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Message Boards Digest

October 14, 2019

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

kmhaab created a topic in Distributions and Loans, Other than QDROs

In-Service Distribution of Employer Stock Fund Only?

Can a 401k plan limit pre-59-1/2 in-service distributions to employer matching contributions that are invested in the employer stock fund only? The plan currently does not allow pre-59-1/2 in-service contributions at all so there would no anti-cutback rule issues. The sponsor is considering eliminating the employer stock fund from the plan, but would like to give participants an option to keep the stock if they wish.

Number of replies posted  2 replies      Number of times viewed  49 views      Add Reply
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Bill Presson created a topic in Continuing Professional Education

Bill Presson, Co-Chair of the ASPPA Annual Conference, Inviting You to Say Hello

Anyone else attending ASPPA Annual the 19th-23rd? I'll be there as co-chairman and this will be my fifth (and last) year on the committee. We're looking forward to it. Please feel free to come say hello if you see me wandering around.

Number of replies posted  3 replies      Number of times viewed  37 views      Add Reply

Carol V. Calhoun created a topic in Governmental Plans

Effect of Qualified 'Governmental Excess Benefit Arrangement' Under Section 457 on Section 401(a)(17) Comp Limit

Section 457(f)(2)(E) contains an exception to the normal rules under section 457 for "a qualified governmental excess benefit arrangement described in section 415(m)." Among the requirements of section 415(m) is that the plan "is maintained solely for the purpose of providing to participants in the plan that part of the participant’s annual benefit otherwise payable under the terms of the plan that exceeds the limitations on benefits imposed by this section." Given that "this section" is section 415, it appears that a qualified governmental excess plan can provide only benefits in excess of the 415 limits, not benefits that are cut back due to the limitations on compensation in section 401(a)(17). However, a governmental 401(a) plan is not bound by the rules against discriminating in favor of highly compensated employees. Would it therefore be possible to say that for everyone except one individual, the benefit is for example 2% of compensation times years of service, but that for a specified individual, the benefit is for example 4% of compensation times years of service? The 4% would likely be developed in order that the individual's benefit would be the same percentage of total compensation as everyone else's, but it would not directly reference compensation over the 401(a)(17) cap. At that point, all benefits not in excess of the 415 limit could be provided by the qualified plan, while those above that limit could be provided by the excess plan. Alternatively, has anyone seen any flexibility on the part of the IRS to allow an excess plan to deal with the compensation limits as well as the 415 limits?

Number of replies posted  0 replies      Number of times viewed  35 views      Add Reply

MarieD created a topic in 403(b) Plans, Accounts or Annuities

Distribution of 401(k) When Forms Alleged to Be Fraudulent

An employee whited out the date next to her signature and the plan sponsor"s signature on a distribution form. The plan sponsor's signature was not accurate because this plan sponsor left. This alerted the investment company who alerted the plan sponsor. The employee didn't know there was anything wrong with this, because she was doing it for convenience. She thought that if there was something wrong with this then the investment company would say something. The employee was fired. The employer said that she was falsifying a document and that she had committed fraud. When the employee challenged these allegations the employer then said it was not them who were alleging fraud but the investment company. The investment company is denying that they alleged fraud. They said that the only alerted the employer that the plan sponsor"s signature was not on their approved list so should they proceed with the withdrawal. The employer said no. The investment company said they are strictly recordkeepers. Did this employee break any laws, rules, or regulations?

Number of replies posted  1 reply      Number of times viewed  54 views      Add Reply

Phoenixlawyer created a topic in Form 5500

Does a Plan Sponsor Have an Affirmative Legal Obligation to Correct a Mistake on a Previously Filed Form 5500?

I anticipate the answer is yes but I am wondering if anyone can cite me to authority that requires this. I know the Form 5500 instructions require the plan sponsor to provide accurate information, but I can't find anything that states it has an affirmative obligation to correct a previously filed 5500 that is inaccurate.

Number of replies posted  1 reply      Number of times viewed  45 views      Add Reply

CaliBen created a topic in 409A Issues

Taxation of Lloyd's Specialty Life Insurance

Not sure which message board to post this. Client is purchasing life insurance [contractual protection insurance?] from a Lloyds specialty broker to provide coverage to key executives above what is available in group plan. Client will be owner and pay premiums, but executive will be able to name beneficiary. Can the client impute income to executives based on Table I rates, and then the benefits paid would be received tax free? Or does the full premium amount need to be included as taxable income like a 162 bonus plan? Or will death proceeds be taxable to estate, or as income in respect of a decedent, or taxable to the beneficiary?
Number of replies posted  2 replies      Number of times viewed  29 views      Add Reply

CaliBen created a topic in Other Kinds of Welfare Benefit Plans

Taxation of Executives Arising From Lloyds Specialty Life Insurance

Client is purchasing life insurance (contractual protection insurance?) from a Lloyds specialty broker to provide coverage to key executives above what is available in group plan. Client will be owner and pay premiums, but executive will be able to name beneficiary. Can the client impute income to executives based on Table I rates, and then the benefits paid would be received tax free? Or does the full premium amount need to be included as taxable income like a 162 bonus plan? Or will death proceeds be taxable to estate, or as income in respect of a decedent, or taxable to the beneficiary?

Number of replies posted  1 reply      Number of times viewed  23 views      Add Reply

Pammie57 created a topic in Retirement Plans in General

Owner Participating in Several Plans of Non-Controlled Businesses

Unless there is a controlled group issue, is there any reason why an owner/highly compensated employee/key employee cannot max out his deferrals in each company's plan, as well as maxing out in each plan in total ($56,000 total for 2019)?

Number of replies posted  5 replies      Number of times viewed  42 views      Add Reply

AlbanyConsultant created a topic in 401(k) Plans

ADP vs. 402(g) Failure -- Precedence?

In a controlled group where they handle payroll internally, an HCE under age 50 was allowed to defer from multiple companies and ended up with $29K deferred for 2018. This plan also happens to fail the ADP test (partially because I had to include all those deferrals), and he will need to get an ADP Test refund that exceeds the amount of the 402g violation (yes, I'm only getting the information to do this today)... until I apply the earnings allocation, which is actually a loss for 2018, which brings it back to less than the 402g excess. So what comes first here? If I apply the net $10,000 ADP refund, then there's still a $500 402g issue. What about taxation - 402g violations not corrected by 4/15/19 are double-taxed, so running them through as an ADP correction seems as if it would not make that clear. Thanks for the last-minute advice...

Number of replies posted  1 reply      Number of times viewed  42 views      Add Reply
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