Message Boards Digest

September 9, 2020

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

Lou81 created a topic in 401(k) Plans

Controlled Group Here?

"Three companies. Father owns 100% of Companies A & B. Daughter (over age 21) owns 51% of Company C. Father owns 49% of Company C. My conclusion:Companies A and B are a controlled group, but C is not in a controlled group. Agree?"

2 replies   |    51 views   |    Add Reply

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WCC created a topic in 401(k) Plans

Forced Cash-Out of Participants Whose Employer No Longer Participates in Plan?

"Companies A and B were related due to a controlled group. Company A sponsors a qualified plan, in which Company B is a participating employer. Due to recent ownership changes the companies are no longer related. Company B decides to terminate all employees and the entity will no longer exist. Company B will be removed as a participating employer. Company A does not want the balances of Company B participants to remain in the plan due to administrative concerns. What can be done with the balances of the terminated Company B participants who have funds in the plan? Is there any exception to forcing out a participant whose balance exceeds $5,000 in this situation? I have not found this situation addressed in the plan document."

3 replies   |    47 views   |    Add Reply

AJC created a topic in 401(k) Plans

Maxing Annual Additions Plus Funding Backdoor Roth

"I have a client under age 50 who makes $500K annually and has been contributing the annual additions limit under his 401(k) plan and also contributing to a backdoor Roth (via traditional IRA) for the past half-dozen years or so. I just learned about the client funding the backdoor Roth. The client's investment broker says all is well. I admit that I have not been this close to a backdoor Roth before. Is it possible to contribute the annual additions limit in the 401(k) plan (all pre-tax) and fund a backdoor Roth? How is it possible without exceeding the annual additions limits? And if it is wrong, how is it corrected?"

4 replies   |    61 views   |    Add Reply

SW77 created a topic in 401(k) Plans

Key Employee Determination for a Short Plan Year

"We administer a plan that was amended from a 12/31 year-end to a 6/30 year-end, creating a short plan year from 1/1/2020 to 6/30/2020. The limitation year is the plan year. The plan has an Officer (not previously a key employee) who has compensation of $93,000 for the 6-month short plan year ending 6/30/2020. Regarding the top heavy test and key employee determination (Officer Test) for a short plan year: the EOB indicates that although there is no specific regulatory guidance, it would be reasonable to either prorate the compensation test for the short period, or to annualize an employee's actual compensation for the 6 month plan year. Curious to what others may have done or would do in this scenario for key determination."

0 replies   |    25 views   |    Add Reply

Joe L created a topic in 401(k) Plans

402(g) Violation in this Plan Combination Scenario?

"Participant X is in two 401(k) plans for 2019. He is less than 50 years old. In plan A he defers $10,000 in 2019. In plan B he defers $10,000 in 2019. In plan A, he is an HCE. The plan fails ADP testing and he is refunded $1,000. Has he violated 402(g) for 2019?"

1 reply   |    31 views   |    Add Reply

Pammie57 created a topic in 401(k) Plans

Partner Deferred on Draw But Ultimately Had Negative Self-Employment Income

"For 2019, each of the two partners of a company deferred $13,000 during the plan year based on their draw. Once we received the K-1 from the CPA, it is evident that both partners had a LOSS for the year of $41,500 each (no guaranteed payments either). Do they receive a distribution of the ineligible deferrals plus earnings or does it forfeit and stay in the plan? What code section does this violate -- 415? Or something else?"

1 reply   |    25 views   |    Add Reply

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