Message Boards Digest

July 9, 2020

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

Coleen created a topic in 401(k) Plans

401(k) Contribution by My Employer Because I Opted Out of Health Coverage

"I have opted out of the healthcare plan at my current employer since I have healthcare through my husband. Since I opted out of our healthcare, my employer is contributing $4.54/hour to my 401K. My employer adds this money into my weekly pay as 'misc income' and then deducts it as H&W 401K. Is this legal or should my employer be contributing separately to my 401K and not through payroll?"

1 reply   |    36 views   |    Add Reply

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52626 created a topic in 401(k) Plans

Review of Vendor Contracts by Plan's Attorney -- OK to Pay Cost from Plan Assets?

"The plan sponsor's new legal counsel wants to review all contracts with their vendors. Due to the complexity of the agreements they want to use outside counsel or a consultant. Can the cost associated with this service be paid from the forfeitures account? Forfeitures are used to offset administration fees. This isn;t a plan design issue because it's just looking at agreements to be sure they're current and they encompass all features provided."

2 replies   |    43 views   |    Add Reply

thepensionmaven created a topic in 401(k) Plans

Notice 2020-52: Suspension of Safe Harbor Contributions for NHCEs for 2019?

"We know this applies to SHNE for HCEs, but I do not see any mention of suspension for NHCEs, such that ADP/ACP needs to be met the customary way and HCEs need go through the reductions anyway, through levelling, returning, etc. and the 3% top heavy needs to be for the full plan year. Question: how does this help the sponsor that can't afford the SHNE for NHCEs? Especially for 2019, when many sponsors will wait until end of year or accrue the contribution."

1 reply   |    27 views   |    Add Reply

bzorc created a topic in 401(k) Plans

Late QNEC Contribution is Doubled?

"Plan auditor determines that the plan did not follow the definition of compensation while performing the 2017 audit of the plan. Tells the plan sponsor to calculate the necessary QNEC at 25% of missed deferrals, plus appropriate match. Going out to do the 2019 audit, they find that the plan sponsor did not remit the QNEC to the plan until January 2020. The auditor believes that the sponsor should now go back and recalculate the QNEC at 50% because the remittance was after the close of the second plan year following the discovery and calculation of the QNEC. Is that correct?"

1 reply   |    26 views   |    Add Reply

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

Rule for Suspension of Benefits: Does Notice Make Any Difference Here?

"If a plan has the following language related to suspension of benefits:

'A participant who remains employed by the Employer after his normal Retirement date and who is to be credited with at least 40 Hours of service each month will have a Late Retirement Date on the first day of the month coincident with or next following actual termination of employment with the employer or change in employment status to a position in which the Participant would be expected to be credited with less than 40 Hours of Service each month. The Plan Administrator shall notify such participant that Monthly Retirement Income will not commence until his late retirement date and the Monthly retirement Income will be equal to that amount determined pursuant to 4.03.'

.... and 4.03 (late retirement) says:

'When a participant retires on his late retirement date, his Monthly Retirement Income shall be an amount equal or greater of: (a) his accrued benefit based on the Participant’s Years of Credited Service and Average Monthly Compensation as of his Late Retirement Date, and (b) the Actuarial Equivalent, as of his Late Retirement Date, of the Normal Retirement Benefit which would have been payable at his Normal Retirement Date. This benefit is payable in the Basic Form and commences on said Participant’s Late Retirement Date.'

... Then isn't it irrelevant if notice is given or not because the SOB language states that the monthly retirement income will be equal to the amount determined persuant to 4.03, which says the benefit will be the greater of the accrued benefit at the late retirement date or the actuarial equivalence of the NRB as of the NRD? Even if notice was given the particiapant should have had actuarial equivalance if it was greater than the accrued benefit and it wouldn't have been limited to NRB at NRD."

1 reply   |    19 views   |    Add Reply

Catch22PGM created a topic in 401(k) Plans

Interaction of Top Heavy and Excess Deferral Rules

"ABC Company has a deferral-only 401(k) plan (no match or non-elective provisions) with one key employee (Fred), who is the CFO and earns $250k per year. The ABC Company 401(k) Plan is top heavy. Fred is also employed by XYZ Company -- completely unrelated to ABC Company -- and participates in the XYZ Company 401(k) plan.

In 2019 Fred had a $10,000 excess deferral -- he contributed the IRS maximum in the XYZ Company 401(k) plan and $10,000 into the ABC Company 401(k) Plan. If the entire $10,000 that Fred contributed to the ABC Company 401(k) Plan is refunded as an excess deferral, is the ABC Company still required to make a top-heavy minimum contribution to non-key employees?

My initial reaction is no, because an excess deferral is not an annual addition, but I can't find anything that would support this. I have colleagues that feel ABC Company is required to make a 3% top-heavy minimum contribution since Fred contributed 4% of his compensation to the plan even though the entire 4% is being refunded as an excess deferral."

3 replies   |    41 views   |    Add Reply

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