Message Boards Digest

March 13, 2020

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

Maureen Lilly created a topic in 401(k) Plans

My Employer's Mistake Caused Me to Default on Loan

"Last year of March I believe, I took a loan out from my 401k and set it up as a payroll deduction to pay off the loan. A couple months before the end of last year, I received a letter from my 401k company stating that there had been a default on one of my loans. So the first thing I did was call my payroll department and I asked them what happened. The lady I spoke to said that it wasn't their fault and that it was the 401k company's fault. So I called them again and they said that they even sent an email to my employer to fix the problem but they never did. Considering that I'm a single mom with 5 kids, I could not afford to pay off the $1,268 estimated amount of the default. So for the next following year, which is this year, I received a 1099 for the whole entire loan, which they reported to the IRS. I already filed my taxes before I even received it because I didn't get it until last week. So now I have to worry about having penalties and late fees. But this wasn't the issue. When I got my tax from last year 2 weeks ago, I called the 401k company to see if I pay off one of the loans I have if I can reborrow again. I spoke to at least 4 different representatives and I've asked them all the same question --  if my having a default will affect my ability to get another loan. They all said no, that it shouldn't matter because my company allows us to get 2 loans out. The reason why I need this loan is to use for my daughter's medical condition. My daughter has Crohn's disease and needs an expensive Infusion every month. I haven't reached my deductible so I know I have to pay out of pocket. But because my tax refund wasn't enough, I called my 401k and asked them about this information. With the information they told me, I went ahead and paid off the smallest loan I have with my income tax refund so I can reborrow for a higher amount. The representative that helped me with my payment told me to wait 7 calendar days and for me to call back on the 8th day so I can process a new loan. With all this going on, I spoke to my benefits manager a week ago to help me out with the setting of the payment and to make sure that the payroll department isn't screwing up again. They called me back on the day before I was gonna call to get another loan and she said because of the default that the 401k can't give me another loan. I was like, that's not what they told me. Now she's saying that because of the default with one of the loans, I cant even reinstate my account. I asked, what if you take out the default amount from the new loan I'm getting to get me caught up, would that work? She said no! daughter is about to have her infusion by the end of this month and I don't even have the money to pay for it. Is there a way around this to protect me? I also spoke to the manager of the 401k company and they apologized for what's going on and that she'll file a case to let me get another loan because it wasn't me who put the stop on the loan but it was my employer. So I called today and the lady said they can't do anything about it, and that it all depends with my employer. I've been with this company for 19 years and I've never once encountered anything like this! Please tell me if there's a way around all this and how I can reinstate my 401k to get a new loan. I also want to see if there's a way my employer can fix the report to the IRS because its their mistake, not mine."

12 replies   |    86 views   |    Add Reply

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

QDRO Payment In Kind Rather Than in Cash?

"The stock market is going through an upheaval. QDRO is defined as a cash value at a certain date, to be adjusted through current for gains or losses. Distributable amount as of most recent year end was sent to payee, forms signed and returned and waiting for distribution. Plan allows for in-kind distributions. Participant has asked if dollar amount as defined in QDRO can be converted to equivalent shares for distribution. What do you think?"

11 replies   |    57 views   |    Add Reply

Logan401 created a topic in 401(k) Plans

Merge 401(k) Plan into SIMPLE IRA Plan?

"Can a 401(k) be merged into a SIMPLE IRA Plan? I know one can roll over a 401(k) into a SIMPLE IRA, but I cannot find topics on plan mergers."

4 replies   |    47 views   |    Add Reply

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

Employee-Participant Attains NRA and Wants an In-Service Distribution Even Though Document Doesn't So Provide

"I have a participant who is still employed and at NRA in a Profit Sharing Plan. She would like to take a distribution but the plan document does not allow for in-service distributions. I am being told that there is an ;unwritten rule' (LOL) that allows participants at NRA to take their money out of the plan. Is that right?"

4 replies   |    46 views   |    Add Reply

nerd-party-administrator created a topic in 401(k) Plans

CEO Receives 1099 Compensation -- Effect on Testing?

