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Message Boards Digest

December 5, 2019

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

Will.I.Am created a topic in Distributions and Loans, Other than QDROs

Cash-Out Provisions in Plan for Accounts Less Than $5,000, But None in Fact Have Been Made

"If a plan has involuntary cash-out provisions set at $5,000 or less and the timing of distributions in the plan document is immediate (meaning as soon as administratively feasible), will the plan sponsor/plan administrator be in violation of the plan document if they aren't processing involuntary distributions (meaning they aren't reaching out to the participant) and they're just leaving the money to sit in the plan? I would think they wouldn't be following their plan document, but I see this in Notice 2005-5: 'Q-9. If a plan that provides for mandatory distributions does not make a distribution to a participant who fails to affirmatively elect direct payment or a direct rollover for a mandatory distribution on or after March 28, 2005, because the plan administrator has not sufficiently established administrative procedures that allow the plan administrator to accomplish the automatic rollover of a mandatory distribution by that date, will the plan be treated as failing to operate in accordance with its terms? A-9. No, a plan will not be treated as failing to operate in accordance with its terms (including the automatic rollover provisions) with respect to mandatory distributions merely because it does not process mandatory distributions for which the participant does not affirmatively elect direct rollover or direct payment due to a lack of sufficient administrative procedures for automatic rollovers, including establishing individual retirement plans to accept automatic rollovers, provided the mandatory distributions are made on or before December 31, 2005.' Any insights?"

Number of replies posted  2 replies      Number of times viewed  38 views      Add Reply
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Spencer created a topic in Cafeteria Plans

Cafeteria Plan Participant Becomes Ineligible; Now Wants Individually-Owned Insurance Premiums Run Through Plan

"We have an employee who used to be full-time. He qualified for, and took, our employer-sponsored group health, dental and vision insurance. Those premiums were run through the cafeteria plan as pre-tax. He's now part-time and hence no longer qualifies for our employer-sponsored insurance. He wants to know if we can run his outside individual insurance premiums through the plan. We only have one other part-time employee, who does not qualify for our group insurance either, but who is covered under her spouse's plan and has no interest in additional insurance. Can we do this? How do we do this?"

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

Rgoose27 created a topic in Distributions and Loans, Other than QDROs

Vendor Made Non-Required 'RMD' and Won't Take It Back

"80-year-old participant, still active and employed -- rolled over to an IRA in 2019 (in-service withdrawal). Retirement/termination date is 1/15/20. The 401k vendor automatically sent out an RMD even though the participant is active and will not terminate until next year. What can be done with this RMD? Vendor will not take the money back. Can it rolled into an IRA within 60 days? What about the tax that was withheld?"

Number of replies posted  5 replies      Number of times viewed  64 views      Add Reply

401(k)athryn created a topic in 457 Plans

Tax-Exempt 457(b) Plan -- Commencement of Distributions

"I'm new to 457(b) Plans. Per the plan document, a terminated participant needs to make a distribution election within 60 days following termination of employment; further, distributions can commence on or after the 61st day. The participant can choose lump sum or installments (annual, up to 3 years). Separately, they can choose to take the distribution as soon as administratively feasible or can delay payment until a specific date. I understand that they can change this election ONE time prior to the distribution commencement date. [1] Can they choose any prospective date for the commencement of the distribution, i.e., can it be 10 years from now? [2] If the participant terminates today (Dec. 4, 2019), then the distribution is not available until 61 days later, so the distribution amount would be reported on a 2020 W-2, because it is reported when first made available. If the participant delays the commencement date until 2021, does the distribution get reported on the W-2 in 2020 or 2021? Likewise, if they opt for installments, does each distribution amount get reported for the year in which it is paid?"

Number of replies posted  0 replies      Number of times viewed  18 views      Add Reply

ombskid created a topic in Retirement Plans in General

Owners of Professional Corporation Get W-2 Income and Pass-Through Schedule K-1 Income

"Five docs have always gotten W-2 income from the P.C. This year they're also getting pass-through income on a K-1. Is this pass-through income treated as earned income for profit sharing plan calculations?"

