Message Boards Digest

July 11, 2019

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

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

TPA Failures Caused Problems for Client

We have a small k/cb plan that was once administered by a small local TPA/actuary that was bought by a very large TPA/RK. The new TPA did fine the first year (2017) but we started having problems in 2018 when they kept failing to respond to inquiries or making promises to deliver requests but not getting the work done. The client, a sole owner firm with just a couple EEs, has had the k/cb plan in place since 2015, and most of the CB contributions go to him (over 90%). The client found out in early 2018 that his key EE (NOT "key" by Code definition, but key to business revenues) was planning to set up shop across town since he had no non-compete, and by September he was off the payroll but much of his revenue contributions had long since dried up, so the business saw a profitability shift downwards by well over 60% through 2018 -- this after many years of consecutive growth. We were trying to get a plan amendment in place for 2018 but the TPA kept dragging feet. Shortly thereafter we were notified the TPA did not file the 2017 5500 in time, no excuse offered. They offered to pay the DFVCP amount and kept promising to complete work in the next couple of weeks. This went on for several months until we terminated the old TPA and hired a new one. After having the new TPA/actuary working on incomplete valuations going back to 2017, we finally got the contribution requirements, which would have been fine when the company was more profitable but it cannot afford it now. Despite our efforts to get the old TPA's act in gear, they never got us those amendments because they never completed the previous work to make the necessary calculations. Now the client has a funding requirement he can't afford and is facing a 10% excise tax of whatever he can't contribute. We have frozen the plan in 2019, but is there any recourse, or any action that can be taken in lieu of the fact that the previous TPA failed to complete work in time preventing us from amending the plan to get his 2018 funding requirement down based on the fundamental change in his business by the loss of the only non-owner key EE? I know it's a stretch, but I'm just wondering if anyone has any specific experience like this and found some option that worked without creating more headache for the business owner?
Number of replies posted  6 replies      Number of times viewed  94 views      Add Reply

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R. Butler created a topic in 401(k) Plans

Pro-Rated Service Determination During a Short Plan Year

Plan has short year plan year. YOS for eligibility is 1 year using 1000 hours of service. Document provides in a short year that both the 1 year and hours are pro-rated (the statutory standards are still maintained as an alternative). My question is -- must the pro-rated hours be worked during the pro-rated months, or just during the short year? Document doesn't really specify. My thinking is that the hours would have to be worked during the pro-rated period, but hoping for verification.
Number of replies posted  2 replies      Number of times viewed  37 views      Add Reply

justanotheradmin created a topic in 401(k) Plans

Ability of Sponsor to Reimburse Plan's Trust for Annuity Surrender Charges

The plan transferred assets and there were significant surrender charges related to annuity investments. The sponsor is trying to reimburse the plan for those charges. Can they? I know there was some publication (maybe a PLR?) that addressed investment losses due to a possible fiduciary breach, where the sponsor was permitted to make up the loss to the plan even if the participants hadn't brought a lawsuit. I know it's not quite the same fact pattern, but if someone knows what I'm talking about, and has a cite for it, I'd appreciate it. I think there was a different publication that directly addressed reimbursement of plan expenses, and how to treat them depending on their type (annual addition or not). If someone has that cite I'd appreciate it too.
Number of replies posted  7 replies      Number of times viewed  55 views      Add Reply

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

Want DB Plan for My S Corp But Getting Conflicting Advice

I want to start a DB plan for 2019, but I've received conflicting advice from two TPA firms. If you could provide clarification or guidance it would be very much appreciated. Should I be looking elsewhere? [1] Firm 1 gave a contribution range range of $74k -- $390k for 2019. Firm 2 gave a contribution range of $153k -- $167k and said they never saw such a large range for 1st year because it's typically very narrow. [2] Firm 1 said my existing individual 401k 5500-SF would be incorporated into DB 5500 that they will do. Firm 2 said they cannot be combined into a single filing. [3] Both firms have an existing document with an IRS number. I'm guessing that it's somehow able to be customized to meet my particular needs? I am 64 and will fund for at least 3 years and possibly [5] I am only the employee. The business is an S Corp. My 3 highest consecutive years shown on myForm W-2 were $120k. I don't intend to take any salary this year or any year going forward. I would like to fund $175k this year and would like flexibility on the downside going forward as I'm not sure what future income will be. Thank you for your advice, thoughts and clarification!
Number of replies posted  9 replies      Number of times viewed  48 views      Add Reply

JustMe created a topic in SEP, SARSEP and SIMPLE Plans

OK to Have Simultaneous SIMPLE IRA and 401(k) Plan During Transition Period Even if 401(k) Plan Is Amended?

