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Message Boards Digest

January 29, 2020

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

#$%! created a topic in Defined Benefit Plans, Including Cash Balance

Investment Advisory Exempt from PBGC Coverage

"The PBGC finally made a determination that the plan sponsor (Investment Advisor) is considered a professional service employer under 4021(c)(2)(A). Further, the sole-owner is a professional individual under 4021(c)(2)(B). It only took the PBGC three years to make the determination since our request."
Number of replies posted  3 replies      Number of times viewed  49 views      Add Reply
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Chris123 created a topic in Defined Benefit Plans, Including Cash Balance

Restorative Payments and Tax Deductibility

"So my questions concerns Restorative payments and tax deductibility for defined benefit plans - I'm currently dealing with a situation where the DB plan trustee (employer) invested in an investment in which the investment became bankrupt and is now worth $0. The trustee later found out that the investment was a ponzi scheme and sued for recovery. As a result of the lawsuit, the trustee was able to recover a $100k settlement check, which the trustee had made payable to the plan. My question is the following: Can the employer contribute a restorative payment to make the plan and the participants whole? Does a restorative payment by the plan sponsor qualify as a deductible contribution? I found language that if a fiduciary commits a breach of his or her responsibility in picking good investments, then the fiduciary is PERSONALLY liable to make restorative payments. Everything talks about if a fiduciary has done some due diligence in selecting investments and given that most plan sponsors are not investment professionals, it's not like they would know everything or all the questions to ask then it would generally NOT be the case that the fiduciary would be personally liable to make any restorative payments. I would think if the sponsor relied on the advice of someone who IS presenting him or herself as a professional, the fiduciary could not be personally blamed for the losses. Thus, based on the above, I believe the amount could not be deposited into the DB plan but, rather, could be used to fund future contributions which, one would assume, would be greater due to the loss in the value of the plan's assets."
Number of replies posted  6 replies      Number of times viewed  63 views      Add Reply

D Lewis created a topic in 401(k) Plans

402(g) and ADP failure

"When an HCE defers over the 402(g) limit we use the full deferral amount in the ADP test. If the plan fails the ADP test, does that mean the plan must return the excess deferral and the excess contribution (which ends up including the amount over the 402(g) limit)? Essentially returning the excess deferral twice? Example: HCE under age 50 defers $21,800. 402(g) excess deferral of $2,800 plus earnings needs to be refunded. The full $21,800 is used in the ADP test which fails. The refund required is $3,135.58 plus earnings. If we used $19,000 in the test (which we can't), the refund would be $335.58. We think that is correct that the participant would receive a refund $2,800 plus earnings for the excess deferral and $3,135.58 plus earnings for the excess contribution, but wanted to make sure."
Number of replies posted  2 replies      Number of times viewed  42 views      Add Reply

draper1 created a topic in Defined Benefit Plans, Including Cash Balance

Terminated vesteds in cash balance valuation

"End of year valuation for cash balance plan. Document requires 500 hours for a pay credit. Interest is credited through the ASD. For people who left during the year(fully vested), is it reasonable/required to value them independent of where their distribution is in process. I think I have heard this argued as a requirement for traditional db plans, but not so sure about a cash balance plan. The rule would be if no distribution has been reported, I value them similar to an active life..that is with projected interest to NRA discounted back at the relevant segment rate. Whether one would generate benefit statement on this basis is perhaps a separate issue."
Number of replies posted  1 reply      Number of times viewed  27 views      Add Reply

401 Chaos created a topic in Health Plans (Including ACA, COBRA, HIPAA)

COBRA Triggered by Employer's Loss of Service Contract

"I think I know the answer to this but wanted to ask to be sure I'm not missing anything. Company A is a large property manager. They have a contract to manage a particular facility among others. The owners of the facility are selling the facility and the new owners intend to engage a different property manager, Company B. Company A must fire most of the employees that worked at the facility. Company B is new to this particular area and plans to immediately re-hire most but not all of the terminated employees who will continue doing their same jobs as in the past. Those employees will have a clear termination of employment with Company A and so should be afforded COBRA rights. (Company B has a relatively weaker and expensive health plan than Company A's plan such that COBRA coverage may be found worth the cost to some of the former employees, at least for some period of time.) I don't think there is any exception to Company A's obligation to offer COBRA coverage to all terminated employees under this scenario, including those that are immediately hired and offered coverage by Company B. That presumably would be different if there were a sale of Company A (or Company A's assets) and Company B was a legal successor (or deemed to be a successor employer for those immediately hired). However, in this case, Company A was simply hired to manage the property and is losing that contract. It's not being sold or selling or transferring any assets to Company B so I don't see any COBRA M&A exceptions here although it has some similarities. Anything I'm missing that might reduce Company A's obligations here? Thanks."
Number of replies posted  2 replies      Number of times viewed  27 views      Add Reply

ldr created a topic in Retirement Plans in General

Long Lost Dead Participant - what to do next?

"Good afternoon to all, We have a profit sharing plan that accumulated quite a few terminated participants who had not been paid out. The plan did not have automatic cash-out provisions until we amended them into it last year. The plan is also very odd in that it has a provision that accounts of terminated participants do not experience gains or losses. The accounts are frozen at the value as of the end of the plan year preceding the date that the person terminated employment. So over the last couple of years, I have been working diligently to find as many of these people as I can and get them paid. One of them has me stumped. The gentleman only worked for the employer for about a year and a half back in the early 90s. However, it was just long enough to get a little contribution that has been sitting in the plan ever since. The amount is just under $400. The employee quit and moved to CA, whereupon he had a fatal automobile accident which also killed his named beneficiary, his wife. We can't find anyone related to him, so far. They were in their 20s when they died and do not seem to have had children. The plan document indicates that the money would go first to the spouse (dead), then the kids (nonexistent) and finally the "estate". It's all very well and good to talk about an estate when a death is recent and the deceased actually had assets. After 25 years, for a couple that likely had nothing, what kind of an "estate" is there to pay the sum to? None. What have the rest of you done with assets under such circumstances? As always, your thoughts are much appreciated."
Number of replies posted  14 replies      Number of times viewed  135 views      Add Reply

pmacduff created a topic in Plan Terminations

Plan term - roth loan balance

"Participant has an outstanding loan from roth source. Roth contributions have been in the plan for more than 5 years. However Participant is not yet 59 1/2 (will be in Sept 2020) for a "qualified" roth distribution. Plan is terminating. Participant elects not to pay back outstanding loan balance. How is that reported on the 1099-R form? The plan is an "old" balance forward plan. Pooled funds that will be liqudated to cash and all participants paid out this year. Thank you in advance for any and all comments!"
Number of replies posted  0 replies      Number of times viewed  17 views      Add Reply

Santo Gold created a topic in Investment Issues (Including Self-Directed)

TPA partnering with a financial advisor

"We are a non-producing TPA firm strictly fee based with the clients. We have an existing financial advisor who is inquiring whether he could bundle his fees with ours, we get paid annually both our fees and his fee, and then cut him a check for his portion at year end. We would 1099 him for the amount. This is what he is proposing. Does this sound A-OK for both us as the TPA as well as for him?"
Number of replies posted  3 replies      Number of times viewed  47 views      Add Reply

hileman created a topic in 401(k) Plans

Top heavy and retirement

"Top Heavy requirement says employed on last day is this waived if you are not employed on last day due to death or retirement? doc waives LDR on all contributions due to death, disability, retirement but I do not know if this applies to a top heavy minimum."
Number of replies posted  1 reply      Number of times viewed  35 views      Add Reply
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