Number of replies posted  4 replies      Number of times viewed  54 views      Add Reply

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

Uniformity of Allocation Under a Floor Offset Plan

"Our firm took over a floor offset DB plan a couple of months ago. The plan's formula provides 4.75% per YOS to the business owner, and 0.5% to each other participant. The benefit offset from the PS plan is limited to 0.5% of pay. The participants except the business owner receive a 6% contribution in the PS plan. The prior actuary was treating this as a uniform allocation, I assume because the participant account offset is limited to 0.5% of pay for all participants. Essentially, the PS account was bifurcated into the portion which provides 0.5% of pay, and the remaining portion. [1] Does this fly for the uniformity requirement for 401(a)(26)? [2] Does anybody know what requirements must be met to use a preapproved plan document for the PPA restatement for a floor offset plan? My document seems to allow this, but doesn't elaborate on what requirements the plan must meet to use."

Number of replies posted  0 replies      Number of times viewed  20 views      Add Reply

austin3515 created a topic in 401(k) Plans

What's a Late Contribution: As Many as Five Business Days?

"Plan auditor determined late/timely based on a time frame of 5 business days (apparently that was what the client told them). All of the corrections were done based on 5 business days and now we are helping with a VFCP. Would you file a VFCP application using 5 business days as the criteria for lateness? They ask right on the VFCP application essentially 'when do you think your contributions are due?' -- I'm concerned if I file it's going to open a whole other can of worms. i.e., 'Seriously, it takes you 5 days? Please provide a 27-page memo describing why you are so slow! And let me see ALL of your deposits so I can use it as evidence to disprove your ridiculous assertion!' I embellish, of course, but probably the only question is to what degree I embellish. There is a kernel of truth I am sure? Beginning in 2019 by the way their new standard is 2 business days."

Number of replies posted  4 replies      Number of times viewed  59 views      Add Reply

Bumppo23 created a topic in Retirement Plans in General

Person Became Participant Before Satisfying Minimum Hours of Service Required by Plan

"As one may perforce recall, plans usually feature eligibility requirements for entry, and then further eligibility requirements to receive an allocation. 1K Hours of Service in a Plan Year serves as an obvious requisite to receive an allocation for a particular Plan Year. If a poster recalls a situation where a participant received an allocation despite lacking the requisite number of hours for a particular plan year to receive an allocation, and SCP remedied the situation, please aptly describe the situation in sufficiently intricate, intimate detail. Perhaps a corrective amendment may attend to the situation. That noted, if one person aberrationally received an allocation, and a person in an akin situation properly lacked an allocation, one ponders if a corrective amendment must provide the allocation to both individuals. To present a hypothetical example, Ralph W- works for M- C- C-, commencing in the year 20XX. The plan requires participants to provide 1K Hours of Service to receive an allocation. Ralph W- entered the plan at a point during the year 20XX+1. Ralph W- works the following hours:

20XX+1: 1000 Hours

20XX+2: no more than 721 Hours

20XX+3: no more than 750 Hours

Ralph W- aberationally receives an allocation respectively for the respective years 20XX+2 and 20XX+3.

Clyde B- entered the plan at a point during the year 20XX-6. Clyde B- works the following hours:

20XX+1: 1000 Hours

20XX+2: no more than 645 Hours

20XX+3: no more than 795 Hours

Clyde B- did not receive an allocation for either of the years 20XX+2 and/or 20XX+3.

If an amendment retroactively allows Ralp W- to receive an allocation for the years 20XX+2 and 20XX+3, one ruminates if such an amendment must grant an allocation for the 20XX+2 and 20XX+3 years for Clyde B-."