Client maintained a SIMPLE IRA at the time of acquisition of an employer with a 401(k) plan and both plans will remain through the transition period of the end of the plan year following the year of the acquisition transaction. The SIMPLE IRA still only benefits the participants originally eligible for it and the same with the 401(k) plan. Can the 401(k) plan be amended and not destroy the transition period that allows the 2 retirement plans to exist simultaneously through the transition period?
Number of replies posted  1 reply      Number of times viewed  28 views      Add Reply

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

Separate Interest Annuity in a Cash Balance Plan

If a company changes from an ERISA-qualified defined benefit plan to a cash balance plan, the Participant and the Alternate Payee have the option of taking an annuitized payout as a shared interest allocation, if, as and when, using a coverture fraction based formula, or as a lump sum from the cash balance component. See -- The question I have: is there an option under a cash balance plan for the Alternate Payee to take a separate interest allocation? This article seems to say "yes". What do you think?
Number of replies posted  2 replies      Number of times viewed  32 views      Add Reply

BG5150 created a topic in 401(k) Plans

Does an Extension of Time to File Also Extend the 402(g) Distribution Date?

Participant has an extension of time to file his personal federal income tax return. He had a 402(g) violation -- he had two jobs in 2018 and deferred $14,000 to each. Does the personal extension also extend the April 15 filing deadline for removing the 402(g) excess?
Number of replies posted  6 replies      Number of times viewed  62 views      Add Reply

Tom Poje created a topic in Retirement Plans in General

Projected Catch-Up and Deferral Limits

CPI was released this morning for June: 256.143. April was 255.548; May was 256.092; so this 3 month period = 767.783 (last month I only used the May value * 3). Plugging in the formula yields a catch-up limit of exactly $6,500 and a deferral limit of exactly $19,500. Quite amazing. So if those numbers hold for the 3-month period Jul/Aug/Sept ...
Number of replies posted  0 replies      Number of times viewed  24 views      Add Reply

REED TOLBER created a topic in Litigation and Claims

Lawsuit for Insurance Benefits Against a Self-Funded ERISA Plan

I'm a lawyer in South Florida desperately trying to obtain an approval for medical treatment needed by my son. Anthem is refusing to authorize for reimbursement. Anthem has indicated that the insurance provided by my wife's employer is pursuant to a self-funded ERISA plan. Anthem denied the initial request for authorization for the treatment recommended by my son's doctor. The treatment, which requires hospitalization, will cost in excess of $40,000. The denial by Anthem was totally ambiguous. Their denial letter indicated that the proposed treatment was not "medically necessary." I appealed the decision, which was denied. I asked for an external appeal and was told by the State of Virginia Insurance Commissioner, where I sought the external appeal, that self-funded ERISA plans have a different kind of "external appeal." The external reviewers are not chosen by the State Insurance office, but rather by Anthem who contracts out these external appeals. Prior to submitting the external appeal file, Anthem asked whether I wanted to supplement the file. I asked several times whether the denial was based on a decision that my son was not suffering the medical illness diagnosed by his doctor or whether the denial was based on the recommended treatment (this was not clear in the initial denial letter). I needed to know this in order to determine what kind of additional records to be submitted in support of our claim, to wit: records supporting the diagnosis or records supporting the appropriateness of the treatment. I received several responses that continued to cover both basis. I questioned how Anthem could challenge the diagnosis based only on the clinical office notes and lab results submitted by my son's treating physician without Anthem's "deciders" conducting a clinical exam of my son. No response. Anthem's "external review" folks have recently declined my request that they speak directly with my son's doctor on the telephone before making a decision. I have no hope that the external reviewers selected by Anthem will reverse the decsion denying benefits. Accordingly, I'm going to have to pay for the treatment myself and seek reimbursement by way of litigation. This is where I need help. Who would be the defendant in a lawsuit seeking reimbursement? Anthem? The self-funding employer (Virginia based)? Both? Could I file the lawsuit in Florida where I live because I would be the plaintiff seeking reimbursement? Would it need to be in federal district court? If not Florida, would I file it in Virginia where the self-funding employer is located and could I leave the employer out of the lawsuit (which is preferable to me because the insurance is through my ex-wife's employment and I wouldn't want to create litigation that would harm her relationship with the employer). If the suit is only against Anthem, could I file and keep the suit in Florida, state court or, more likely, federal court? I'm pretty sure that Anthem is doing this with all children suffering the same ailment as my son. His treating physician says that a number of other insurance companies approve the treatment based upon her diagnosis but she always has denials from Anthem. Apparently Anthem makes the insured parents jump through the appeals process hoops in the hopes that a lot of parents of kids sick with the same ailment as my son will not have the resources or knowledge to get through the process. I'm quite comfortable that in litigation I have experts who will support both the diagnosis and recommended treatment as appropriate. One of them would be the Chief of the Pediatrics & Developmental Neuroscience Branch at the US National Institute of Mental Health. Can I bring a class action for declaratory relief to establish that the diagnosis and treatment recommended is appropriate for all similarly situated children who are diagnosed with the same ailment and are fighting for the same treatment and join in any insurer who has been routinely denying reimbursement for the recommended treatment? Any help will be greatly appreciated.
Number of replies posted  2 replies      Number of times viewed  45 views      Add Reply, Inc.
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