Message Boards Digest

August 24, 2020

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

AKconsult created a topic in 401(k) Plans

Getting a Matching Contribution from Multiple Employers

"The plan is a multiple employer plan with 2 employers. The employers are related, BUT not enough to be a control group or ASG (attorney has already opined on this). One person owns 99% of company A which is a partnership and a small % of company B, which is a Corporation. He receives compensation from both entities. Both entities offer a basic safe harbor match, no other employer contributions.

Can this person split his deferrals between the 2 entities and get a full match from each entity? I am going back and forth on this. Because both entities are in the same plan (even though it is a multiple employer plan) do we would have to combine his pay and calculate just 1 match? I read that there is one combined 415 limit, but what if the owner received $285,000 in pay from each entity and deferred $13,000 from each entity and received $11,400 match from each entity? He would not be over the 415 limit. I think this would be OK if each entity had a separate plan, but is there anything about the MEP that would prohibit the full match from each employer?"

1 reply   |    52 views   |    Add Reply

DR245 created a topic in SEP, SARSEP and SIMPLE Plans

SERIOUS Mishandling of the VCP?

"I would be interested in receiving some good advice on what to do with this eroding situation since early February of this year. I did create an initial post on the issue and at the time, the fix was weeks away and results unknown as to how my boss would handle the entire situation. And to true form he let me (and others) down terribly, in my opinion. So I'm turning to the board for 'expert' advice based on my telling of what I perceive to be fairly factual evidence of wrongdoings and misdeeds and he should certainly be held accountable in some way. I have questions about the attorney's responsibilities in this as well.

I will try to be concise with what has unfolded. We have 6 current employees affected by the lost IRA contributions as of 2/1/2020 that were 'overlooked' for every current employee except one apparently. An ERISA attorney was hired to move forward with the VCP and as of 3/25/2020, we all had our new IRA amounts deposited into our accounts, fixing the error. My years affected were from 2013-2020 and others were very similar to that time frame. However the one co-worker who has been with the company for 15 years was not given anything during the VCP for reasons we are not aware of. The employer sat us down with a memo (attached) in hand and read from it verbatim, explaining the entire situation and what he planned to do about it. This is the part of the memo that shines a light on the employer's intentions: 'However, if an eligible employee was given an opportunity to make an election to defer into the Plan (and chose not to do so), no corrective contribution will be due for that employee.'

This individual was offered, what appeared at the time to be the SIMPLE IRA plan, by the plan representative in 2008 (the first year it was offered). The employee turned it down due to another investment that he was provided by the employer a year or two earlier and thought this was one of the same and didn't want to contribute from his check at the time.

What has come to certainly be known as the company SIMPLE IRA plan was never again offered in any way, shape or form to this employee and also to our current employees. This is why we all received our lost IRA for this lengthy time period, no questions asked, but this one employee was left out and he thinks it has something to do with the initial ask and decline in 2008.

Fast forward to the dust settling on the VCP and this employee drafts a 4 page letter explaining and pleading for some explanation as to why he was left out. Silence for quite a while until ultimately the employer decides it best that he go ahead and deposit his IRA portion, 5 months after the closure of the VCP.

Just to be clear, the employer did speak briefly to the employee shortly after the closure of the VCP and everyone else had received their "fix email". He was sorry that he couldn't do anything for the employee and he had the "document" with his signature (guessing the one from 2008 where he declined the deductions for that year). The employee asked to see the document and any evidence proving he had been asked each year and declined each time, to which none have been provided to this date.

Now, if this isn't bad enough with the employer trying to conceal and basically steal the money from the employees over the 12 year period, he tried to do it again to the one CURRENT employee AND still has not contacted any of the FORMER employees. I know of at least 4 former employee's that had worked for this company for 3-4 years each during this time frame (2008-2020).

How can this be? How can both the employer and the ERISA attorney have an opportunity to fix this egregious error and make the final decision to look over the 1 employee (with no investigation or even a question as to his status) and also not contact 1 former employee about this error and appropriate steps to fix their situations?

Something is terribly wrong here or I am terribly misunderstood how a VCP is supposed to unfold or at the very least, the requirements that the employer and ERISA attorney need to meet to finalize the VCP.

Please offer advice/suggestions as to what would be the next step in holding this employer/ERISA attorney accountable? I feel he purposely left everyone out the first time around (year after year) and when he had the opportunity to fix it (after getting caught), decided to screw some people over once again, including an employee who has been with the company since day 1 (2005). Also as a side note, the employer has ample opportunity to reveal the company IRA plan at the time of hire for us past 4 employees but never, not once, did the employee mention the IRA to any of us during the hiring phase. Thanks!

I'm attaching the actual MEMO [to this thread on the BenefitsLink web site], read verbatim by the employer at the company meeting on 2/25/20. I brought the entire IRA situation to his attention on 2/1/20: SIMPLE IRA memo.docx"

0 replies   |    64 views   |    Add Reply

eml691 created a topic in Retirement Plans in General

Plan Assets Invested in a Partnership; How to Distribute?

"I work for a TPA. We took over a profit sharing plan, where one of the former owners has assets invested in a partnership. He has passed away. How would the plan distribute his balance to his beneficiary?"

2 replies   |    77 views   |    Add Reply

Below Ground created a topic in 401(k) Plans

Excluding Phantom Stock Distributions for Purposes of Safe Harbor Match Calculations

"Client uses a 'Phantom Stock Program.' This type of program does not involve an actual exchange of equity, but does result in periodic payments which coordinate with actual dividends paid to actual stock holders. These payment are processed through payroll, and are shown on W-2 as taxable income (payroll taxation applies). These monies are paid only to a select group of HCE. The question is, can these monies be excluded for purposes of 401(k) Safe Harbor Match calculations? Would such exclusion violate the requirement to use Total Compensation under a 401(k) Safe Harbor Plan?"

2 replies   |    53 views   |    Add Reply

Ian created a topic in Retirement Plans in General

ERISA Anti-Alienation After Distribution of Retirement Funds

"Does ERISA anti-alienation still apply once funds are distributed out of the plan? I found an article from 2014 indicating that seven federal Courts of Appeal had ruled that anti-alienation does not apply and one has ruled that it does. Is that still the state of the law, or has something changed since them?"

3 replies   |    44 views   |    Add Reply

AlbanyConsultant created a topic in Retirement Plans in General

Controlled Group Compensation: Sole Prop Loss and S-Corp in Same Year

"Have a client that is a sole prop, but added an S-corp at the beginning of the year (calendar year 2019; sole prop was left open through 2019) and the employees were transferred to the S-corp as of 1/1/19. It's a controlled group, and the S-corp adopted the plan 1/1/19. The sole prop (which has only the owner, no employees) is booking a bunch of losses, so the net comp is going to be about -$5K, and the owner's S-corp W-2 is going to be $100K. What's the best way to determine the owner's compensation? Is it $100K? $95K? Something else?"

0 replies   |    16 views   |    Add Reply

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