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April 30, 2019

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

thepensionmaven created a topic in 401(k) Plans

Excessive Voluntary Contributions by Owners

We have a safe harbor 401(k) with employee, SHNE and EE voluntary contributions. Of course the owners are the only participants who did the voluntary contribution. ACP tests have been met, but each owner seems to have overshot the maximum $61K 415 limit. I suppose that if the excess was contributed in 2019, all is OK; but what if not?
Number of replies posted  2 replies      Number of times viewed  48 views      Add Reply

cathyw created a topic in Correction of Plan Defects

Attorney Mistakenly Allowed Into Plan (Only Named Attorneys Permitted) -- Eligible for SCP?

A law firm client maintains a 401(k) plan with 21/1 YOS eligibility and semi-annual entry. The plan excludes attorneys other than those specifically named. We just found out that they allowed a NHCE attorney into the plan on what would have been her otherwise correct entry date of July 1, 2018. The Appendix B correction method by plan amendment doesn't seem to fit this since it's not a case of the early inclusion of an employee who did not yet meet the age/service requirements. Any chance it would come under the new retro amendment SCP provisions of Rev Proc 2019-19? I would characterize it as an increase in a benefit, right or feature (albeit for one individual)... but what is meant by the requirement that such increase "applies to all employees eligible to participate in the plan"? All employees who are otherwise eligible to participate already participate. Since no attorneys (other than those specifically named) are eligible to participate in the plan would that sentence be satisfied without extending participation to them? I know VCP would always be an alternative, but is SCP possible?
Number of replies posted  1 reply      Number of times viewed  37 views      Add Reply

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

Making an 11g Amendment

Client has a cash balance plan and a safe harbor 401(k) plan. Because the owner is over 70-1/2, he's been taking in-service distributions of his entire vested benefit so that he can use the DC method and have a smaller RMD while the rest of his benefit goes to his IRA.

The plans are general tested -- DB plan has a $100k credit for the owner against 3% of pay for the staff, so the staff gets the rest of their gateway on the PS side (and the owner's also getting maxed out there in this PBGC-covered setup).

Now, because of all the great deductions they've been taking, they've got basically no room for a contribution for 2018.

Of course, an -11g amendment would allow the plan to increase benefits, but they must be done in a nondiscriminatory manner.

I think that means, if they want to dump more money in, then the corresponding benefits must pass 401a4 on their own -- meaning there's going to be a brand new additional gateway requirement to pass, just on the new amounts, such that anything they may have already received doesn't count. I don't expect the new gateway to be an additional 7.5%, but depending on how much more the owner's benefit might be, could I be looking at such a second minimum?

And, does an amendment like this actually open up new deductibility on the DB side? Isn't there something where the deduction rules are determined by the plan's provisions as they already were in effect on 12/31, rather than what they're being amended to?

Oh right, and basically I need an 'amendment for both plans, right? Is it okay to increase benefits in one plan that are discriminatory, if the other plan's increased benefits take care of the overall 401a4?

Number of replies posted  4 replies      Number of times viewed  45 views      Add Reply

wifrbr created a topic in 401(k) Plans

Calculation Periods for Vesting Service; Terminated 2 Days Too Soon?

Plan has 3 year cliff vesting. Employee A was hire on 4/28/16, was terminated on 4/26/19 -- two days shy of 3 years. But he did work more than 1000 hours in 2016, 2017 and 2018. I say he gets credited for 3 years. From the document:
1.109 "Year of Service" means the computation period of twelve [12] consecutive months, herein set forth, and during which an Employee has at least 1,000 Hours of Service. However, the Employer may amend the Plan to provide a lesser number of Hours of Service in a Plan amendment for eligibility purposes, vesting purposes, or accrual purposes without adversely affecting the Plan's reliance on the IRS advisory letter.

For purposes of eligibility for participation, the initial computation period shall begin with the date on which the Employee first performs an Hour of Service. The participation computation period shall shift to the Plan Year which includes the anniversary of the date on which the Employee first performed an Hour of Service. If there is a shift to the Plan Year, then an Employee who is credited with the required Hours of Service in both the initial computation period and the Plan Year which includes the anniversary of the date on which the Employee first performed an Hour of Service, shall be credited with two [2] Years of Service for purposes of eligibility to participate.

A Year of Service for eligibility purposes is not credited until the end of a participation computation period.

For vesting purposes, the computation periods shall be the Plan Year, including periods prior to the Effective Date of the Plan. The computation period shall be the Plan Year if not otherwise set forth herein.

Notwithstanding the foregoing, for any short Plan Year, the determination of whether an Employee has completed a Year of Service shall be made in accordance with [DOL] regulation Section 2530.203-2(c). However, in determining whether an Employee hascompleted a Year of Service for benefit accrual purposes in the short Plan Year, the number of the Hours of Service required shall be proportionately reduced based on the number of full months in the short Plan Year.

Number of replies posted  4 replies      Number of times viewed  56 views      Add Reply

thepensionmaven created a topic in 401(k) Plans

Eligibility After Converting from 1099 to Common-Law Employment

A 1099 "employee" has been with a client for 7 years and is now a W-2 employee. Eligibility is age 21, 12 months of service, with entry the 1st of the month following. Must this person wait 12 months to enter? Technically he's never been an employee. Or, maybe he was, but the client treated him as 1099 as a way to keep him from being an employee?
Number of replies posted  3 replies      Number of times viewed  32 views      Add Reply
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