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Message Boards Digest

April 24, 2019

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

401(k)athryn created a topic in 401(k) Plans

Late Offset of Participant Loan

We're taking over a 401(k) plan. A participant has an outstanding loan balance. She terminated employment in 2017, continued making payments until June of 2018, then stopped making payments. The prior TPA should have had the loan offset as of 9/30/2018, the end of the cure period. I need to offset the loan now, but it's been accruing interest since last June. I will request that the recordkeeper (Hancock) offset the loan using the balance on 9/30/2018, which is the date this should have been done. Do you agree? I don't think it's fair to the participant to have to pay any additional interest. Also, I don't see anything in EPCRS about a late loan offset and I don't want the participant to have to redo 2018 taxes, so do you think it is OK to have this reported as 2019 taxable income even though it should have been 2018 income?
Number of replies posted  5 replies      Number of times viewed  69 views      Add Reply
 
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Flyboyjohn created a topic in SEP, SARSEP and SIMPLE Plans

VCP Correction for SIMPLE IRA: What Are 'Excess Amounts'?

I've discovered (hiding in plain sight) a VCP correction for a SIMPLE IRA maintained by an employer who became an ineligible employer by exceeding the 100 employee limit in 2 prior years. The correction appears to allow the contributions to stay in the SIMPLE IRA accounts but also appears to require an additional sanction of at least 10% of the "excess amounts" plus loss of the employer deduction for the "excess amounts." My question is, what are the "excess amounts"? If none of the contributions exceeded the employee deferral limits or the employer contribution limits, does that mean we have no "excess amounts" and no additional sanction?
Number of replies posted  4 replies      Number of times viewed  48 views      Add Reply

Purplemandinga created a topic in 401(k) Plans

3% SHNEC Plan Adds Matching Contribution -- How is ACP Test Applied?

A Safe Harbor 3% nonelective plan decides to make a matching contribution to the plan in addition to the 3% SHNE. This matching contribution is 100% of deferrals contributed up to 6% of compensation. Is the ACP test required for the entire matching amount or just the amount greater than 4%?
Number of replies posted  1 reply      Number of times viewed  46 views      Add Reply

sdix401k created a topic in 401(k) Plans

Participant Writes 'My Children - Per Stirpes' on Beneficiary Designation

A participant wants to designate their children per stirpes as the primary beneficiary using a non-standardized prototype plan document. The Participant wrote this on the form:
My Children -- Per Stirpes same terms and conditions as the ABC Trust Dated XYZ
Is that allowed? My document simply states that it must be an individual or trust. Although the beneficiaries here would qualify as individuals, how would we determine who they are (i.e., who is a surviving heir)? Would that be done by the executor of the estate?
Number of replies posted  0 replies      Number of times viewed  38 views      Add Reply

AgTrader created a topic in Nonqualified Deferred Compensation

Can I Stretch Out My Payments from My Employer's Nonqualified Deferred Comp Plan?

I am an employee who has a sum invested in an unfunded NQDC plan with my employer. The plan document states distribution triggered by separation will be distributed in 5 annual (yearly) payments. For obvious reasons I would prefer distribution to be extended to smaller annual payment over a greater time period. For example, if the sum held in NQDC plan balance at separation equals $1M it will be distributed in 5 annual payments of $200K. I would prefer 10 annual payments of $100K or 20 annual payments of $50K. If in principle both the employee and employer agree to this, can it be done? I am aware of the risks due to the plan being unfunded and extending the time from 5 years to longer.
Number of replies posted  6 replies      Number of times viewed  53 views      Add Reply

Scott50 created a topic in 401(k) Plans

Rollover from IRA Into a 401(k)?

The document notwithstanding -- can you roll an IRA into a 401(k) plan?
Number of replies posted  2 replies      Number of times viewed  91 views      Add Reply

JustnERPA created a topic in Correction of Plan Defects

Entitled to Rollover Treatment?

A fully vested NHCE participant, age 59.5, requested an in-service distribution last year of their entire account from a 401(k) plan, to do a direct rollover to an IRA. The plan sponsor approved. However, the plan does not have an in-service option at age 59.5, it has age 60 for some reason. They did not reach age 60 until this year. They currently do not intend to pay it back to the plan.

EPCRS, Rev. Proc. 2019-19, 6.06(4):

Make-whole contribution. To the extent the amount of an Overpayment adjusted for Earnings at the plan's earnings rate is not repaid to the plan, the employer or another person must contribute the difference to the plan. The preceding sentence does not apply when the failure arose solely because a payment was made from the plan to a participant or beneficiary in the absence of a distributable event (but was otherwise determined in accordance with the terms of the plan (for example, an impermissible in-service distribution)). [Emphasis added.]
To me, the emphasized language means the employer does not need to repay the amount to the plan. Let me know if you disagree. The question I have is the tax reporting of the distribution. Was it actually rollover eligible? Or because it violated the plan's in-service provision, is it to be reported as taxable? Would the answer change is this was distributed in error before age 59.5 and the payout included deferral accounts?
Number of replies posted  3 replies      Number of times viewed  38 views      Add Reply

CLKent23 created a topic in 401(k) Plans

Loan Maintenance Fees Added at New Vendor

A client has a current recordkeeper who doesn't charge an annual loan maintenance fees for outstanding loans. The client is considering moving to a different recordkeeper that DOES take annual loan maintenance fees. For those loans already outstanding, is a fee disclosure to participants valid to then start charging annual fees to their loans after conversion?
Number of replies posted  0 replies      Number of times viewed  19 views      Add Reply

austin3515 created a topic in 401(k) Plans

'Collapsible' Adoption Agreement

My document provider just sent us an email that they are adding a "collapsible" Adoption Agreement where the unselected options will be suppressed. Does anyone have more information on what that will look like? I assume for example a non-safe harbor plan, the whole safe harbor section will be suppressed. But their email was a little sparse on detail, perhaps because they haven't figured it out yet. Just curious what others know about it. I'm also concerned about losing familiarity with all of the options available for my own selfish purposes (i.e., being an expert on what my own document can do, because I see it all the time in its entirety).
Number of replies posted  5 replies      Number of times viewed  51 views      Add Reply

KevinMc created a topic in 401(k) Plans

Can 5% Owner Avoid RMDs at 70-1/2 by Selling Some or All of His Ownership?

A 5% owner of a law firm is approaching age 70 and would like to be bought out of his ownership share in order to avoid the otherwise required minimum distributions from his 401(k) plan. Would this work? For example, is there a "lookback" period the IRS has on a situation like this? Also, is there a separate IRS table for calculating RMDs from a 401(k) as opposed to an IRA?
Number of replies posted  2 replies      Number of times viewed  39 views      Add Reply
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