Message Boards Digest

April 15, 2020

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

frank1971 created a topic in 401(k) Plans

Review of Form 5500 by Wharton Group

"Two 401k sponsors have received calls from the Wharton Group about a new DOL requirement for a third party 5500 review, which they are offering to provide. Is this a scam or has DOL implemented a new rule to require a third party to review 5500s? Employers in question have 25 or so participants."

3 replies   |    81 views   |    Add Reply

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

Distribution Onslaught Due to Coronavirus

"Any other recordkeepers struggling to keep up with the demand of distributions during Coronavirus? Argument suggestions for participants unable to time the market? Suggestions for limiting liability?"

3 replies   |    53 views   |    Add Reply

Steamboat created a topic in 401(k) Plans

FEMA-Declared Disaster Area: Hardship-Eligible Participant Must be in Area Designated for 'Individual Assistance'?

"We use the immediate and heavy financial need safe harbor definition, including expenses incurred as a result of a FEMA declared disaster. The regs provide the employee's principal residence or place of employment at the time of the disaster must be in an area designated by FEMA 'for individual assistance with respect to the disaster.' I interpret this to mean that just because a state/area is declared a disaster, that isn't sufficient for a hardship but rather must be eligible for FEMA's individual assistance program. So while FEMA's site ( provides that most, if not all, states are declared disasters due to COVID-19, only a few states appear eligible for the individual assistance program. I've seen conflicting interpretations stating that if a state is declared a disaster, that is sufficient for a hardship. Any thoughts would be appreciated!"

0 replies   |    41 views   |    Add Reply

Pri created a topic in Plan Terminations

CARES Act Distribution Questions

"Hi, I have questions related to CARES Act.

  • As per the Act, eligible participant will be able to withdraw up to $100,000 now if a plan is terminating and the participant has only $50,000. Can the participant withdrawal the complete amount under the CARES Act? Or does it have any anything specific to terminating plan and withdrawal option?
  • As we know the CARES Act also talks about RMDs. If a participant has received his/her 1st RMD check after passage of the Act, can the person return the check back and deposit it into the distributing 401K plan? Because the plan is terminating, the participant would then would take a termination distribtion that could be rolled over into an IRA (for example).
  • Does the RMD apply to anyone who has reached 70-olus or only the eligible participants as per the bill?

Is there anything that I can refer how the CARES-ACT will apply for plans that are Terminating? any portal/website?"

6 replies   |    53 views   |    Add Reply

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

Payment of COBRA Premiums by a Hospital or Other Third Party

"If a third party pays certain individuals' COBRA premiums, does that third party risk creating a MEWA or otherwise being deemed to be engaged in the business of insurance? A specific example would be a hospital or other provider paying the COBRA premiums of certain of its patients, in effect in order to get reimbursement from the patients' insurer."

2 replies   |    52 views   |    Add Reply

pensionam created a topic in 401(k) Plans

Intern Will Work for Plan Sponsor But Be Paid by the U.S. Military for First 90 Days

"A plan sponsor will be hiring an intern for 90 days who will be paid by the military through a military internship program. After the 90 day period, the intern will be paid by the plan sponsor. The plan has no eligibility requirements and no excluded classes so the question came up as to when the employee would be eligible to defer and what compensation would be used. There is a debate among coworkers as to whether the employee can use military pay to defer by personally writing a check to the plan sponsor or instead needs to wait until he is paid by the plan sponsor."

1 reply   |    42 views   |    Add Reply

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

New Plans After Year-End, Sure, But...

"If I recall correctly, one of the provisions of the SECURE Act is that plan sponsors can adopt a new 2020 plan up through the date of their tax filing deadline next year. Assume a calendar year for the the plan and client's tax filing. Some sponsors may want to freeze their plans now, before folks get into the 1000-hour range for benefit accrual. If there were no plan, I'd think the sponsor could start up a new plan some point in 2021. But that's not the same as un-freezing an existing plan in 2021 for the 2020 year before their tax deadline. Would I need to get a decision from the plan sponsor by 12/31 to un-freeze? (I hope the alternative isn't to adopt a new plan and merge them.)"

1 reply   |    47 views   |    Add Reply

Patricia Neal Jensen created a topic in 401(k) Plans

CARES Act Distribution from a FICA Alternative Plan (Section 401(a) Plan)

"Are there any provision(s) required in a FICA Alternative 401(a) plan which would prevent the addition of a CARES Act distribution provision?"

7 replies   |    72 views   |    Add Reply

Luke Bailey created a topic in 401(k) Plans

CARES Act Loan Provisions -- Some Troubling Ambiguities

"The CARES Act provision for COVID-19 distributions is different from the provision liberalizing the loan rules. The provision for distributions merely describes what a plan can do and not violate the qualification rules, as well as the tax treatment for the participant of COVID-19 distrributions. Clearly, the employer must implement the distribution provisions through an amendment or through a policy change eventually backfilled by an amendment in order for the distribution provisions to apply to a participant.

