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Message Boards Digest

August 3, 2020

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

OR-ERISA created a topic in Retirement Plans in General

Looking for Sample Interim Distribution Policy for Pooled DC Plan

"I'm looking for sample policy language that would guide trustees in conducting interim valuations for a pooled plan that has been annually valued in the past. This topic was discussed in 2012, but I'm curious as to whether anyone has come up with a policy since that time. Some posters in the 2012 forum discussion advocated for not adopting a policy and instead leaving interim valuations up to the discretion of the trustees via broad interim valuation plan language. The thought being that the policy would potentially force the trustees to take action when it practically does not make sense. If no one has policy language, has anyone seen any triggers of interim valuations that were helpful, or mechanisms that would help mitigate loss in the case of large distributions taken after a substantial market drop? I am not so concerned with nondiscrimination issues at this point in the analysis."

2 replies   |    46 views   |    Add Reply

Will.I.Am created a topic in 401(k) Plans

One Participant Plan Despite Controlled Group Caused by Family Attribution?

"I have a 401(k) plan that covers a family group (Father, Mother, children). The entity is a partnership (parents are the owners) and they will pay the kids a wage until they are 18 years old and have the children participate in the 401(k) plan. When a child turns 18 they will set up an S corporation for the child and set up a separate 401(k) plan. My question: is this separate 401(k) plan for the child's S corporation (the plan covers only the child) a 'one-participant' plan and can it wait until it has $250,000 to file a 5500-EZ? Or does the family attribution of the ownership of the child being attributed to the parent's cause the plan to not be a 'one-participant' plan? I'm fairly sure the child's entity would be in a controlled group with the family partnership but because the plan only covers the child's S corporation perhaps it's still considered a one-participant plan."

1 reply   |    46 views   |    Add Reply

Ian created a topic in 401(k) Plans

CARES Act Suspension of Loan Repayment

"Can a plan that adopts the CARES Act loan repayment delay provision extend the plan's cure period when there is a deemed distribution of an outstanding loan? Or maybe it's even required to do so?"

4 replies   |    49 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

In-Plan Roth Rollovers vs. Roth Conversions

"For an in-plan Roth rollover, the money can only be converted to Roth if the participant is otherwise eligible for an in-service distribution by law. (I realize the events don't need to be consistent for regular distributions versus in-plan roth rollovers.) Therefore, post conversion, are the amounts pure rollover, and hence subject to the rollover distribution rules? What about top-heavy treatment? Is the conversion added back for 5 years as an in-service withdrawal? I'm trying to figure out whether, upon an in-plan Roth Rollover, I need a 'Roth Rollover-Profit Sharing' in the way I know I do upon a Roth conversion."

3 replies   |    57 views   |    Add Reply

matthny created a topic in 401(k) Plans

Mechanics of Updating Plan Document Involving an Asset Custodian

"I'm looking at a custodian that offers model plan documents for their 'individual 401(k) accounts.' They offer traditional and Roth accounts. Because the model documents are a little restrictive in their options/elections, we're looking at bringing in more customized documents via a TPA. Something I'm trying to figure out in the mechanics of this updating of document is whether the broker who has custody of the assets (and where the accounts were created) 'needs to know' if we updated the underlying plan documents. The role of the custodian here appears to be simply reporting on Form 1099-R (or generating the data for reporting using that form). The question is, if/when we might implement a new set of plan documents, is there any reason (other than the custodian desiring it) that the custodian not being informed of this might be a problem in terms of plan compliance or tax compliance?"

4 replies   |    36 views   |    Add Reply

Gilmore created a topic in Correction of Plan Defects

Sponsor Contributed Too Much as SH Nonelective Contributions, and Some Went Out the Door

"A plan moved from a 3% nonelective safe harbor prior to 2019 to a basic safe harbor match for 2019. Through some miscommunication with payroll they continued to allocate a 3% nonelective during 2019, so some participants received too much safe harbor and some not enough. The net effect is an overcontribution to the plan because the participants who received too much exceeded the participants who need more.

Two participants who received too much also took distributions before the error was realized. One took a distribution in 2019 and one in 2020. The amounts are not huge -- $500 for the 2019 distribution and $1,500 for the 2020 distribution.

Because the plan sponsor already has an excess in the plan, they would like to use some of the excess to treat the ineligible distributions as non-recoverable from the participants. Am I correct, however, that in both cases the participants need to be informed that the ineligible portion of their distributions were not eligible for rollover and must contact their new custodians to distribute the ineligible amount plus earnings, corrected 1099s will need to be completed, and in the case of the 2019 distribution, the participant will most likely need to amend their tax return?

I'm trying to think of a way in which the contributions could be considered as actual contributions for these two non-highly compensated employees to avoid further correction. The plan document does allow for profit sharing in which each employee is their own allocation class, but also requires last day of employment (which disqualifies the 2019 distribution employee), and the 2020 distribution employee would not be fully vested in profit sharing."

1 reply   |    17 views   |    Add Reply

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