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Message Boards Digest

April 2, 2020

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

Philip2 created a topic in Distributions and Loans, Other than QDROs

CARES Act -- Can New $100,000 Distribution Come from 403(b) Custodial Account?

"Can the new $100,000 distribution be taken from employer contributions to a custodial account? 403(b)(7)(A)(ii) prohibits hardships from the employer contributions. The CARES Act statutory language says a distribution satisfies 403(b)(7)(A)(i). But it doesn't reference (ii). Probably a drafting error, but just want to be sure."

0 replies   |    36 views   |    Add Reply
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Peter Gulia created a topic in 401(k) Plans

Is Terminating the Plan the Way to Stop an Obligation for an Employer-Provided Contribution?

"Here's some reporting on what American Retirement Association said."

https://www.pionline.com/defined-contribution/small-dc-plans-risk-termination-amid-coronavirus-outbreak-ara

1 reply   |    38 views   |    Add Reply

Stash026 created a topic in 401(k) Plans

CARES Act -- Can Plan Continue to Limit Number of Loans?

"One of my plans limits the number of loans to 3. Does the CARES Act override that or can the Plan continue to limit the number of loans under the law?"

1 reply   |    54 views   |    Add Reply

EBECatty created a topic in 401(k) Plans

Certain 2020 Mandatory Distributions per Plan Document -- Eligible for Coronavirus-Related Distribution Treatment?

"Does anyone have thoughts on whether distributions that would otherwise be required before December 31, 2020, could qualify as coronavirus-related distributions? For example, a plan has a mandatory distribution for terminated participants who reach normal retirement age. If the participant reaches NRA next week, can they certify they have been impacted and receive the first $100,000 as a coronavirus-related distribution? Or existing ESOP installment payouts? Say a participant was scheduled for an installment payment to be made this summer. If they certify they have been affected, is the first $100,000 treated as such? Assume each plan is willing to accommodate by operating and subsequently amending the plan in accordance with the new provisions."

2 replies   |    59 views   |    Add Reply

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

2019 RMD Due Today

"Would a person who was required to take a 2019 RMD by April 1, 2020 (today) still have to take the distribution today? Can't see if the CARES act affects this."

4 replies   |    74 views   |    Add Reply

tghooper created a topic in 401(k) Plans

Paid by Two Controlled Group Members -- Any Effect of Schedule K-1 Self-Employment Income on Plan's Form W-2 Comp Definition?

"Company A is an LLC taxed as a partnership (i.e., generates self-employment income). Bob owns 8%, Corporation B owns 75%, and the remaining 17% is owned by two others. Bob owns 100% of Corporation B. The plan defines compensation as W-2 (not 415). Let's assume there's a loss of $10,000 on his Schedule K-1. Bob receives a W-2 for $40,000 from Corporation B. For non-discrimination testing, I need to only consider Bob's compensation of $40,000 and I don't need to net the loss with his W-2. Correct?"

4 replies   |    54 views   |    Add Reply

RRivera created a topic in 401(k) Plans

COVID-19 Loan Despite Already-Outstanding Loan? And Other Questions

"[1] If an employee already has an outstanding loan, can they get another loan during this crisis? Our current plan documents only allow one loan, so do we need to do an amendment? [2] If this same employee takes out a loan, can they stop their loan paycheck deductions on one or both loans for loans for one year due to the CARES ACT? [3] If an employee wants a hardship withdrawal to cover expenses incurred as a result of this corona virus, what back-up documentation do we need from them to prove this? [4] Is an employee eligible for a hardship withdrawal (to cover expenses incurred as a result of this corona virus) if they are still working full time hours at the same rate of pay? [5] Can an employee request a COVID-19 hardship distribution based on their spouse's being terminated (due to lay-off)?"

1 reply   |    58 views   |    Add Reply

Gilmore created a topic in 401(k) Plans

COVID-19 Sick and Leave Pay Counts as Compensation for Retirement Plan Purposes?

"Am I correct in assuming if a Plan uses the 'W-2' definition of compensation then the compensation earned as COVID-19 Sick or Leave Pay would be considered as compensation for plan purposes?"

