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Message Boards Digest

March 12, 2020

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

Jakyasar created a topic in SEP, SARSEP and SIMPLE Plans

Adding a SEP to an Existing DB Plan -- Looking to Maximize 2019 Deductions

"Sponsor has an overfunded DB plan (active and accruing benefits). It is a family business -- only spouses (owners) and their children (all over age 21). It is an S corporation. Sponsor wants a deduction for 2019. Because DB is not a viable option for deduction and no DC plan was put in as of 12/31/19, the only option seems to be adding a SEP for 2019. Four participants have a combined eligible salary of $500k, so the 25% deduction limit produces $125k. Because one participant is making $265k, his is limited to $56k, which leaves $69k as additional deductible contribution. The other salaries are $150k, $75k, and $10k. Can they each get over 25% of their salaries on a pro-rata basis as long as the total does not exceed 69K? It can be done is a PS plan but I'm not sure how SEP works here."

1 reply   |    34 views   |    Add Reply
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BHarrison created a topic in Health Savings Accounts (HSAs)

HSA Deductions from Severance Pay

"We have a former employer whose severance package includes payments over several years and health insurance. The employee has a HDHP and no other health insurance. Can they make HSA contributions through payroll deductions from their severance payments? We are making all of the payroll tax withholding and basically treating the severance payments like wages except they are not for services rendered, so they are not eligible for our 401K plan."

4 replies   |    35 views   |    Add Reply

waid10 created a topic in Retirement Plans in General

How Does the 415 Limit Work with a Combination of 401(a) and 457 Plans?

"I need help understanding how the 415 limits work with multiple plans. We are a local governmental entity. We have a 457 plan and a 401a plan. We have a participant that defers the max allowed to his 457 plan account ($19,500) and catch-up ($6,500). I know that the catch-up is not taken into account with the 415 limit ($57,000). Does that mean that the $57,000 limit is imposed on the 457 deferrals and any contributions he receives under the 401a plan? In other words, he could receive up to $37,500 in employer contributions in the 401a plan, correct?"

4 replies   |    44 views   |    Add Reply

WesleyT created a topic in 401(k) Plans

Mid-Year Safe Harbor Amendment Can Change Compensation Definition Also?

"Compensation currently defined as full year compensation. Plan sponsor wants to amend Safe Harbor plan to use compensation from date of plan entry, effective immediately. Calendar year plan with semi-annual entry dates. Since it is March, the amendment would affect only employees who are not yet eligible for the plan. I would generally apply the same principle of the IRS approved example of changing entry dates... if it applies to future participants only, it would be permissible. Do you agree? Or do you think the fact that the definition of compensation applies to all participants causes us an issue?"

0 replies   |    25 views   |    Add Reply

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

MASD and 100% of Comp Limit

"Has anyone had an audit where the owner was at the 100% of comp limit and took more than one distribution? Owner took an in-service distribution at NRA 62. He rolled over the LS to an IRA. He continued working and his average comp increased and he accrued additional benefits. At age 65 he elected 12 monthly payments of his accrued benefit with a retroactive annuity starting date to the beginning of the year to be paid from the trust. He subsequently took the commuted value of the annuity payment in a lump sum. Plan was terminated and excess assets were allocated to him. The method we used to account for the MASDs in illustrating that his 415 limit had not been exceeded was from a presentation by Michael Preston and Kurt Piper at the ACOPA Advanced Actuarial Conference in June, 2014. We consider this a good faith effort to comply with 415 when MASDs are concerned. The IRS actuary is challenging the calculation siting Reg 1.415-(b)-1(b)(iii) that requires the plan to actuarially adjust past and future distributions when determining the annual benefit as of a particular annuity starting date. The audit is ongoing. Since the participant is at the comp limit, we don't think an actuarial adjustment is necessary. So, we were wondering if anyone had been through an IRS audit where someone was at the comp limit and there were MASDs."

0 replies   |    27 views   |    Add Reply

TA created a topic in 401(k) Plans

Undoing a Plan Termination After Final Participant Distributions?

"A company was acquired and their 401k plan was amended for plan termination. The notice went out to participants and all assets have been distributed to participants except for the owner. The owner of the company is working on buying back the practice and wants to stop the plan termination and keep the plan. I saw that this topic has already been discussed and that if there were no distributions, the replies were that the plan could adopt a resolution to revoke the plan termination. However, in this case, the participants received a distribution of their accounts. In my opinion, this plan would need to continue the plan termination process and consider a new plan 12 months from now. Would that be accurate?"

2 replies   |    39 views   |    Add Reply

Tom72981 created a topic in 403(b) Plans, Accounts or Annuities

Panicked About Stock Drop's Effect on My 403(b) Account

"I have a 2030x 403b plan with my previous employer that I will soon roll over into my new job. Of course like everybody else I am losing money very fast. What should I do at this point? Should I withdraw funds or should I keep my funds in there? Secondly, what happens when your stock hits rock bottom and there is nothing left? Do you lose the stock or just the value of the stock?"

3 replies   |    29 views   |    Add Reply

legort69 created a topic in 401(k) Plans

Penalty for Year-End Match Funded After March 15 That Fails ACP

"Is there a 10% penalty for a late refund of a year-end 401k match funded after March 15 that fails ACP ?"

0 replies   |    21 views   |    Add Reply

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