Message Boards Digest

October 23, 2019

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

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

DB Plan Distribution Form Signed, Participant Dies the Next Day

A participant signed a distribution form requesting a large lump from his DB plan, then dies the next day. His spouse predeceased him. At this point, I don't know if the distribution form is still on somebody's desk, or if the check is in process. I'm hoping his children can at least get the benefit of inherited IRAs. Any thoughts?

Number of replies posted  4 replies      Number of times viewed  61 views      Add Reply
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K-t-F created a topic in 401(k) Plans

Deferrals Mistakenly Suspended When Plan Sponsor Sold to New Owners

A dental practice was sold and the new doctors who purchased the practice took over payroll. I was not made aware of the sale until after it was finalized. As a result deferrals were not withheld or paid in. Employees" paychecks were larger as a result and no one spoke up. Is there any cure? Instead of making everything right with one correction to an employee"s next paycheck, can the missed deferrals be spread out over a few paychecks?

Number of replies posted  6 replies      Number of times viewed  81 views      Add Reply

Peter Gulia created a topic in Communication and Disclosure to Participants

If One Has a Participant's E-Mail Address, Why Not Just Attach the Document to Be Furnished?

The DOL has published notice of a proposed rulemaking under which fiduciaries of an ERISA-governed retirement plan could furnish some ERISA-required communications under a notice-and-access regime with a notice that the communication is available at a plan-maintained website. Relying on the new regime would require, among other conditions, having an electronic address for the person entitled to the communication to be furnished. If that electronic address is an e-mail address (rather than a smartphone number): Is there a reason why a plan's fiduciary should not attach to the e-mail message a .pdf of the document to be furnished? (One could do this besides posting the document on a website.) Is there ever a situation in which attaching a .pdf could be harmful to the e-mail"s addressee?

Number of replies posted  6 replies      Number of times viewed  58 views      Add Reply

S Derrin Watson created a topic in 401(k) Plans

Deadline for 401(k) Hardship Amendment

Treasury Official Gives Favorable Interpretation of 401(k) Hardship Amendment Deadlines for Volume Submitter and Prototype Plans

And suggests there may be more to come

At the ASPPA Annual Conference on Tuesday, October 22, 2019, Carol Weiser, Benefits Tax Counsel at the Treasury, discussed recent concerns about the deadline for preapproved plans to amend to conform to the recently published final hardship regulations. In effect, she said that the deadline is the due date of the employer"s income tax return (e.g., Form 1120), plus extensions, if any, for the tax year which includes January 1, 2020. This is true even if . . .

[Editor"s note: to see remainder of this item, click on its title, above]

Number of replies posted  3 replies      Number of times viewed  78 views      Add Reply

thepensionmaven created a topic in Cafeteria Plans

Relationship of Cafeteria Plan to HSA

I must confess, being a qualified plan TPA, I know next to nothing about HSAs or Section 125 plans. My client has inquired about updating its 125 plan document; are these considered two separate plans -- an HSA and a 125?

Number of replies posted  2 replies      Number of times viewed  26 views      Add Reply

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

Floor-Offset DB Plan -- Life Insurance for Owner Only

Not sure the following is right and/or passes BRF. A floor offset plan -- assume 401a26 passes. After all offset are applied, only the owner has a substantial benefit in the DB plan. Only the owner is HCE. So far so good.

Now the agent wants to provide insurance to the owner under the DB plan, thinking since no one has any benefits and plan passes 401a26, kosher, right? Also, they do not think that they need to provide any insurance under the DC plan.

I am not in agreement for the following reasons (the ones that come to mind -- possibly missed a few): [1] Any insurance provided to the rank&file (or NHCE) under the DC plan is not of the same value as the one provided to the owner under the DB plan; [2] For any insurance provided to the rank&file under the DC, the premiums have to be paid thru their benefit i.e. the contributions provided to them by the employer where in the DB plan, only the employer pays as contribution to the plan and does not reduce any benefits; [3] There is BRF issues for DB and combined plans. [4] As per some prior information I heard, even if the DB plan provided a benefit to the rank-and-file employees (say 2% and the owner gets 10% of pay), the insurance provided is not of equal value (even if calculated the same way, say 50X) due to the discriminatory type of benefit formula. The DC portion would not make it equal due to the reasoning I provided on item 2 above. [5] How is 410b satisfied?

Number of replies posted  1 reply      Number of times viewed  30 views      Add Reply

401 Chaos created a topic in Correction of Plan Defects

Correction of Erroneous Deferrals (Excess Amounts/Overpayments)

So, basic story is plan permitted deferrals from some types of bonuses but not others. Due to admin/payroll error, all bonuses were considered eligible comp and some deferrals were made from ineligible bonuses. The amounts were not great and the company caught after a couple of years but a few of the participants have since terminated and taken distributions. The distributions included the erroneous deferrals tied to the ineligible bonus amounts (that would have been treated as regular wages had the plan been properly administered) plus corresponding matching contributions and earnings. Some of the terminated participants rolled the amounts over to IRAs or other plans and some just took a taxable distribution when they left.

Employer is self-correcting and wrote letter informing former participants of the errors, that the excess amount distributed was not eligible for rollover etc., and asked the former participants to return the full excess amount to the plan. Interestingly, one former participant who rolled to an IRA has indicated he is wiling to return but asking about process.

I"m trying to understand how the deferral portion of the excess amount gets handled here? The deferral portion should have been taxable wages subject to withholding generally. Here, the plan will presumably get the full amount back and will put the match amounts back in a suspense account but how does it get the deferral portion to the participant. Will the IRA return and issue a 1099-R noting distributions per EPCRS (Code E)? If the 1099-R is issued, it seems that just reflects the removal of the amounts from the IRA. How should the employer return the erroneous deferral amounts to the former employee--report on a 1099-R, a 1099, a corrected W-2 for the year deferred?

As a twist, how would this get handled for somebody that had received a taxable distribution and returned the amount? Can they just get the matching contributions and earnings back and let the deferrals go then since they were already taxed?

Am I making this more complicated than it is? The guidance I"ve seen just seems potentially incomplete with respect to addressing all the possible tax issues.

Number of replies posted  0 replies      Number of times viewed  27 views      Add Reply

Stash026 created a topic in Defined Benefit Plans, Including Cash Balance

Is the Approved Interest Rate When Calculating an EBAR in a Cash Balance Plan Still Between 7.5% and 8.5%?

Is the approved interest rate when calculating an EBAR in a Cash Balance Plan still between 7.5% and 8.5%? I was discussing this with someone and know that used to be the acceptable range, but I wasn't sure if that had been changed or indexed. Thanks!

Number of replies posted  1 reply      Number of times viewed  46 views      Add Reply

thepensionmaven created a topic in Retirement Plans in General

Deceased Participant; Trouble Getting Rollover for Surviving Spouse

We administer a 401k invested with Voya. Two trustees, husband and wife; the husband died a few years ago and his account has remained open. Voya has thus far refused to rollover his account into hers since she has requested. The plan is the beneficiary and she is the contingent; both are over 59½. Voya is telling me she cannot rollover his account into hers for RMD purposes. Neither are close to 70½. Since he is dead, he can't take an RMD anyway, so what is their rationale?

Number of replies posted  1 reply      Number of times viewed  38 views      Add Reply, Inc.
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