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Message Boards Digest

November 27, 2019

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

Griswold created a topic in Cafeteria Plans

Cafeteria Plans 'Restart' Every Year?

"I was doing a little digging on a cafeteria plan issue and I came upon this paragraph: 'While cafeteria plans have much in common with their qualified retirement plan counterparts...there are significant differences. For example, failure to correct an administrative error in a qualified retirement plan could result in taxation of all future (otherwise deferred) benefits as well as a loss of exemption for trust earnings.... Cafeteria plans, on the other hand, by their very nature restart each year i.e., an administrative error should not affect prospective exclusions once correction is made.' This is kind of a head-scratcher from my qualified plan perspective, where an error is an error until it's fixed. Does anyone have a cite for this restarting notion?"

Number of replies posted  2 replies      Number of times viewed  34 views      Add Reply

BG5150 created a topic in 401(k) Plans

Exclude Class of Employees (Mostly NHCEs) from Eligibility for Match under Safe Harbor Plan

"Plan has 3% SH and a discretionary match. Can they exclude 'junior executives' from the match? Most of these will probably be NHCEs. Coverage is not an issue."

Number of replies posted  9 replies      Number of times viewed  73 views      Add Reply

mromney created a topic in 401(k) Plans

Two Spouses Spousing, Three Companies Comping, and a Partridge in a Pear Tree

"Husband is 100% owner of S-Corp A. Husband & Wife are 50/50 owners of S-Corp B. Wife is 50% owner of LLC C (the remaining 50% is owned by an unrelated 3rd party). They do have minor children together. It is believed that S-Corp B and LLC C are considered an Affiliated Service Group, and that S-Corp A is not an ASG with any business. Based on that, S-Corp A and S-Corp B are a controlled group, and S-Corp B and LLC C are a controlled group -- correct? We are trying to determine if Husband can establish an individual 401(k) for S-Corp A without the need to perform coverage testing from LLC C."

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

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

Contribution After DB Plan Termination

"A small non-PBGC traditional defined benefit plan terminated 3-1/2 years ago without applying for a determination letter. I know, all assets need to be distributed within one year. However, they did have significant problems with one private investment in the plan. All is recovered now and they are ready to distribute. Can they make a deductible contribution now (so very late in the game) to make plan whole? Otherwise the owner employee will need to take a reduction in his benefit."

Number of replies posted  0 replies      Number of times viewed  26 views      Add Reply

Belgarath created a topic in 401(k) Plans

Spinoff in Controlled Group Safe Harbor Plan Situation

"Let's look forward to 2020. Suppose Corporation X and Corporation Y are a controlled group, each owned 100% by Winnie the Pooh. Corporation A is the plan sponsor, and Corporation B is signed on as a Participating Employer. Winnie decides to sell Corporation A to Tigger on 6/30/2020. Tigger has no interest in maintaining a plan, because he's bouncy and fun, and 401(k)s are not. So Corporation A's plan will be terminated effective 6/30/2020. Winnie, however, wants to maintain the Corporation B plan (it invests primarily in honey pots, which Winnie deems Socially Responsible Investing), so will spin off the Corporation B portion of the Plan. Because this is a 401(b)(6)(C) transaction, the Corporation A Plan should qualify as a Safe Harbor Plan through 6/30/2020, the termination date. Corporation B adopts a new plan document with identical provisions for the initial short Plan Year of 7/1/2020 to 12/31/2020, and the Spinoff assets are transferred to the new plan -- for the Corporation B employees, this is not a distributable event, and 100% vesting is not required. This plan should also qualify as a Safe Harbor for the 2020 short Plan Year. Am I missing anything here? Whenever something seems relatively straightforward in these situations, it makes me nervous. Hope you all have a great Thanksgiving holiday -- drive carefully, and hopefully the weather won't interfere with your travel plans!! P.S. -- just for the heck of it, suppose this transaction takes place on, say, 11/30/2020 -- can Corporation B still have a Safe Harbor plan for the 1-month plan year? I'd argue that they can, since the spinoff plan, although a 'new' plan document, is considered to be a continuation of the prior plan. Since the provisions will be identical, seems reasonable. But on this subject, what about the 5500 forms? Do you show it as a 'new' plan 001? I lean toward that, as otherwise, seems like it will confuse the DOL system if you don't show it as a new plan. Also, would you set up your new document as a 'new' plan, or an amendment/restatement of the existing plan? I lean toward amendment/restatement, even though for 5500 forms, I lean toward 'new' plan."

Number of replies posted  1 reply      Number of times viewed  28 views      Add Reply

Albert created a topic in 401(k) Plans

Switching Recordkeepers -- Guaranteed Fund with a Market Value Adjustment Option

"Curious to see thoughts on this -- client is switching recordkeepers, and has a guaranteed fund with a market value adjustment option for termination. Client wants all assets to come over... the guaranteed fund contract states: 'Unless the Company (listed as the guaranteed fund provider) receives payment of any applicable market value adjustment from the Group Contractholder (listed in the document as plan sponsor) prior to the Distribution Date, Company will remit to the Group Contractholder or its designee the lesser of the Guaranteed Fund Value or Guaranteed Fund Value adjusted pursuant to the Market Value Adjustment Factor.' The recordkeeper has given the sponsor the option to wire the amount of the MVA prior to the distribution of assets, so that no plan assets will be adjusted. Would this be considered a contribution, even if no assets are moving into the plan and no assets are being adjusted from the plan?"

Number of replies posted  2 replies      Number of times viewed  36 views      Add Reply
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