Message Boards Digest

May 8, 2020

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

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

Participant Dies Shortly After Making Elections But Before Distribution

"This is a first for me. A plan participant executed their distribution election forms but passed away before the distribution was made (within a week of completing the forms). The distribution is in connection with a plan termination. The participant had not reached retirement age, and the election was for a lump sum distribution greater than $5,000. The death benefit is PVAB. I do not see that the plan document addresses this exact situation. My initial thought is that the participant's elections prior to death are now not applicable because the distribution was not made, and the spouse should receive distribution election forms for a death benefit distribution instead. Any input would be appreciated."

2 replies   |    51 views   |    Add Reply

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

Pooled Account -- Anend to Make an Immediate Distribution?

"All of our plans having pooled trustee directed accounts allow for distribution during the first plan year following termination of employment. Client has a terminated participant whom they want to pay out immediately, and is considering amending to allow immediate distributions. How many plans out there allow for immediate distribution from a pooled plan? Are there any drawbacks to be considered? If they do amend to allow immediate, then I know they can't amend again to revert to the current provisions, due to anti-cutback. This plan is PS only with EOY requirement."

4 replies   |    50 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

Auto Increases Under an EACA -- Any Maximum Amount?

"There is no maximum auto escalate number on an EACA like there is on a QACA, correct? So I could auto escalate to 20% if I wanted to?"

0 replies   |    25 views   |    Add Reply

khn created a topic in 401(k) Plans

Safe Harbor Mid-Year Change to Immediate Eligibility and Full Vesting

"Can a safe harbor plan change to immediate eligibility and vesting mid-year? I believe they can with notice, because it's an increase in benefits. But does that then mean anyone not previously vested would become 100% vested?"

1 reply   |    37 views   |    Add Reply

DeborahPal created a topic in 403(b) Plans, Accounts or Annuities

Annuity Distribution Rollover from Break in Service

"I left my employer-sponsored ERISA plan over 2 years ago and left my annuity balance there. I decided in December of 2019 to roll over my annuity into my 401(k) plan at my current place of employment. The check sent to my 401(k) was dated __/7/2020. I took the balance as of 12/31/18 because the accounts are valued on an annual basis . The valuations take place in April and I was expecting to receive earnings for the plan year 2019. When I called the Fund office today I was told I'm not eligible for any investment earnings because I had to have an annuity balance on the valuation date of April 2020. I feel I am being robbed a full year of interest and we know that 2019 was a good year for investments. Does this seem legal?"

2 replies   |    25 views   |    Add Reply

jevd created a topic in Retirement Plans in General

My Retirement from the Employee Benefits Industry

"As of March 31, I have retired after being in the industry since 1970. I was on a securities settlement desk when the Dow first hit 1,000! I've thoroughly enjoyed my career and have seen many changes. I've been privileged to know all of you through these message boards, and all of you have been extroardinarily help in my pursuit of knowledge. Stay healthy in this stressful time. May God bless you all."

3 replies   |    49 views   |    Add Reply

Belgarath created a topic in Retirement Plans in General

Transaction Privilege, Use, and Severance Tax Return for Arizona Dept. of Revenue -- (TPT-EZ)

"One of our CPA contacts, for a client NOT located in Arizona but in Northeastern U.S., received this form from the Arizona Department of Revenue. We don't administer the plan, but the CPA has never seen such a form, and asks whether we know anything about it. I certainly don't. The plan in question is a Union, and it's a defined benefit plan. The form is for a 'TPT License' and says that penalties will apply if you haven't paid. We told the CPA we knew nothing about it, but for my own information, do any of you know anything about this? Is this a 'normal' thing that actually applies to a defined benefit or other qualified plan in Arizona, perhaps similar to the (often ignored) loan document fee in Florida?"

2 replies   |    30 views   |    Add Reply

Purplemandinga created a topic in 401(k) Plans

Daily Testing Method for Coverage

"Client stablished a plan in 2018. Here are the relevant plan provisions:

[1] Plan effective date: 1/1/2018

[2] Plan does not exclude comp prior to participant entering plan

[3} Eligibility for profit sharing contributions was Age 21, 1000 hours in a 12 month period, entry each 1/1 and 7/1

[4} To receive a profit sharing allocation a participant must be employed on the last day of the plan year

[5] Method to correct coverage failures for nonelectives is to 'Add Just Enough"

[6] Profit Sharing formula was discretionary, 'New Comp -- One Group per Participant'

[7] There is no one year hold out rule for eligibility or vesting

[8] There is no 5 year rule of parity rule for eligibility or vesting

The client gave us a census with 14 individuals who were employed at some point during 2018. There were 3 eligible HCEs (1 of which was not an owner), and 4 eligible NHCEs. Before the end of the year the sponsor terminated employment of all eligible NHCEs. The termination wasn't nefarious, a large project ended and no longer needed these employees. The owners, of which there were 2 gave themselves each a 30k profit share on 12/31 of that year. There were no other contributions. Using the annual coverage testing method the plan fails coverage and requires pulling back into the allocation several employees who had terminated (because of the employed on the last day rule). General testing required that those employees collectively receive an additional 42k in allocations to pass nondiscrimination. The partial plan termination didn't help the situation either.

If the plan uses the daily testing method for coverage on the last day of the plan year when the allocation was made, it passes coverage because there were no eligible NHCEs on the last day. Because of this there is no nondiscrimination issues. Is this allowable or am I missing something?"

0 replies   |    22 views   |    Add Reply

ratherbereading created a topic in 401(k) Plans

Gateway Contributions Went Way Up

"Plan wants to max out 3 partners and give 2 other partners $20,000 each. Staff gets 5%. Employer money is profit sharing only -- not a SH plan, no match. Plan is TH. Two terminated participants are not getting the 5% gateway or a TH allocation because they were not employed on the last day of the plan year. Section 401(a)(4) test fails unless I give staff 9%. The scenario is very similar to 2018 and it passed with 5% to staff, no contribution to 1 terminated participant. Am I missing something?"

1 reply   |    28 views   |    Add Reply

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