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Message Boards Digest

May 29, 2020

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

Stash026 created a topic in Defined Benefit Plans, Including Cash Balance

Restatement of Cash Balance Plan Document

"I know the deadline to restate DB Plans for PPA had been April 30, 2020. Due to the lockdown, was that extended?"

2 replies   |    41 views   |    Add Reply

PensionPro created a topic in 401(k) Plans

Adding 3% SH Nonelective Contributions Mid-Year But Only for Certain Employees

"A non-safe harbor 401(k) plan with 3 months eligibility wants to add the 3% SH nonelective by December 1 as provided by the SECURE Act. However, they only want to add this feature for not otherwise excludible employees who are age 21 and have a YOS. They will test the otherwise excludible group under ADP/ACP. Can they do this?"

1 reply   |    42 views   |    Add Reply

BG5150 created a topic in 401(k) Plans

Missed Roth Deferrals: Participant Now at a Disadvantage Due to Taxable Earnings on Correction in the Form of a QNEC?

"So the Employer did not take out 401(k) from bonuses. Correction is a 50% QNEC (with earnings). The participant's deferrals are Roth, though. Is she now losing out because the earnings on the QNEC are taxed, where the earnings on a Roth deposit wouldn't have been?"

1 reply   |    34 views   |    Add Reply

TPApril created a topic in 401(k) Plans

Both Parent and Wholly-Owned Subsidiary Are Participating Employers -- It's a Multiple Employer Plan?

"Company A owns Company B. Both companies run separately and have different EIN's. Company A wants to offer one plan covering all employees equally in both plans. Single or multiple employer?"

6 replies   |    61 views   |    Add Reply

Belgarath created a topic in 457 Plans

Distribution Expenses Charged to Participant's 'Account'

"Tax-exempt 457(b) plan. Participant retiring, and is going to take monthly installments for some number of years. The recordkeeper or TPA or whoever handles this is going to be charging a monthly fee to calculate each month's distribution. Employer wants to know if this can be charged to the participant's "account."

I've reviewed their plan document, and it is silent on this issue. It provides for payment of Trustee fees form the plan assets if it is a Governmental plan, but this isn't.

While it seems reasonable to have fees charged to the participant's account, (which is a general asset of the employer, not in a Rabbi Trust), I can't find anything specifically addressing this issue in the regs. Is this just a matter of State law? Or have I missed something? Anyone ever dealt with this issue?"

2 replies   |    26 views   |    Add Reply

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

Qualified Loan Offset -- Oddball Situation

"Several pieces come into play here. Employer A has a 401(k) plan. Employee X has a participant loan, and terminates employment in December of 2019. However, Employee X continues to make repayments on the loan, as permitted under A's plan. Employee X subsequently goes to work, for Employer B. In May of 2020, Employee X is laid off from employer B, and is a 'Qualified Individual' for COVID purposes. Employee X now defaults on the loan with Employer A's plan.

Whew! First, purely with regard to the COVID loan delay provisions under the CARES Act -- Assuming employer A's plan will allow the CARES Act delay, would it apply to a terminated participant from a different employer? I incline toward this being an employer decision when they do the amendment, but I'm not certain.

Second, at the very least, there is a delay in the deemed distribution/offset due to the IRS Notice 2020-23 provisions applicable to all loans with due dates during the applicable period.

Finally, when this loan does default and is offset, is this a 'Qualified Loan Offset' under IRC 402(3)(c)? I would tend to interpret the statute that this would only apply if the offset occurred due to the termination with Employer A, and not because of a termination with a subsequent employer. Thoughts? Other observations?

(ii) Qualified plan loan offset amount. For purposes of this subparagraph, the term 'qualified plan loan offset amount' means a plan loan offset amount which is treated as distributed from a qualified employer plan to a participant or beneficiary solely by reason of -- (I) the termination of the qualified employer plan, or (II) the failure to meet the repayment terms of the loan from such plan because of the severance from employment of the participant."

0 replies   |    19 views   |    Add Reply

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