However, the CARES Act loan provision regarding the 1-year payment extension (Section 2002(b)(2) of CARES Act) can be read as a command regarding the administration of a loan. It does not say the equivalent of, 'Hey employer, if you want to change your loan policy, you can do the following without having a distribution under 72(p),' but rather it says:

'"(A) if the due date pursuant to subparagraph (B) or (C) of section 72(p)(2) of such Code for any repayment with respect to such loan occurs during the period beginning on the date of the enactment of this Act and ending on December 31, 2020, such due date shall be delayed for 1 year...' [emphasis supplied].

The problem is that loan payments aren't really due pursuant to the referenced subparagraphs of Section 72(p)(2), but rather pursuant to the loan's legal documentation, which presumably complies with 72(p). So you can interpret this (or not) as meaning that to the extent the loan documents incorporate 72(p), they are overridden as to the one-year extension. Moreover, the CARES Act loan provisions for the 1-year suspension say nothing about amending loan documents or policies, although I guess you could argue that Congress thought plan documents contained loan rules, which obviously is not typically the case, and therefore would need to be amended for the suspension.

Another ambiguity, I think, is regarding what payments have a 'due date.' Suppose a participant who qualifies for the COVID provisions terminated a month or two before 3/27/2020 and under the terms of his or her participant loan, the remaining balance is accelerated and due as a lump sum 3/31/2020, or it will be distributed as an offset? Is the lump sum repayment suspended for a year? If it isn't and a loan offset distribution occurs, is that distribution a COVID-related distribution qualifying for the 3-year averaging, extended rollover, etc.? What if the employee has not terminated, but payment could not be made by withholding for some reason beginning in the fourth quarter of 2019, so that 3/31/2020 was the last day of his/her grace period. (Again, assume the participant does qualify as a COVID-19-affected individual.) If you don't buy my first argument that the requirement to bring the loan current as of 3/31/2020 is suspended for a year, is the resulting 'deemed distribution' a COVID-19 distribution?"

3 replies   |    67 views   |    Add Reply

Jake Wright created a topic in 401(k) Plans

Mandatory Distribution of Entire Account Balance at Normal Retirement Age

"One can, according to regs, distribute a balance of >$5,000 to someone of NRA without consent. My example is an ex-partner in a law firm, with a balance of $2m+, in which case one presumably can fully liquidate the positions and roll over to an IRA without consent, assuming all regulatory requirements have been met. But that seems like the definition of an administrative nightmare. Thoughts?"

1 reply   |    44 views   |    Add Reply

Vlad401k created a topic in Distributions and Loans, Other than QDROs

Excess Deferral (402(g) Limit) Distribution Deadline -- Extended to July 15?

"Do you know if the April 15 deadline for Distribution for Excess Deferrals (participant worked at 2 companies during the year and exceeded the Deferral Limit when we look at the total Deferrals) is now July 15 for 2020 due to COVID-19?"

3 replies   |    63 views   |    Add Reply

mydayjob created a topic in 401(k) Plans

New IRS Notice 2020-23 Loan Repayment Confusion

"Anyone figure out what the new relief for plan loans means under IRS Notice 2020-23? Are loan repayments automatically suspended until July 15?

From the Notice:

'The Secretary of the Treasury has also determined that any person performing a time-sensitive action listed in either § 301.7508A-1(c)(1)(iv) - (vi) of the Procedure and Administration Regulations or Revenue Procedure 2018-58, 2018-50 IRB 990 (December 10, 2018), which is due to be performed on or after April 1, 2020, and before July 15, 2020 (Specified Time-Sensitive Action), is an Affected Taxpayer.'

From Rev Proc. 2018-58:

'Statute or Regulation Act Postponed -. Sec. 72(p)(2)(B) and (C), and Sec. 1.72(p)-1, Q&A10 A loan from a qualified employer plan to a participant in, or a beneficiary of, such plan must be repaid in accordance with the timing requirements of section 72(p)(2)(B) and the level amortization requirement of section 72(p)(2)(C) (taking into account, if applicable, any cure period granted pursuant to § 1.72(p)-1, Q&A-10(a)).' "

0 replies   |    38 views   |    Add Reply

thepensionmaven created a topic in Form 5500

Filing of Form 5500 After Assets of Plan Sponsor Are Sold

"We have a situation wherein the Plan Sponsor is in the process of selling the assets of the company, the employees will all be terminated from the seller's payroll and will all be hired by the purchaser. The seller made the SHNE contribution for those employees through the date of termination of employment. The name of the plan has remained in the name of the seller.

The sellers will be changing the name of the company and I assume will file corporate registration under the name of the new corp with respective EINs. The sellers will be the only employees in the new corp and will have W-2 income.

Would the termination resolution be effective as of the date of sale, and be in the name of the seller's corp? In order to avoid any IRS communication (which, on prior experience is unavoidable), would Form 5500-SF for 2020 be in the name of the new corp and Item 4 would show the name of the old corp with the old EIN?

We've had a lot of headaches in the past with IRS not looking at Item 4 on the 5500s and clients have received numerous letters and notices asking for 5500s."

2 replies   |    28 views   |    Add Reply

MAS created a topic in Form 5500

Automatic Extension for Form 5500 for Deadlines Through July 15?

"Has anyone heard of an automatic extension of 5500s for deadlines falling between April 1 and July 15, 2020? This article from ASPPA states there is: , but when our office called the IRS for guidance, they denied any knowledge of such automatic extension."

1 reply   |    67 views   |    Add Reply

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