2 replies   |    40 views   |    Add Reply

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

Coronavirus-Related Scenario: One Loan Plus Two Distributions

"Is the following possible? 401(k) plan allows for safe harbor hardship reasons, all sources, includes deferral earnings. Business owner in California has a reduction in business due to coronavirus related restrictions. Needs funds to keep the business going short-term and also owes bills on the building of his primary residence currently under construction. Has $300,000 in 401(k) plan account, which is split between deferrals and safe harbor contributions. Is it possible for the business owner to take a COVID-19 related loan of $100,000, a COVID-19 related distribution of $100,000, and the remaining $100,000 as a regular hardship, because California is a FEMA-declared disaster area? Thank you."

0 replies   |    42 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

Effect of Loan Payments Delay: Here's What I Figure an Amortization Schedule Would Look Like

"So I have been playing with amortization schedules to try and figure out what it would look like taking into account the suspension. After playing with it a little bit it became clear (to me anyway) that essentially what you would do is: [1] Accumulate interest until 1/1/2021. [2] Figure out the payment to pay it off to zero by the end of the 6 year term. If the participant, pre-suspension, had a larger payment then just start that larger payment. If it's a new loan and they want to pick a higher dollar amount, then let them. I know the statute talks about suspending the payments and resuming them after a 1-year delay and then amortizing, etc. I tried to play around with all of it and the differential in the payments each way is minimal. Payments essentially are being delayed only for 9 months, but we get an extra year to pay it off. I have attached my amortization schedule. If someone has a different take on how this works, could you let me know?"

0 replies   |    39 views   |    Add Reply

Dougsbpc created a topic in Retirement Plans in General

CARES Good Faith Amendment -- Any Samples Out There?

"Does anyone know of a sample good faith CARES amendment? It sure would be much easier if we could document something. Then the plan sponsor could choose the language that would apply to the CARES provisions they wish to offer."

0 replies   |    29 views   |    Add Reply

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

CARES RMD Waiver -- Is It Optional?

"Section 2203 of the CARES Act seems clear to me that 401(a)(9) does not apply to RMDs paid in 2020 or for 2020 -- they are 'waived', which I interpret to say they're not to be taken. (I'm not a lawyer, though, and I don't claim to understand Congress.) But I"m seeing some recordkeepers including it in a list of optional provisions that plan sponsors can choose to elect. Are they being overgenerous, or am I mis-reading the law?

My concern is that most of our plans provide that terminated participants can't take partial distributions (though I suppose coronavirus-related distributions would get around that), so if there is no legitimate RMD for 2020 per regulations, then can the plan really elect to let a 2020 RMD happen?

This also applies to those few plans without an in-service withdrawal provision where the 5% owners would be affected, but we can amend to fix that if we had to.'

2 replies   |    33 views   |    Add Reply

MGOAdmin created a topic in 401(k) Plans

Buying Life Insurance with Plan Assets

"I have a client (under age 59-1/2) who wants to buy life insurance with his 401k/Profit Sharing account. He's been a participant for 15 years so there's no any issue with "seasoned money" because the plan document states that after 5 years this is a non-issue. Could I be missing something? Can he use any source to buy life insurance, or does it have to be employer-sourced because he is under age 59-1/2?"

0 replies   |    18 views   |    Add Reply

Pammie57 created a topic in 401(k) Plans

Stopping Matching Contributions -- Regular or SH -- Notice Required?

"In light of COVID-19's effects on a lot of small businesses, what kind of notice (30 day) is the employer required to give to participants if the employer wants to stop matching contributions for the rest of the year? Can this be done with a safe harbor match? I think so, but then the plan would seem to need to pass ADP testing, correct? Did the CARES Act give any guidance in this area?"

1 reply   |    31 views   |    Add Reply

roundlou created a topic in 401(k) Plans

Switch from Safe Harbor Non-Elective to Safe Harbor Match Mid-Year

"With everything going on have a client that would like to switch from safe harbor non elective to safe harbor match. Can this be done mid-year? None of the safe harbor non-elective contributions have been made yet."

1 reply   |    35 views   |    Add Reply

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