Message Boards Digest

April 24, 2020

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

ombskid created a topic in 401(k) Plans

SHNE Plus Profit Sharing -- Must the Profit Sharing Part Be 100% Vested for Use with General Test?

"401(k) plan has SHNE plus profit sharing. General test. 1 year eligibility. New entrant leaves after 3 months of participation. Profit sharing is 0% vested under 6-year vesting schedule. Must the profit sharing piece be vested in order to be counted in the general test?"

5 replies   |    59 views   |    Add Reply

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JMP created a topic in 401(k) Plans

Effect of Dual Eligibility on Testing Requirements?

"My client is setting up a safe harbor 401(k) plan with a SH matching contribution and wants to implement dual eligibility, that is, allow participants to defer immediately into the plan but require one year of service in order to receive the match? Is there any concern in having dual eligibility? How would you test these dual eligibility groups each year? What complications would you see in implementing a plan like this?"

9 replies   |    82 views   |    Add Reply

IhrtERISA created a topic in 401(k) Plans

Form 5558 Extension / Change in Plan Sponsor

"Plan Sponsor (and plan name) was changed effective 1/1/2019 via a plan amendment. We need to file a 5558 extension for the 5500, for the plan year ending 12/31/19. We've changed who the plan sponsor is since the last 5500, so I am not sure if the old or the new plan sponsor should file the extension. While Form 5500 has a place to provide for a change in plan name, Form 5558 does not. My gut tells me to file Form 5558 under the current (new) Plan Sponsor and check the box under #1 (stating this is the first Form 5500 for the plan listed above). As an aside, would the new plan sponsor also need to file Form 8822-B to Report Change in Identity of Responsible Party? Seems like a simple issue, but one that I can see the IRS having an issue with."

4 replies   |    36 views   |    Add Reply

mjf06241972 created a topic in Defined Benefit Plans, Including Cash Balance

Outsourcing DB / Cash Balance Plans

"I'm a TPA looking to outsource our current DB/CB Plans to an actuary. About 20 Plans. Having a lot of issues with the company we work with currently."

1 reply   |    65 views   |    Add Reply

TPA Bob created a topic in Form 5500

Late Filing of Forms 5500 -- But Delinquent Filer Program Not Used

"I have received a referral client from a CPA friend of mine. Client had not filed Forms 5500 for several years. When the CPA became involved he prepared and filed 5 years worth of Forms 5500 but not through the Delinquent Filer Program. Client has now received notices from IRS wanting lots of money. And it appears that this is probably not the first time the client has been delinquent (many years ago). Has anyone been successful going through the Delinquent Filer Program 'after the fact'? Or does anyone have any suggestions?"

1 reply   |    45 views   |    Add Reply

Mona created a topic in IRAs and Roth IRAs

Possibly Excessive IRA Fees

"I'm in the process of setting up a traditional IRA with a financial adviser, whom I unfortunately found through my credit union. The fees associated with the account, or for him, are 0.8%. Is this rate about right? The amount accidentally rolled over was $14,000. This has been a nightmare for me but I'm slowly but surely learning more about finances so I won't make another mistake in the future. Back story (I'll try to be swift): I had an ESOP for 7 years from a previous employer. I wanted to roll over $45,000 and keep $14,000. I knew 20% was going to be held from the $14,000. Well, the documents sent to my employer were incorrectly filled out by my financial adviser. And I signed it, so I was slow too. I was sent a huge check I didn't want, and the bank was sent $14,000. $9,000 was sent to the IRS for federal -- nothing can be done about that. I may get it back next year but I doubt it. Lastly I still have this check I haven't decided what to do with. My financial adviser has been trying to get that too but I just want other options."

3 replies   |    62 views   |    Add Reply

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

CARES Loan Suspension of Less Than 1 Year?

"I've got a participant who is confident that they will be brought back from furlough in 'three of four months' and wants to start making repayments when they come back. It sounds like they will be at reduced pay: enough to make the weekly loan repayment, but not enough to 'double up' and catch-up on the missed ones, at least not right away. Can the CARES suspension period be used for less than a year? So we'd add a few months of interest accrual and reamortize from the date he came back, but it's not the '1 year' as CARES 2202(B)(2) says. It seems reasonable..."

1 reply   |    46 views   |    Add Reply

Hayden Taylor created a topic in 401(k) Plans

Mid-Year Amendment to Switch from Yearly Match to Per-Payroll Match

"A Plan provides for a Plan-Year-based discretionary match with a year-end true up. There are no allocation conditions on the match. The sponsor currently is not making a discretionary matching contribution. Can the Plan be amended prospectively, but during the current plan year, to a per-payroll match with no true up? Or does this violate the anti-cutback rule? For example: it is now April 2020. The sponsor is interested in beginning a per-payroll discretionary match in June 2020, with no year-end true up. Can we amend the match from plan year to per payroll, effective June 1, 2020? Or does this constitute a cutback because employees will not receive a match on deferrals made earlier in the year?"

