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Message Boards Digest

May 29, 2019

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

Patricia Neal Jensen created a topic in 403(b) Plans, Accounts or Annuities

Providing Employees with Choice of HSA Contribution or 403(b) Contribution

Nonprofit (Code section 501(c)(3)) plan sponsor provides a lump sum number to each employee representing an amount which can be contributed to the HSA or, if not, to the 403(b) plan. It has always been my opinion that such a choice makes this money, when contributed to the 403(b) plan, an employee contribution because of the old cash or deferred rules. The employer would like it to be deemed an employer contribution. We could insert a Non-Elective provision with individual groups and test it, but I am just not certain that the fundamental question and answer are correct.
Number of replies posted  1 reply      Number of times viewed  28 views      Add Reply
 
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AMDG created a topic in Investment Issues (Including Self-Directed)

Plan Allows Participant-Selected RIAs; Co-Fiduciary Duty to Monitor Reasonableness of Fees?

Some participants in ERISA plans have hired registered investment advisors (RIAs) to manage their retirement plan accounts -- selecting investments from the plan's menu, rebalancing the investments, considering in-plan and out-of-plan assets collectively, etc. The plan sponsor/fiduciaries do not endorse any RIAs to plan participants. Assume that the plan sponsor has permitted RIAs to access participants' accounts, and further, to deduct the RIA's asset management fees directly from the accounts. The Deseret Letter (DOL Advisory Opinion 2005-23A) does not directly address the fee deductions. The question is, do the plan fiduciaries have co-fiduciary responsibility and liability for ensuring that the RIA's fees are reasonable? Is a failure to monitor the fees a breach of fiduciary duty?
Number of replies posted  0 replies      Number of times viewed  25 views      Add Reply

ldr created a topic in 401(k) Plans

Tiny Amounts of Interest on Late Deferral Deposits

Have any of you ever calculated the earnings on a series of slightly late deposits (between a few days and 6 weeks each) for a client and found that some participants are only going to get a very little bit of money? I just had to do this for a school with about 45 participants. While 19 of their 26 deposits during the year were late, they weren't THAT late, and the total interest on the late deposits per person just isn't much. Some will get a few bucks but many will get less than a dollar. Why did I bother with it? Because some of the employees found out that deposits were being made tardy and demanded to know what our client was going to do about it. He's in the unhappy position of having to prove that the rules have been followed to the letter. So he will have to pay us more than the interest and penalties involved to find out what he owes. The toughest part to figure out is what to do when the participant has already terminated employment and been paid out. How does our client manage to pay someone as little as 13 cents after they are gone? Do these tiny payments have to funnel through the platform provider or can the school just write a check to the terminated employees and mail it to them?
Number of replies posted  3 replies      Number of times viewed  51 views      Add Reply

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

Overfunded, Single-Participant DB Plan

We are advising a client (along with bringing in outside experts) regarding an overfunding of a sole proprietor DB plan. Long story short, the actuary was unable to accurately anticipate the aggressive nature of our client's investing and currently has a nearly $1 million overfunding situation. The actuary has suggested that the sole proprietor take "catch up" distributions to eat up the overfunding, but the client has reached out to us to brainstorm some additional options due to income tax impacts. The business is wrapping up operations within the next year or so and may exist in a "slowed down" state for a number of years beyond. I realize the option of a Qualified Replacement Plan (QRP) exists, but I believe that the overfunding amount will remain suspended until used for contributions (which may be impacted because of the lower amount of income). The issue with the suspension is that in the case of untimely death of the sole proprietor, my understanding is that it automatically reverts. Beyond that, I have read that using the money for health benefits is possible, but the topic is less popular and murkier based on my limited research. Any thoughts or suggestions on avenues to explore?
Number of replies posted  3 replies      Number of times viewed  49 views      Add Reply
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