA were eligible to participate in the Better Feet, P.A. 401(k) plan for the remainder of 2018. At 01/01/2019, all of the employees of Better Feet, whether they used to be employed by Happy Feet or not, became eligible to participate in the plan and the SIMPLE plan was terminated. So now, as to the Top Heavy test for 2018: I am understanding what I read to say that because Dr. A and Dr. B were owners of the (previous) plan sponsor "at any time during the relevant plan year" (2018), they are Key employees for purposes of the 2018 test. We had initially hoped that perhaps they could somehow be considered non-Key because by the end of the year, they were not owners, the plan sponsor had changed, their company had been completely bought out by the new owner, etc. The reason it matters: Running the Top Heavy test for 2018 with Drs. A and B as the Key employees results in the plan being Top Heavy for 2019. This puts Dr. C in the unhappy position of now sponsoring a plan that is considered to be Top Heavy for 2019 even though he had nothing to do with it getting to be Top Heavy. He and his own employees were not even eligible to participate in 2018. That may be irrelevant. This just may be a risk he was assumed to be taking when he agreed to sponsor and continue the Happy Feet 401(k) Plan when he bought out Happy Feet PA. Am I missing anything that would change the test results? Thank you as always.
Number of replies posted  1 reply      Number of times viewed  38 views      Add Reply

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

Overzealous Auditors

Is it an industry trend for pension plan auditors to go nuclear and penalize a plan sponsor with all kinds of Notes for seemingly minor data discrepancies such as one participant's date of birth off by a year out of 400 total participants, or a gender being incorrect on 3 participants?
Number of replies posted  10 replies      Number of times viewed  92 views      Add Reply

thepensionmaven created a topic in Retirement Plans in General

Contribution Due or Not -- Senior Moment

Pardon my senior moment, but we recently took over a new comparability profit sharing plan (no 401K option) with a 1,000 hour/last day contribution req't. Two participants terminated in 2017 with >500 hrs, but <1,000. The previous TPA had given these two participants a contribution for 2017. Is this correct?
Number of replies posted  3 replies      Number of times viewed  64 views      Add Reply
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