Message Boards Digest

September 6, 2019

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

Lou81 created a topic in 401(k) Plans

Amount to Put on Form 5330 Line 3b -- Late Deferrals Situation

What amount to put on line 3b of a Form 5300 for a penalty in this situation? I have a client with late deferrals for 1 participant from 2018. The amount is small and we are not filing through VFCP. I have calculated the lost earning using the participant's rate of return. I am completing the 5330. Line 3b is a 100% tax on the failure to correct. If I'm reading this correctly, if the prohibited transaction is not corrected within the taxable period, an amount equal to 100% of the 'amount involved' is imposed. If my lost earnings are $50. My excise tax is $7.50. Since it was not corrected until 2019 the penalty is $50. Total due with 5330 $57.50 . Right?

Number of replies posted  0 replies      Number of times viewed  28 views      Add Reply

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Gary1899 created a topic in Defined Benefit Plans, Including Cash Balance

Paying Lump Sums After Window Expires- Part II

This was originally discussed in October, 2018 when the participant could be said to be at fault for not getting in their application on a timely basis before the window closed. Now, it's the plan sponsor and/or the vendors administering the window who are at fault. A sponsor has a calendar year plan and is working hard to take advantage of the interest arbitrage to take GAAP/IFRS gains for lump sums before December 31. We anticipate that due to the tight time frame remaining in 2019 the trustee will not be able to cut checks in time for payments to be made by 12/31- anytime the week after is more likely due to the plan sponsors inability to verify some vital data before it's processed by the actuary, etc. W.e are roughly talking about 100 people out of 1,000. With 417e interest rates dropping, a strict application of the governing 417e rules will result in payments that could be significantly higher for these 100, resulting in a PR problem. Can anyone rationalize the continued use of the 2018 interest rate basis for January 2020 payments?

Number of replies posted  3 replies      Number of times viewed  38 views      Add Reply

CLE401kGuy created a topic in 401(k) Plans

Form 5558 - Incorrect Plan Name and Plan Number

The employer sponsors 2 retirement plans -- one is a regular 401k and the other is a 457 Plan for which has no 5500 filing requirement -- when filing the 5558 to extend the 12/31/2018 filing due 7/31/2019, the 401k was intended to be extended but the 457's plan name and number were used by mistake. Is fixing this as simple as sending correspondence to the IRS in advance of them sending any late filing notice to bring the issue to their attention? On the IRS website, it addresses getting a late filing notice and at that point realizing incorrect incorrect info was entered on the 5558 and just responding to that late notice indicating your error... I'm figuring that it's always best to get in front of the issue as soon as we know about it and not wait for a late notice from IRS... and when/if we do get a late notice, being able to point to correspondence that brings the issue to their attention. Your thoughts would be greatly appreciated.

Number of replies posted  0 replies      Number of times viewed  34 views      Add Reply

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

Did the Plan Make a PBGC Filing?

Is it possible to find out if a plan has ever filed with the PBGC? I am thinking the Plan Sponsor would have to call the PBGC and identify himself -- thus begging the question, "why do you ask?" Dealing with about the worst situation I have ever seen a Plan Sponsor in. Thanks for any ideas on this.

Number of replies posted  2 replies      Number of times viewed  44 views      Add Reply

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

Sole Proprietor -- Handling a Late Contribution to DB Plan

2017 Schedule C of $250,000 after 1/2 SE tax is taken out, owner-only DB plan. Assuming that no contribution is made, there's a minimum required contribution of $50,000 for 2017. They make a contribution of $60,000 on 10/12/2018 (late). The 5500 was filed 10/10/2018 showing an unpaid min of $50,000. If I take the $60,000 out of comp, the new min required is only $30,000. Do I refile the 2017 5500 and SB showing an unpaid min of $30,000? When do I show the $60,000 contribution, the revised 2017 5500 and SB or on 2018 5500 and SB? I feel like I have more questions, but I don't remember them right now.

Number of replies posted  1 reply      Number of times viewed  37 views      Add Reply

CuseFan created a topic in Cross-Tested Plans

PS Allocations and Otherwise Excludables

Background: I have a relatively young doctor who has one older >1000 hours employee, another older <1000 hours employee, and two younger <1000 hours employees. Already has max 401(k) elsewhere (no CG, ASG or 415 aggregation concerns), so looking at doing PS only and getting $56k max. Including all and cross-testing doesn't work well because only one of the two younger employees are substantially younger than the owner. The one >1000 hours employee is fairly low paid, so an integrated formula at the lowest threshold, excluding the <1000 hours people, works very well. HOWEVER - and hold onto your hats because how many times have you seen this with a doctor - he wants to include everyone. In that scenario, whether integrated or cross-tested, the contribution rate required for employees is substantial, not an issue with one low paid employee but a different story including everyone. Questions: I know I can include in the Plan and essentially carve out from testing the <1000 hours people as otherwise excludable employees, but can I have the integrated formula for the >1000 hours people and something else, TH minimum or greater, for the <1000 hours people? If the only way to do (or mimic) this is individual rate groups and testing on contributions with permitted disparity, must I use the SSWB? I assume I cannot arbitrarily pick something lower even if allowed formulaic if designed that way, but wanted to confirm. Any other thoughts are appreciated.

Number of replies posted  4 replies      Number of times viewed  39 views      Add Reply

mattmc82 created a topic in Mergers and Acquisitions

Controlled Group Becomes Unrelated During Particular Plan Year

Company A and Company B are part of a controlled group that sponsors a safe harbor profit sharing plan. Both companies are sold mid-year to an unrelated buyer. Assume buyer does not own any other companies. Can Company B create its own plan mid-year AFTER the transaction? I know transition rules provide some relief for mergers, but I'm having trouble finding guidance on the situation in which a controlled group of employers becomes unrelated mid-year. The safe harbor provisions makes me lean towards a conclusion that it has to be a MEP until year-end. Thoughts?

Number of replies posted  0 replies      Number of times viewed  18 views      Add Reply, Inc.
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