Message Boards Digest

September 27, 2019

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

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

412(e)(3) Conversion to Cash Balance Plan

Looking for guidance to convert 412(e)(3) plan into cash balance plan. Am a single owner S-corp 44 years with 2 years into 412(e)(3) plan with Whole life and Annuities. Life insurance was not required personally and seems foolish now to have been sold into policy by the CPA. (Should have been a red flag that CPA is the sales agent!) The CB plan option looks more attractive with conservative investment strategies and flexibility compared to 412(e)(3). Can the 412(e)(3) be converted into cash balance plan instead of being terminated? Any references for good companies with this kind of experience will be appreciated. Goal is to fund the pension plan in 10-12 years instead of stretching for 20 years.

Number of replies posted  1 reply      Number of times viewed  26 views      Add Reply

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

Pension Trust Form 5471/Foreign Corporation Filing

I represent a large defined benefit master trust which has been advised by its tax adviser that it may need to file a Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations) because it owns over 10% of a foreign investment that qualifies as a CFC. This form is supposed to be filed with an income tax return (or, if applicable, partnership or exempt organization (Form 990) return). The trust is not otherwise required to file a Form 990 because it has no income to report. Does anyone have experience with a trust taking the position that a Form 5471 is not required under these circumstances because there is no required tax return? Or is the trust required to now file a Form 990 (reporting no income) so it has a tax return to which the Form 5471 can be attached?
Number of replies posted  0 replies      Number of times viewed  17 views      Add Reply

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

Does the Underfunded Frozen PBGC Plan Exception to 401(a)(26) Apply Here?

The NRA is 62. For funding assume the two partners will retire at 64. The plan is underfunded based on 62, but it is not underfunded based on 64. (The plan does not give increases past NRA.) Because the partners are legally entitled to their benefits at 62, and the assets are not sufficient to cover this, would this plan qualify for the underfunded frozen PBGC plan exception to 401(a)(26)?

Number of replies posted  1 reply      Number of times viewed  31 views      Add Reply

justatester created a topic in 401(k) Plans

Controlled Group Situation; One Plan Covers Only Pharmacists and Managers

This one goes into the "just doesn't seem correct" category. Two plans. Plan A: Age 21, no service requirement, excludes all EEs except pharmacists and managers. Plan B: Age 21, 1 YOS, no exclusions. Both plans are safe harbor. After 1 YOS, the pharmacist and managers move over to Plan B (at least in payroll's eyes). I am not sure of several things. [1] What provisions makes the pharmacists and manager "no longer" eligible for Plan A? I believe they are still eligible. [2] What about coverage? Can the plans be aggregated for coverage purposes? If so, are they still safe harbor since less than 1 YOS employees except pharmacists and managers are not eligible. How do I count those non manager/pharmacist employees in combined coverage? I think that the manager/pharmacists are still eligible for Plan A and therefore they will not pass coverage.

Number of replies posted  4 replies      Number of times viewed  40 views      Add Reply

SoCalActuary created a topic in 401(k) Plans

Dang It, Meant to Convert Only a Part of Pre-Tax Account to Roth, Not Whole Thing

Participant has existing accounts in 401k plan and wants to convert part of the pre-tax accounts to in-house Roth, accepting tax consequences. They get sloppy and check the box to convert all of their account. Trustee has completed the transfer in the past few weeks. Participant realizes the error and wants to reverse the transaction. Trustee wants an opinion on what is allowed and what is taxable. Simple answer would be that it was already done, no looking back. But can the Trustee allow the correction and restore part of plan accounts back?

Number of replies posted  2 replies      Number of times viewed  35 views      Add Reply

Santo Gold created a topic in Retirement Plans in General

Can Previously Nonparticipating Subsidiary Start a New 401(k) Plan Even Though Parent Terminated Its 401(k) Plan Less Than 12 Months Ago?

An employer terminated a plan earlier this year and recently paid everyone out. He wanted to start a new one but he's got to wait at least 12 months. But he also owns two subsidiary companies. If either or both of the subsidiaries were not participating in the original 401k plan, could they start a plan up immediately, even though the owner of the main company and the 2 subsidiaries had sponsored the original plan?

Number of replies posted  1 reply      Number of times viewed  29 views      Add Reply

Doghouse created a topic in 401(k) Plans

Begin Roth Deferrals Even Before Authorizing Amendment is Signed?

We are financial advisor for a plan that uses a TPA. A recent restatement of the plan adds the provision to defer on a Roth basis. The restatement has not yet been adopted, but the TPA is telling the sponsor that participants can defer on a Roth basis now because the effective date of the restatement will be 1/1/19. It doesn't seem right that they are able to do this before the amendment is executed. Sanity check?

Number of replies posted  1 reply      Number of times viewed  43 views      Add Reply

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

MRDs from DB Plan with In-Service Provision

Owner-only pension plan. NRA is 75 (65 + 5). MRD will be taken as an annual single sum payment equal to 12 x prior year monthly accrued benefit in December each year. With an EOY valuation, the actuarial equivalent of the MRD must reduce the accrued benefit used to compute FT under 430(d)-1(c)(1). Didn't use cliff vesting. Is there another way to do the MRD without a funding impact?

Number of replies posted  2 replies      Number of times viewed  31 views      Add Reply

ratherbereading created a topic in 401(k) Plans

Employer's Practice Is to Wait More Than a Year Before Funding a Discetionary Matching Contribution

We have a plan that does not fund their discretionary match until the second year after the plan's year-end (Dec. 31). Example: the match for the plan year ended 12/31/16 was funded on June 5, 2018. The auditor is saying that earnings should be calculated on the late matching contributions. I cannot find any guidance on this other than making the employer contribution prior to the filing deadline of the employer’s income tax return, including extensions, if they want to take a tax deduction, which they didn't. Has anyone heard of this, or can anyone cite a regulation?

Number of replies posted  4 replies      Number of times viewed  39 views      Add Reply, Inc.
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