Message Boards Digest

May 4, 2020

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

Belgarath created a topic in 401(k) Plans

Doin' the Hokey Pokey: Safe Harbor Was Amended Out of Safe Harbor, Now Wants to Amend Back In

"So, a Safe Harbor 401(k) plan amended out of Safe Harbor (match) a couple of weeks ago. Now they got a PPP loan and want to amend back in, for the next 8 weeks. Then will probably want to amend out again. I say no, but this stuff has been changing so fast that I wanted to make sure I haven't missed anything."

4 replies   |    80 views   |    Add Reply

Catch22PGM created a topic in 401(k) Plans

Tax Deduction under Section 404 -- Correction Scenarios

"Two semi-related questions. [1] A large plan fails ADP testing every year and dozens of HCEs take refunds. In 2019 there was a matching contribution made every pay period. Some of the match attributable to the refunded deferrals had to be forfeited. Is the amount of match that was forfeited still a deductible contribution and do we count it towards the 25% deduction limit? [2] Assume an employer calculates and deposits a match equal to 10% up to 100% of deferrals every pay period throughout 2019. A mistake is made by payroll and too much match was deposited for one participant in 2019 -- instead of receiving $1,000 match on $10,000 of deferrals she received $1,500 match. The error is caught after the end of the year (January 2020). The excess $500 that was deposited is transferred-out of the participant's account and into the plan's forfeiture account which was then used to pay administrative fees. Is this excess match tax-deductible for the employer in either 2019 or 2020?"

0 replies   |    35 views   |    Add Reply

Towanda created a topic in Retirement Plans in General

Section 415 Limits -- Chicken vs. Egg

"A 401(k) Safe Harbor Plan was terminated effective March 15, 2019. In December 2019 the owner deposited $19,000 as salary deferrals into the plan. She earns W-2 income, and those deferrals were reported on her 2019 W-2. Because of the short plan year, and because the plan was not terminated as the result of economic loss or an acquisition, the plan lost its Safe Harbor status for the short plan year. Further, the owner was the only employee who contributed salary deferrals to the Plan in 2019. The owner would like to make a Profit Sharing contribution to the extent possible. 415 limit for 2019 is pro-rated to $11,666.67. This whole series of events is scrambling my brain. [1] Can we deposit $11,666.67 as Profit Sharing and treat the $19,000 in deferrals as an Excess Annual Addition? In other words, moving her out of ADP test failure/Form 5330 territory into 415 violation territory. [2] Or, by virtue of having made the salary deferral contributions, is she no longer able to even consider a Profit Sharing contribution for 2019 because a 415 violation already exists? [3] And if we go with Door #2, do we split her $19,000 refund into two pieces: [a] ADP test failure refund of $11,666.67 and prepare Form 5330, and [b] treat $7,333.33 as a 415 excess to be refunded? I know there are other sticky issues going on here, but my primary concerns for the moment are these questions."

11 replies   |    134 views   |    Add Reply

Bri created a topic in 401(k) Plans

Pre-funding and Section 415 Limits in a Volatile Market

"Sponsor deposits $100,000 early for 2020 to a 'pre-allocation account' with a well-known recordkeeper. That $100,000 then grows to $105,000 by the time it ends up being allocated the following January. For 415 purposes, is an individual limited to $57,000 as of the date it's allocated? Or can he get $57,000 plus 5% for his share of the earnings? Or $57,000 plus only the earnings after December 31 (the plan's actual allocation date for contributions)? And a similar question. If the $100,000 drops to $95,000 by the time it's allocated... ('Hey, favored employee, we'll max you out! Oops, we invested some of that for you early and lost you a chunk of it.')"

17 replies   |    112 views   |    Add Reply

Rena Breeding created a topic in Form 5500

Same Three-digit Plan Number for Two Different Plans

"I have a new client referred to me by a CPA. Two TPAs ago, they were filing a Defined Benefit Pension Plan (Plan #001) and a 401(k) Plan (Plan #001 -- which should have been #002, based on effective dates), sponsored by the same employer. The DB plan terminated and was distributed in 2016. A final 2016 filing was never completed. Filings for 2014 and 2015 were never filed for the 401K Plan. I'm thinking that we probably need to amend the filings for the 401k Plan as #002 (and plan document) to get the system cleaned up along with the 3 delinquent filings for the two plans? Agree?"

1 reply   |    66 views   |    Add Reply

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

Owner-Only DB Plan -- PBGC Knocking on Door

"A DB Plan has been owner only (owner and wife) for approx. past ten years, but kept filing PBGC until now (showing only 2 participants each year). This year did not file. When contacted by PBGC, it was explained to the agent that the plan is owner-only since 2008 and a copy of the 5500 EZ was given to the PBGC (showing that it's an owner-only plan). The agent agreed that the plan is not covered anymore and emailed a convoluted form to fill out so that the plan can be removed from PBGC records. [1] The form has a box to check to confirm that a copy of plan document is being included with the form. Why do they want/need a copy of the plan document for this purpose? [2] They ask whether, if the spouse of the owner is a plan participant, she was an employee, director, or manager. Why is that relevant? Doesn't attribution say that the spouse is an owner as well? This is an incorporated business, and there is an attribution exception of non-involvement (when a spouse has no involvement in the other spouse's business). Here, because the wife is on the plan that means she is involved in her husband's business, because one can only be a plan participant if employed by the sponsor. [3] So attribution means the wife is an owner. yes?"

2 replies   |    101 views   |    Add Reply

Jakyasar created a topic in Cross-Tested Plans

Profit Sharing Plan -- Grouping for a New Category

"Looking at a takeover PS plan. The formula is cross-tested and has 3 groupings (no option to have everyone in their own group), each identified for a specific job category. Sponsor adopts a resolution each year on how to allocate the contribution. Sponsor hired a 4th category employee. Became eligible for 2019 but does not fit in any of the categories. Not an excluded class job category. How to allocate for this new job category -- maybe 11-g?"

1 reply   |    70 views   |    Add Reply

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