Message Boards Digest

May 2, 2019

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

BG5150 created a topic in Cross-Tested Plans

QNEC Needed to Pass ADP -- Triggers Gateway?

Participant does not qualify for a PS (term < 500 hrs). However, plan fails ADP and he's getting a QNEC in lieu of HCE distributions. Does that QNEC trigger a gateway?
Number of replies posted  5 replies      Number of times viewed  50 views      Add Reply

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pixmax created a topic in 401(k) Plans

Controlled Group Here? Two Owners Are Unrelated

I am trying to verify controlled group status here. No family attribution. Company A -- has owner 1 and 2 owning 50% each. Company B -- has same two owners and ownership%. Company C -- has same two owners and ownership%. Company D -- has the same two owners above owning 27.5% each. Owner 3 has 35% and Owner 4 and 5 each own 5% each. The two owners only receive compensation from Company A but of course are officers of all. I was provided an income interest repurchase agreement from Company 4 which states Owner 3 (35%) has the right to sell his vested portion (there is a vesting schedule and he is currently 0% vested), but it must be sold back to the company. I feel Company D is part of the control group, based on that Owner 1 and 2 have option to repurchase. The client feels differently and instead of seeking Legal Counsel per my request they have asked their Accountant to review. The Accountant is telling them that their is no attribution because Owners 1 and 2 are not family. Am I missing something?
Number of replies posted  0 replies      Number of times viewed  24 views      Add Reply

Cardscrazy created a topic in 401(k) Plans

Plan Sponsor Overcontributed to 401(k) for Many Years

I just joined a great company as a 401(k) administrator and immediately saw that their annual 401(k) match calculation formula of 25% of first 6% had two failures [1] failed to cap wages at the the 401(a)17 compensation limit and [2] failed to cap the match computation based on the first 6% of wages. They essentially took 25% of deferrals across the board as the company match. $750K overpaid match in 2018 by my calculation. Match was correct for those whose effective deferral rate was 6% or less (400 EEs). The match on 600 EEs with higher deferrals than 6% were all overpaid. It is an audited Plan; been around for many years making this mistake. I can see that a VCP filing will be needed. I took a look at Rev Proc 2018-52, 2.07(1)(b), Example 25 and I don't see how a retroactive amendment will work when it's not just a 401(a)(17) failure but compounding computational errors. The company is successful and expensed and shelled out way more than it should have. The company I'm sure they would be more willing to fix going forward than pull funds out of accounts. I'm sure we'd offer to pull out money from executives at a certain level and above if that's what it takes. Has anyone seen such a longstanding mistake and what would be a typical IRS response to the company be with such a huge overpayment? How far back would they make the correction go? What negotiation can be done? Haven't informed ERISA counsel (I'd fire the auditor if it were my decision) yet only working my way up the chain of command at this point. I am a new hire, after all. I just want to have some idea of what the company is facing here before I push harder.
Number of replies posted  2 replies      Number of times viewed  63 views      Add Reply

austin3515 created a topic in 401(k) Plans

Need Sample 404(a)(5) Notice with Employer Securities

Working on a plan with employer securities and finding there are certain required disclosures as part of the 404a5 notice rules. The disclosures seem generic in nature. Would someone be kind enough to share the language they have in one of their disclosures? I assume there is a difference in disclosure if one is publicly traded or not. Mine is privately held.
Number of replies posted  0 replies      Number of times viewed  18 views      Add Reply

52626 created a topic in 401(k) Plans

Can Acquiring Plan Sponsor Grant Vesting Credit for Prior Service by Independent Contractors?

Employer acquires a company under an asset purchase. There were several individuals who were paid as 1099 contractors by the prior employer. Under the new employer these employees will be paid W-2 wages. Eligibility for the 401(k) and match is immediate. The question is regarding vesting. Can the new employer recognize service for vesting purposes? If the employer were to credit service for vesting, he would need to list each individual as a sole proprietor, correct? The new employer would need to get the effective date of the sole proprietorship in order to determine the years of service. Does that make sense? Are there any issues with giving vesting service credit to this group?
Number of replies posted  1 reply      Number of times viewed  37 views      Add Reply

CuseFan created a topic in Retirement Plans in General

Affiliated Service Group Question: At Least SOME Overlapping Ownership Required?

My reading of the ASG rules for A-org or B-org groups (management organization does not apply for my case) is that there must be at least some overlap of ownership for two entities to be an ASG, is that correct? I have two service corporations (S-corps) that are each 100% owned by separate unrelated persons. They provide their services together under the same brand/joint marketing, so to the public it looks like ABC company, but each company X and Y has its own book/P&L. I believe the rules say there must be some ownership overlap between the A or B organization and the FSO. Am I missing anything?
Number of replies posted  2 replies      Number of times viewed  30 views      Add Reply

waid10 created a topic in Health Plans (Including ACA, COBRA, HIPAA)

Retiree Health Insurance Premiums -- Employer Wants to Pay Former Employee's Share of Cost

The employer is a school division. They have a retiree health plan. The employer subsidizes a very small portion of the premium. Most is the retired employee's share. The superintendent has recently retired. The school board would like to pay the employer and the retired employee's share of the premium until the retired superintendent reaches Medicare eligibility. Is this permissible? I thought that these types of arrangements (employer pays or reimburses an employee for premium cost) was banned by the ACA. Are there other ways to accomplish this? I know that the school board won't want to change the structure and raise the employer subsidy for all retirees. I also thought about the option of having the school division hire the former superintendent as some sort of consultant so that they could pay him a wage equal to his share of the premium cost (but I don't think the school board is interested in that). Other ideas? Am I missing a simple solution?
Number of replies posted  0 replies      Number of times viewed  19 views      Add Reply

Kac1214 created a topic in 401(k) Plans

Two Plans Sponsored by Same Employer, Both Require Top-Heavy Minimum Contributions

We're taking over a PS plan that has employer-directed investments. We're not taking over the 401k plan, employee-directed investments. In reviewing both documents, we found that both plans provide the TH minimum. The 401k also includes some union people but otherwise the covered employees are the same. Under the 401k, the PS eligibility is 6 months (never contributed to) while the PS is 21/12/1000. We found that no one had been doing the combined TH Test and luckily, they are not top heavy. But we are thinking that only one plan should provide the TH. Because we're restating the PS, we're thinking of suggesting that it be removed from this Plan. Are we missing anything? If the plans were TH, would 3% have to be given under both plans? We have differing opinions in the office.
Number of replies posted  2 replies      Number of times viewed  52 views      Add Reply

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

ASOP 51: Applicable to ASC 715 Reporting?

Our interpretation of ASOP 51 is that it is not applicable to ASC 715 reporting. Agree?
Number of replies posted  0 replies      Number of times viewed  19 views      Add Reply

B21 created a topic in IRAs and Roth IRAs

LLC as Investment Vehicle in a Self-Directed IRA -- Timing of Prohibited Transaction

A client is in the process of establishing an LLC as an investment vehicle for self-directed IRAs. I'm aware of the 25% rule that would cause funds transferred to the LLC to be considered as "plan assets" & subject to the prohibited transaction regulations if the aggregate equity in the LLC held by all IRAs exceeds 25%. Assuming the LLC does not satisfy the 25% rule exemptions, my question is: does a prohibited transaction occur at the time an IRA accountholder purchases equity in the LLC (IRA equity exceeds 25%), or does a potential prohibited transaction occur based on the use of the funds once invested?
Number of replies posted  0 replies      Number of times viewed  24 views      Add Reply, Inc.
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