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Message Boards Digest

May 1, 2020

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

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

DB Plan Distress Termination -- What to Expect Nowadays?

"I have a small non-profit client. They have a DB plan. They're now out of business -- done, kaput. The lockdown has ended all their activities that generate revenue. They won't be able to operate in an extended 'social distancing' environment either. The DB plan has been frozen for several years with just 3 participants. They were about one year away from being fully funded to the plan termination liability, but with the market drop and the lockdown, there will be no more contributions and the plan is underfunded so they will need to file a distress termination. All benefits are well under the guaranteed benefit amount.

Any recent experiences with distress terminations? The last one I'm familiar with in the early 2000s did not ever get resolved. PBGC did not do anything, the plan eventually ran out of money paying fees, and no participants ever received any plan benefits. I'd like to be able to tell the board members (all of whom all volunteers) what to expect."

4 replies   |    64 views   |    Add Reply

Santo Gold created a topic in SEP, SARSEP and SIMPLE Plans

SIMPLE IRA Employee Contributon -- Sole Proprietor

"In 401k plans, self-employed individuals can make employee contributions up to the due date of their personal tax return, including extensions, which could mean a 2019 calendar year 401k contribution can be deposited as late as 10/15/20. But if the same employee/employer has a SIMPLE IRA, the employee contribution deadline is 30 days after PYE, correct? I have quoted an excerpt from the IRS website, below. So my conclusion is that different timing deadlines apply whether a SIMPLE or not.

Also, does the coronavirus relief change anything for SIMPLE IRA employee contributions?

When must I deposit the salary reduction contributions?

You must deposit employees' salary reduction contributions to their SIMPLE IRAs within 30 days after the end of the month in which the amounts would otherwise have been payable to the employees in cash, according to IRS rules (IRC section 408(p)(5)(A)(i)). For self-employed persons with no common-law employees, the latest date for depositing salary reduction contributions for a calendar year is 30 days after the end of the year, or January 30th. The Department of Labor rule for deposit of the salary reduction contributions may be stricter. They do have a 7 business day safe harbor rule."

0 replies   |    23 views   |    Add Reply

CMC created a topic in 401(k) Plans

CARES Act -- Loan Extension -- Does 'One Year' Really Mean 9 Months?

"After reviewing the KETRA safe harbor guidance in IRS Notice 2005-92, it seems that, as a practical matter, the 'one year' delay permitted under the CARES Act winds up as a practical matter to be more like 9 months. But for the difference in the period of time for which payments can be suspended (August 25, 2005 to December 31, 2006 in the case of KETRA vs. March 27, 2020 to December 31, 2020 in the case of CARES), the loan repayment relief is formulated in exactly the same way -- both call for the due dates of any payments occurring during the specified period to be delayed 'for one year.'

In the example in 2005-29, the participant ultimately ceases making any payments for more than one year, but that seems to be a function of the fact that the employer in the example acted to take advantage of loan repayment suspension for 13 of the 16-ish months such relief was available under KETRA, rather than the fact the suspension is described in KETRA as being delayed 'for one year.' (The implication is that if the employer in the example had waited until sometime in 2006 to act, the participant would have had his or her payments suspended for less than 12 months.)

In the text of the 2005-92, the Service indicates that as part of the safe harbor approach 'loan repayments must resume upon the end of the suspension period....' Consistent with that, in the example, loan payments resume on January 1, 2007.

Consequently, I'm thinking in the case of a CARES Act loan extension, loan repayments would resume in January of 2021. Meaning participants, at most, would have gotten a 9-month break on repayments. Does that seem right or am I missing something?"

1 reply   |    55 views   |    Add Reply

AlbanyConsultant created a topic in 401(k) Plans

Disaggregation for ADP Test

"For 401a4 testing, we can do some exciting disaggregation of the participants to get groups with the most beneficial characteristics for testing purposes. How much of that is applicable to ADP testing? There's the standard excludable employee segregation that can be done, but I don't recall if we can go any further than that. I've found some slide decks on testing from seminars I've gone to (and online) but none have mentioned it so far, which is leading me to think that it's not a thing... or do I just need to keep digging? Anyone have a direction to point me in?"

1 reply   |    32 views   |    Add Reply

Becky Schwing created a topic in 401(k) Plans

Combination 401(k) Refund and QNEC

"I have a plan that fails 2019 APD testing and it is now after March 15. Is it correct that the deadline for issuing refunds without an excise tax was pushed back? There are 4 HCE's all over age 50 and two NHCE's. The The HCE's deferred, respectively, $5,000, $5,000, $11,000, and $12,500. So none had 402(g) catch-up in 2019. Is it permissible to do both a small QNEC for the two NHCE's and still have the plan fail ADP testing -- then do the corrective refunds but to the point where I can utilize ADP catch-up contributions to avoid having to issue refunds altogether? This is on an ASC volume submitter plan document. I don't see where it allows or does not allow a combination of corrective options."

1 reply   |    24 views   |    Add Reply
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