Message Boards Digest

April 23, 2020

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

JustMe created a topic in Governmental Plans

CARES Act Distribution from Governmental 457(b) Plan

"Could an Qualified Individual take a CARES Act distribution from a governmental 457 plan and repay that distribution over the next 3 years to the same governmental entity's defined benefit plan rather than the 457 plan? I believe so, based on the language below, but want to see if anyone has any different thoughts."

(A) IN GENERAL.--Any individual who receives a coronavirus-related distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make 1 or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), of the Internal Revenue Code of 1986, as the case may be.

1 reply   |    34 views   |    Add Reply

Jakyasar created a topic in Retirement Plans in General

Qualified Replacement Plans -- Fees Paid from Plan Assets

"PS plan is utilized as a QRP and has both the QRP assets as well as PS assets. Let's say balances are 50/50. All assets are comingled and pooled, so no individual accounts. Clients pays $X amount in annual fees from the plan's assets. Can the fee be split 50/50 -- i.e., 50% is deducted from the QRP balances and 50% is deducted from the PS balances?"

0 replies   |    32 views   |    Add Reply

JustMe created a topic in Operating a TPA or Consulting Firm

TPA as Trustee in Plan Document

"Do any TPAs list themselves as Trustee in their client's plan document if they provide Administrative 'trustee' services, such as benchmarking fees, confirming deposit of contributions in the plan, signing off on distributions, etc.? This is not 3(16) services. If there is a service agreement in place with such services indicated, what is the benefit of putting the information in the plan document?"

5 replies   |    51 views   |    Add Reply

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

Maryland Income Tax Withholding Requirement -- Gone Up for 401(k) Plans?

"The Maryland State mandatory tax withholding has been 7.75% as long as I can remember. However, we recently were notified that the mandatory percentage is now higher for 401k withdrawals. Does anyone know what the new state withholding for Maryland is?"

5 replies   |    40 views   |    Add Reply

Jakyasar created a topic in Correction of Plan Defects

401(a)(4) Failure -- Can Self-Correct?

"Taking over a combo plan for 2019. Received information on 2018 so that I can check the 2018 test. Based on my calculations, it does not pass. If there is a failure on 401(a)(4), is this a self correction? If it is, where can I find it? It seems to be a failure to provide the minimum gateway. It would have been done through an additional profit sharing allocation because the DB allocation is set. If the gateway had been provided correctly, 401(a)(4) would have passed with no issues."

6 replies   |    48 views   |    Add Reply

thepensionmaven created a topic in Operating a TPA or Consulting Firm

Circular 230 Ethics -- Prior TPA Wants Fee for Copying Certain Documents

"We have recently taken over a plan from another TPA. Client has notified TPA and asked that the transaction be handled as smoothly as possible. Client cannot find certain documents. The prior TPA is charging him a fee to copy the documents from TPA's file. The last time we ran into this situation I believe Circular 230 had been mentioned and that a client was told that a request for a duplication fee is prohibited under Circular 230. I can't find that in Circular 230, though."

4 replies   |    53 views   |    Add Reply

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

COVID Distribution -- Partial Payback in 2020

"A participant takes a $100,000 COVID distribution. The participant is rehired in July and is able to repay $75,000 of the $100,000 by the end of 2020. Assume he does not make any additional repayments in 2021 or 2022. Is his $100,000 still divided by 3, for a taxable distribution amount of $33,333 in 2020, 2021, and 2022, and he uses the $75,000 to reduce each year's liability (meaning $0 in 2020, $0 in 2021, and $25,000 in 2022)? Or is the entire $100,000 reduced to $25,000 in 2020 and he pays $8,333 in 2020, 2021, and 2022?

The first way does not seem to make much sense unless you consider that, if it is handled in that manner and he does make additional payments in 2021, he would not need to amend his 2020 tax return (because he would not have paid any taxes on the distribution in that year). In the second method he would need to amend his 2020 return to recoup the taxes paid on the $8,333."

2 replies   |    39 views   |    Add Reply

NW529 created a topic in 401(k) Plans

Entity in Controlled Group Revoking Safe Harbor

"A controlled group is made up of two entities. One of the entities would like to revoke Safe Harbor mid-year. All the HCEs are in the entity that is revoking Safe Harbor. How would the 2020 Coverage Test be performed for the 401(m) portion? Are all the NHCEs considered as benefitting due to the Safe Harbor for the partial year?"

3 replies   |    43 views   |    Add Reply

Belgarath created a topic in 457 Plans

Notifying IRS If TIN No Longer Active?

"A governmental employer who has a 'deferred compensation' plan -- I'm guessing a 457(b) -- is apparently either changing or terminating the plan, whatever the plan is. We got a call out of the blue asking how they notify the IRS that the TIN will be 'inactive.' I don't work with governmental 457 plans, or any other governmental 'deferred compensation' plans for that matter. Does anyone have any idea as to whether there is a required notification to the IRS when a TIN becomes inactive? I believe if a corporation terminates/dissolves there is a notification process involving the corporate EIN, but that's a different matter."

0 replies   |    16 views   |    Add Reply

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

Employee Deferral Processed Outside of Payroll

"Is it okay for one employee's deferral to be processed outside of regular payroll (approximately one week after everyone else's)? This was an HCE who decided to max out their deferrals at the beginning of 2020 for the 2019 plan year."

3 replies   |    41 views   |    Add Reply

ERISAGal created a topic in 401(k) Plans

ACP Calculation for Discretionary Match Stopped Mid-Year

"If the employer chose to stop their discretionary match mid-year, would the compensation for determining ACP testing also only be for the period of time the match occurred during the year or is full Plan Year compensation always used?"

2 replies   |    39 views   |    Add Reply

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

Distribution and Loan Offset Exceeds $100,000 Limit

"Let's say a participant has $80,000 in their 401k. He also has a $40,000 loan. The participant is terminated due to COVID and would like to take a full distribution. He's under 59-1/2. Since the limit for COVID distribution is $100,000, how would you process this request? The participant chose to have no taxes withheld on the COVID distribution and my understanding is that Code '2' is used for COVID distributions if the participant is under 59-1/2. So, I'm thinking we process the request as follows: [1] The loan Offset of $40,000 is processed under Code 2. [2] $60,000 of the distribution amount is processed under Code 2 (with no Federal Tax withholding) [3] The remaining $20,000 of the distribution amount is processed under Code 1 (with Federal Tax withholding) because the $100,000 limit has been reached. Would you agree?"

3 replies   |    35 views   |    Add Reply

Pri created a topic in Plan Terminations

QDRO -- What Does 'Date of Valuation for Distribution' Mean?

"This is related to QDRO -- I need to know understand what the 'date of valuation for distribution to the Alternate Payee' means. Is it the date funds are deposited to the Alternate Payee account? Also, I would like to know what would be the time frame between the date of segregation and the date of valuation for distribution to the Alternate Payee."

1 reply   |    25 views   |    Add Reply

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