"Facts: 401(k) PS plan; company is an S Corp; the plan's definition of comp is W-2 (wages, tips and other compensation on form W-2). CEO of the company receives 1099 comp and is treated as an outside consultant. The CEO does not participate in the plan. I would think the CEO does not need to be included in the testing because he has not received W-2 comp from the company. Agree?"

3 replies   |    44 views   |    Add Reply

CuseFan created a topic in Retirement Plans in General

Filing Relief Upcoming Due to Coronavirus Pandemic?

"Does anyone know if any of the ARA bodies have advocated to the IRS or if the IRS is considering filing deadline extensions due to the pandemic? DB plans in particular have a 4/30 PPA restatement adoption due date and, if required, determination letter application filing due date. Just curious, as an unexpected prolonged sickness hitting service providers or their client plan sponsors could derail the timing necessary to complete the process."

6 replies   |    104 views   |    Add Reply

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

DB for S Corp While Working for Another Physician

"Accountant has a doctor client who will work for the first half of 2020 at a hospital and participate in its 401K. He also has a PC where he is self employed, where he has a SEP (he contributes 25% of salary). In the last half of 2020 he plans to change employers and does not want to participate in their 401K plan but wants to do a DB plan in his PC. Can he form DB plan in same year he terminates SEP? Can he form DB in 2021 while working for a company wherein he is eligible to participate in 401K but does not? I believe if he contributes to a hospital plan he must subtract that amount from the maximum amount he can contribute to the SEP.

Second half of the question -- He's still a participant in the 401K, whether he contributes or not (most confuse 'does not want to participate' vs. '$0 contribution'). As far as a DB in his PC, my gut tells me 'no,' but I'm not sure why."

2 replies   |    43 views   |    Add Reply

BG5150 created a topic in 401(k) Plans

Correcting Late Contribution of Deferrals in 2017 Means Measly Amount of Interest to Allocate Among Many Former Employees

"Say you had $100 of interest to spread out over 250 people for a late deferral in 2017. Many of the allocations are under a buck, and in some cases like $0.07. What would you do for the people who terminated and took their money? There are quite a number of these folks. To me, it's pointless to allocate 50 cents (or even 3 bucks) to someone who left so long ago. The funds would probably just get liquidated as fees anyway."

2 replies   |    38 views   |    Add Reply

Kevin C created a topic in Distributions and Loans, Other than QDROs

Spousal Consent by Incarcerated Spouse - Effect of 28 USC 1746 on Form Notarization Requirement

"In a DC Plan subject to J&S requirements, a participant with a large balance is eligible for a distribution. His spouse is incarcerated. He sent the distribution paperwork to his spouse to get her consent to a lump sum distribution and her waiver of the J&S benefit notarized. She signed both places, but the prison turned down the request to have the paperwork notarized. Instead, they provided a notice that includes the language for an unsworn declaration under penalty of perjury under USC 1746 (and an identical state law), which she completed, that they told her means she doesn't need to have the paperwork notarized.

Has anyone come across this before? I couldn't find anything even mentioning an unsworn declaration in the context of a qualified plan. I'm not seeing this as overriding the requirement that the spouse's signature be witnessed by either a plan representative or a notary. But, I wanted to ask here before responding to the participant.

28 U.S. Code § 1746. Unsworn declarations under penalty of per­jury
Wherever, under any law of the United States or under any rule, regulation, order, or requirement made pursuant to law, any matter is required or permitted to be supported, evidenced, established, or proved by the sworn declaration, verification, certificate, statement, oath, or affidavit, in writing of the person making the same (other than a deposition, or an oath of office, or an oath required to be taken before a specified official other than a notary public), such matter may, with like force and effect, be supported, evidenced, established, or proved by the unsworn declaration, certificate, verification, or statement, in writing of such person which is subscribed by him, as true under penalty of perjury, and dated, in substantially the following form:
(1) If executed without the United States: “I declare (or certify, verify, or state) under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on (date). (Signature)."
2 replies   |    45 views   |    Add Reply

tron created a topic in 401(k) Plans

Safe Harbor Plan Can Change Formula Mid-Year?

"Can a safe harbor plan change their formula during the plan year, specifically the basic matching formula to the 3% non elective?"

1 reply   |    39 views   |    Add Reply

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