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Message Boards Digest

May 6, 2019

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

Sara Hotvedt created a topic in Form 5500

Stop Filing Form 5500-EZ When Asset Valuation Dips Below $250,000?

Is it safe to say that if a "solo" 401k plan's assets fall below the $250,000 threshold as of 12/31/2018 & they have filed the 5500-EZ in the past years, they can just stop filing without worrying about receiving correspondence from the IRS? And then they start back up if their assets exceed $250,000 at the end of a future plan year?
Number of replies posted  2 replies      Number of times viewed  68 views      Add Reply

ldr created a topic in 401(k) Plans

How Important Are Default Enrollments?

John Hancock sends out an email every day with a list of alerts regarding plans we as TPA have in common. They seem to think that it's "Urgent" when a plan has contributions that come in for participants who are not enrolled in the contract or have missing investment instructions. This is not the norm for most of the participants in most of our plans -- if someone is employed and deliberately signs up to make deferrals, they usually choose investments too. But sometimes a Safe Harbor 3% non-elective contribution or a profit sharing contribution gets deposited for participants who didn't choose to defer, are indeed not enrolled in the contract, and do not have any investment directions on file. How important is this? Is it a violation of something or other to have participants on default enrollment? What is John Hancock looking to us to do about it?
Number of replies posted  0 replies      Number of times viewed  34 views      Add Reply

ERISA-Bubs created a topic in 409A Issues

Top Hat Filing for Phantom Stock Plans

We have a Phantom Stock plan. It's essentially deferred compensation but it doesn't specifically limit participation to a Top Hat group. Do we need to do a top hat filing? If not, do we need to comply with ERISA rules? To make things a bit more complicated, how do we handle omnibus equity plans? They offer some types of awards that are exempt from 409A, such as stock options, but they also allow for phantom stock, which is deferred compensation. Do we need to do a Top Hat filing for an omnibus plan? And, again, how does it factor in that participation is not limited to a top hat group? If not a Top Hat filing, is there something else?
Number of replies posted  2 replies      Number of times viewed  40 views      Add Reply

jane murray created a topic in Defined Benefit Plans, Including Cash Balance

Plan Sponsor's Election to Burn Through Its Credit Balance

For a 12/31/2019 valuation, can an election by the plan sponsor be made before the end of the plan year (12/31/2019) that states the plan sponsor will burn enough of the prefunding balance so that the 12/31/2019 AFTAP and FTAP will both be at a minimum of 100%? Or does the election have to state a certain dollar amount that will be burned? In the case of an end-of-year valuation, you won't know the end-of-year liabilities until the following year and then it will be too late to burn a portion of the prefunding balance for the prior year. If the election must state a certain dollar amount that will be burned, how does everyone handle a situation like this where you want to maintain the AFTAP and FTAP at 100%?
Number of replies posted  0 replies      Number of times viewed  35 views      Add Reply

LIBERTYKID created a topic in Retirement Plans in General

Attribution of Ownership in This Controlled Group Situation

Unrelated person 1 owns 70 percent of company [1] Dad owns 9 percent, and has three minor children. It is my understanding that for controlled group purposes, you first test unrelated person 1 and dad with their ownership in a second company, then unrelated person with child 1, separately with child 2 and separately with child [3] In other words, all individuals are not tested at the same time and you never have at the same time ownership of more than 100 percent when you do a test. Derrin Watson does say this in an old 2001 Q&A on BenefitsLink, but I can't seem to find any authority. Can anyone find a cite to formal or informal IRS guidance that so states? Is this also true with a grantor trust, where the grantor is always attributed the trust shares, and for example two beneficiaries have an actuarial interest in the trust shares?
Number of replies posted  0 replies      Number of times viewed  26 views      Add Reply

pixmax created a topic in 401(k) Plans

Coverage Concerns: Only 1 Out of 10 Companies in This Controlled Group Sponsors a Plan

I have a controlled group of 10 companies -- has 1 plan, which is excluding 9 companies and all Highly Compensated Employees. Am I correct that at least 70% of NHCEs need to be eligible in order to pass 410(b)? If the total of all of companies' NHCEs is 100 and only 7 are allowed to participate, doesn't this fail?
Number of replies posted  6 replies      Number of times viewed  56 views      Add Reply

TPA Bob created a topic in 401(k) Plans

Handling Missed Deferrals After Plan Sponsor Crippled by Ransomware

We have a client who just started their 401(k) at the beginning of the year. They have essentially been shut down for days due to ransomware. They still do not have access to most of their computer functions including payroll. All election forms are electronic. And emails are down. Payroll was manually completed last week (approx 500 employees) and the bare minimum was done to get paychecks out. FICA, Federal and State withholding. As their software handled the employees 401(k) in the past they did not have deferrals taken out of the last payroll. And it appears that they will still be manually required to do payroll for a while (they are not paying the ransom but there are backup issues). FYI, safe harbor plan with standard match, determined on a payroll v payroll basis. No true up. I have not encountered anything like this in the past. Generally you can make up missed deferrals if the participant has enough time to make up what was not deferred. Trying to formulate options. Any thoughts would be appreciated.
Number of replies posted  0 replies      Number of times viewed  71 views      Add Reply
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