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Message Boards Digest

April 16, 2020

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

TN CPA created a topic in 401(k) Plans

Moving from an Enhanced Match to a Basic Match Mid-Year

"A client has a 401k plan with an enhanced safe-harbor match formula. They have asked to reduce the safe-harbor enchanted match to the basic safe-harbor match for the remainder of the plan year. (Eliminating SH provisions is a top-heavy issue). With the proper 30 day notice and plan amendment, would this be allowed?"

2 replies   |    35 views   |    Add Reply
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khn created a topic in 401(k) Plans

Employer Already Out of Business -- Effect on Form 5500 Audit Requirement

"An employer has already gone out of business due to the business impact of coronavirus. All employees have been terminated. They had over 200 participants at the end of 2019. Are they able to submit their final 5500 without an audit? The business is shuttered and there is presumably no one still employed to even have the auditors in. How is this to be handled?"

4 replies   |    69 views   |    Add Reply

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

Corrective Distribution on Behalf of Deceased Participant

"If a plan needs to make a corrective distribution due to a 415 violation in a prior year, but the participant has since died, to whom is the distribution payable? The participant's estate? And is it reported on a 1099-R as Code 4? EDIT: Code 4 in addition to Code E. Or just E? Still not clear to whom it is payable."

8 replies   |    81 views   |    Add Reply

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

CARES Act Effect on Participant Loan Provisions

"[1] Does the $100k limit increase come with any provisions for extended loan repayments, or do they have to abide by the 5 year rule? [2] Can a 'qualified individual' take a new loan and suspend payments immediately until 1/1/2021, or do the suspension rules only apply to outstanding loans as of 3/27/2020. Just a question of whether these rules only apply to already existing loans or new loans too."

4 replies   |    69 views   |    Add Reply

jah191 created a topic in Qualified Domestic Relations Orders (QDROs)

Interpretation of Survivor Benefit Provision in QDRO

"QDRO entered and submitted in 2003, and contains the following relevant provisions:

1. The Alternate Payee shall receive payments from the Plan of the benefits assigned to the Alternate Payee under this Order commencing as soon as is practicable after this Order has been determined to be a QDRO or, if later, on the date the Participant commences receiving benefit payments from the Plan. Payment to the Alternate Payee pursuant to this Paragraph shall cease on the date that payments from the Plan with respect to the Participant cease. Survivor benefits, to the extent provided in this Order, are not affected by the provisions of this Paragraph.

2. The Alternate Payee is assigned for her lifetime 50% of the net payments after mandatory deductions and survivors benefits to be paid to Participant and Participant covenants and agrees that he shall make all proper provisions to ensure such payment of benefits to Alternate Payee and keep her as the beneficiary of any available survivor benefits.

3. The Alternate Payee shall be treated as the Participant's 'surviving spouse' for purposes of the Order, the Plan or Internal Revenue Code Sections 401(a)(11) and 417.

In 2014, Participant, now re-married, submitted a retirement benefit application naming his new spouse as beneficiary and electing a 10 year certain annuity (with remainder of payments after Participant's death going to a named beneficiary) in lieu of a joint and survivor annuity. The application was signed/consented to by his current spouse, but not the former. Participant retired and commenced receiving annuity payments, with 50% going to former spouse/AP pursuant to the QDRO. Participant died in 2019, with about 5 years left of the 10 year annuity.

The plan has refused to make any payments to the current spouse, even the 50% retained by participant pursuant to the QDRO, and is instead making the payments entirely to AP.

Is there an argument to be made that the phrase 'The Alternate Payee is assigned for her lifetime 50% of the net payments after mandatory deductions and survivors benefits to be paid to Participant and Participant covenants and agrees that he shall make all proper provisions to ensure such payment of benefits to Alternate Payee and keep her as the beneficiary of any available survivor benefits' means that the AP is only entitled to 50% of the future annuity payments, with the other 50% going to Participant's current spouse? Or, does the phrase 'The Alternate Payee shall be treated as the Participant's 'surviving spouse' for purposes of the Order, the Plan or Internal Revenue Code Sections 401(a)(11) and 417' mean that AP gets everything?"

4 replies   |    59 views   |    Add Reply

BG5150 created a topic in 401(k) Plans

FFCRA Wages Subject to 401(k) Withholding?

"Are FFCRA wages subject to 401(k) withholding? And the subsequent match responsibility?"

1 reply   |    49 views   |    Add Reply

BTG created a topic in 401(k) Plans

Timing of Retirement Plan Contributions for Purposes of Paycheck Protection Program

"Retirement contributions are a permissible payroll cost for purposes of Paycheck Protection Program loan forgiveness under the CARES Act. However, in order to be forgiven, the expense must be 'incurred' during the 8-week covered period following the loan origination. In order to be 'incurred,' does the contribution actually have to be made to the plan, or is it sufficient that a tentative liability is accruing during the covered period? (I suspect the former... i.e., that this is handled on a cash, not accrual, basis.) Has anyone considered how this will affect plans with an 'employment on the last day of the plan year' allocation condition, which would normally not be made until early in the next plan year? Except for those with very unusual plan years, these plans will have no way of knowing who is entitled to contributions by the end of the covered period. If it will be necessary for PPP employers who have plans with allocation conditions to pre-fund contributions in order for those amounts to be eligible for forgiveness, how are people seeing the mechanics of that handled? Are these amounts just being stuck in a forfeiture account or some other unallocated account?"

0 replies   |    38 views   |    Add Reply

B21 created a topic in Distributions and Loans, Other than QDROs

Pre-March 27 RMD -- Can Reclassify as a Coronavirus-Related Distribuiton?

"The CARES Act specifically states that a Coronavirus Related Distribution is any distribution taken between January 1, 2020 - December 31, 2020. Therefore, if an individual received his/her 2020 RMD in January and has missed the 60-day rollover deadline, can the RMD be reclassified as a CRD if the individual becomes an affected individual for CRD purposes even though not an affected individual at the time the RMD was received. I've seen interpretations of this rule that a CRD has to be received from March 27, 2020 - December 31, 2020."

5 replies   |    37 views   |    Add Reply

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