Number of replies posted  1 reply      Number of times viewed  34 views      Add Reply

Thornton created a topic in Qualified Domestic Relations Orders (QDROs)

Death of Alternate Payee

"A couple's divorce was final on July 16, 2019. I am retained in August by the attorneys to draft two QDROs, one for a cash balance pension plan and one for a 401(k) plan. All parties approve draft QDROs by late September and they are submitted for pre-approval to the plan sponsor on October 9. The plan administrator acknowledges receipt and freezes the participant's accounts, but wants several changes to both QDROs which are made and both are resubmitted on October 22. On November 27, the plan administrator pre-approves the 401(k) but wants one revision to the pension QDRO, which it did not mention in the first revision request. I'm used to this, so I made the minor revision and resubmitted the pension QDRO today. Meanwhile, the Alternate Payee dies on November 26! Both QDROs have language covering this contingency. Because of the alternate payee's health, signature pages were signed the by both the participant and alternate payee when they approved the drafts in September, but before submission to the plan administrator for pre-approval. Because pre-approval is not complete, the QDROs have not been submitted to the court yet. Of course, the alternate payee does not have a beneficiary form filed with the plan sponsor. [1] Are the signature pages valid? I would prefer to revise the pages to reflect the personal representive of estate's signature. I guess it's up to the attorneys since they are filing them, but thought I'd ask. [2] Should the plan sponsor be made aware of the death of the alternate payee before the court signed QDROs are submitted for payment? [3] Does anyone have advice/thought in this situation?"

Number of replies posted  0 replies      Number of times viewed  30 views      Add Reply

rocknrolls2 created a topic in Defined Benefit Plans, Including Cash Balance

RFP for Single Premium Group Annuity Contract

"A client has a defined benefit plan with 390 participants (all term vesteds, retirees and beneficiaries) and slightly under $2 million in assets. The plan would like to issue an RFP to solicit bids for a single premium group annuity contract for all of the plan's participants. Does anyone have an RFP they could share as a template for creating such a document?"

Number of replies posted  0 replies      Number of times viewed  15 views      Add Reply

thepensionmaven created a topic in Retirement Plans in General

Plan Takeover with Pooled Investments

"We took over a profit sharing plan with 3 pooled accounts. We have not dealt with pooled accounts in so many years. I do not recall how this had been handled. In the past, participants had been given account balance statements combining the total of the three. Like most plans, December lost money. One participant is questioning her % of the loss and wants to know not only her breakdown of the three accounts (2 are CDs and one is invested with a broker), but her breakdown of the underlying investments in the brokerage account. Furthermore, she says her attorney told her she has a right to see her portion of the breakdown of the underlying investments in her account balance statement."

Number of replies posted  4 replies      Number of times viewed  32 views      Add Reply

Belgarath created a topic in Correction of Plan Defects

Missed RMDs for Multiple Years

"Situation where census provided by client showed incorrect DOB for an individual, from inception, and it was never caught by the client. Employee terminated, left funds in plan. Now turns out that former employee is in fact several years older than 70-1/2, so multiple years missed RMDs. So you self-correct, but under SCP you can't get a waiver of the excise tax, so you file the 5329 with the 'reasonable cause' statement. Any thoughts as to the relative merits (or risks) of submitting under VCP solely to try to get a formal waiver of the excise tax? The total tax involved would likely be 'only' a couple of thousand dollars more than the VCP fees. I know the IRS has historically been pretty reasonable about waiving excise tax in missed RMD situations, but not sure about a multiple-year situation where VCP is otherwise available. Also, would you file multiple 5329's -- one for each year RMD was missed, or just one 5329 using the total of missed RMDs plus interest as the RMD for, say, 2019? I'd say the latter, but others may disagree."

Number of replies posted  0 replies      Number of times viewed  24 views      Add Reply

BG5150 created a topic in Distributions and Loans, Other than QDROs

Rollover to a U.K. Plan?

"Can a person roll over (tax-free) her 401(k) plan balance into a U.K.-based plan?"

Number of replies posted  1 reply      Number of times viewed  22 views      Add Reply
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