0 replies   |    20 views   |    Add Reply

ST created a topic in Employee Stock Ownership Plans (ESOPs)

Stock of Employer Bought for 200% of ESOP Appraised Value, Soon After I Retired

"I was associated with a 100% ESOP company that was sold for 200% of its recent third party evaluation. Is that premium a red-flag that the third party evaluation was unrealistically low? I was a 30-year employee and retired just a moment too soon -- I missed the buyout price. Should I look deeper into the whole process or just accept it as horrible timing? Were are talking serious money here."

2 replies   |    50 views   |    Add Reply

timofeo created a topic in 401(k) Plans

Safe Harbor 401(k) and Non-Safe Harbor 401(k) in a Controlled Group

"Client, Corp A, has sponsored a safe harbor 401k (w/Basic SH Match) since 1999. Owners of Corp A purchased another business, Corp B, back in 2010, and never let us, the TPA, know. Corp B has sponsored a traditional 401k (w/ 50% of 5% discretionary match) since 2003. Corp A and Corp B are a Controlled Group. Plans DO NOT pass 410b independently on their own so I need to test them together. What recommendations do you have for me to fix the situation?"

0 replies   |    21 views   |    Add Reply

Rena Breeding created a topic in 401(k) Plans

ADP Test Fails When Top Paid Group Election Is Skipped

"A CPA asked me to review a client's ADP testing. They left one TPA for another TPA in 2018. The plan passed testing in the past because it used the 'Top Paid Group' election. The new TPA omitted the 'Top Paid Group' election in the plan document starting in 2018 and elected to use prior testing year's results. For 2018, the plan passed because it was using 2017 testing results. March of this year, the TPA refunded ALL deferrals for 2019 stating the plan failed ADP testing and the client did not know the checks were being issued. The checks were just issued and sent out. There was no discussion regarding QNEC or anything else. This might be a stretch -- but under EPCRS (Rev. Proc. 2019-19), Section 6.02, is it possible to change the method that was used to correct the testing for 2019? Stating the principal to keep money in the plan? We'd ask for all the refunded money returned and the client would put in the $2,759.71 QNEC to the one NHCE who did not defer based on testing not using the 'Top Paid Group' election. That would be $69,000 put back in to restore the accounts and the HCEs keeping their tax savings. We are definitely changing the Plan to have safe harbor in 2020 and 2021 forward. No one ever explained Safe Harbor to them -- they are interested."

6 replies   |    59 views   |    Add Reply

HulaJoe created a topic in Employee Stock Ownership Plans (ESOPs)

How Do Diversification Percentages Work Under My Employer's ESOP?

"When I am eligible for diversification, can I choose a percentage rate lower than the maximum 25%? When using the formula (EOY shares plus previously diversified shares) times % minus previously diversified shares, differing percentages from year to year give a negative result. Say I want to diversify 15% in the first year of the five year period. The result is 255 shares if my starting balance is 1700 shares. In year 2, I receive an additional 100 shares so my share balance is now 1545 shares (1700 - 255 + 100). If I want to diversify 6% in year two, the result when using the above formula is -147 shares. Am I missing something?"

2 replies   |    43 views   |    Add Reply

austin3515 created a topic in Form 5500

Using the Form 5500 Special Extension Box?

"Are people using the special extension box now for this COVID 19 extension on a 6/30/19 plan year-end (for example)? And are you just typing in COVID-19 or Coronavirus or what? Have they told us what to write?"

2 replies   |    43 views   |    Add Reply

JTWeave created a topic in SEP, SARSEP and SIMPLE Plans

New Employees Didn't Get Contributions Under SEP-IRA Program

"Question on SEP-IRA. Self-employed individual has had a SEP for several years. No employees to begin with. Eventually hires an employee but fails to make contributions for them for the first two years they were eligible -- 2016 and 2017. But made contributions for himself at 20% of his net SE income. So we know that the employees' contributions plus earnings need to be put into the plan ASAP. They will be deposited by the end of the month. My question is, can the make-up contributions be deducted on the 2019 or 2020 business returns? If no other contributions are made for the 2019 return other than what is being contributed to fix the error, can we apply an amount equal to 25% of the employees' 2019 wages as a deductible 2019 contribution and apply the balance of the correction contribution as a deductible 2020 contribution when we file for 2020? Does the entire deduction get lost? Does it apply as a 2019 contribution and an excise tax place on the excess for 2019 for any amount over the 25% limit, or if not 2019 then the same situation for 2020 if the whole thing becomes a 2020 contribution?"

3 replies   |    28 views   |    Add Reply

Automate your distribution and loan tracking process!

Sponsored by Wolters Kluwer
With's 100% cloud-based Distribution Tracking Software (DTS), you can track ALL your distributions: hardship distributions, loans, plan terminations ... from one spot no matter where you are. Don't manually process them! Learn more!

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