Message Boards Digest

September 15, 2020

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

Toy Cannon created a topic in Defined Benefit Plans, Including Cash Balance

Adding Years of Service

"Under a defined benefit plan (pension), are there circumstances under which a non-profit employer may credit an Highly Compensated Employee (HCE) years of service toward the pension benefit? For example, having reached 33 years of service, can they credit 7 YOS so when the employee reaches normal retirement age they receive the same amount they would have if they had worked the 7 years (excluding potential raises)? The reasoning would be it saving the company money by taking the higher salary off the books."

7 replies   |    51 views   |    Add Reply
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mjf06241972 created a topic in Retirement Plans in General

Employer Profit Sharing Contribution Limit

"Client did not deduct the 2018 employer profit sharing contribution and will be deducting on 2019 return. Does this amount get used in the calculation of the max employer contribution (the 25% rule) for the 2019 employer calculation?"

1 reply   |    34 views   |    Add Reply

ufo9 created a topic in 401(k) Plans

Hardship Withdrawal -- Can I Apply Without My Employer Knowing the Reason for the Hardship?

"I'm in immediate need for hardship withdrawal, I can also go with a loan, but I am inclined towards withdrawal, because, for a loan, I would need to pay it immediately if my employer let me go for any reason. How does that process work? To whom do I send documentation? Would my employer be notified/examine my documentation, or are there protection laws such that I don't have to fully disclose the situation?"

5 replies   |    59 views   |    Add Reply

BruceM created a topic in Investment Issues (Including Self-Directed)

Wondering About Some ESG Issues and Investment Adviso Responsibilities

"I'm retired, so this does not involve my present client experience, but I'm reading quite a bit these days on ESG investing and the apparently growing interest by employees and other clients. [1] Holding or not holding a stock or fund -- holding that stock has nothing to do with the ability of the company to be profitable, yet I never see this addressed in the articles I'm reading on ESG qualifying stocks. I can certainly understand that there may be 'feel-good' component to this on the part of the client and perhaps some virtue signaling. But it would seem logical to me that in the client discussion would be a paragraph on how ownership/non-ownership does not affect the company's performance and instead, the buying of the company's products/services does this. [2] What constitutes an ESG qualifying company? Other than broad qualitative factors, what would an IA use as quantifiable selection criteria if individual stocks were used rather than ESG funds?"

0 replies   |    11 views   |    Add Reply

Becky Schwing created a topic in 401(k) Plans

Our Accounting Firm Forgot to Deposit Our 401(k) Deferrals

"I have a partnership. For 2018 the partners were going to defer $18,000 in 2019 for the 2018 plan year. The plan is a safe harbor basic match. I provided them the safe harbor match amount based on the $18,000 each they were supposed to deposit. The problem is, they had some changes to their accounting group and they forgot to deposit the 401k deferrals even though they did fund the safe harbor match. The match was like $14,000. What are the possible corrective options for this? Can they forfeit the match and use it to offset their 2019 match? Or do they have to allocate that ineligible match as a profit sharing contribution for 2018? Any other ideas? It was just an oversight on the part of the accounting group."

3 replies   |    38 views   |    Add Reply

cathyw created a topic in Retirement Plans in General

Selective Vesting under a Nonqualified Deferred Comp Plan

"The plan sponsor maintains a top-hat NQDC plan with Rabbi Trust (in addition to its 401(k) plan) which includes employee deferrals and employer match. The plan uses a 3-year cliff vesting schedule for the match. A participant is being terminated, and the plan sponsor wants to fully vest his match account ($175,000). I suggested that they apply the vesting schedule as is, follow the plan's provisions to forfeit the $175,000 which the plan sponsor can use towards its future match contributions. The plan sponsor would then pay him a severance/bonus of the $175,000 so that the financial effect on the plan sponsor is the same. For various reasons, they don't want to pay him the severance/bonus from the company.

Is there any problem with amending the plan to provide for 100% vesting for this one participant, other than possibly triggering FICA tax? The plan also has a risk of forfeiture in the event of termination due to theft or violation of a covenant not to compete."

0 replies   |    22 views   |    Add Reply

52626 created a topic in 401(k) Plans

True-Up Feature Added Mid-Year

"Plan has a fixed match 50% up to 4%. Effective 10/15, the match was changed to be discretionary -- the employer will match 50% up to 6% -- funded each payroll for the remainder of 2020. In addition, the employer added the true-up feature as of 10/15/2020 for the 2020 plan year. On 12/31/2020 when the true-up is calculated, is the matching contribution based on the formula in place as of 12/31? Therefore, even though the match was 50% up to 4% for the first 10 months, you use the total wages and deferrals as of 12/31 and determine the true up base on the 50% up to 6% formula?"

2 replies   |    40 views   |    Add Reply

justatester created a topic in 401(k) Plans

Moving from a MEP to a SEP Mid-Year

"An employer is part of a Multiple Employer Plan. They decide to leave the MEP and establish their own SEP. [1] Would the SEP plan be considered a 'new' plan? [2] If new plan is established with an effective date of 5/1/2020, can the contributions/compensation be combined in the new plan for the entire year? (assume 12/31 PYE for both). [3] Does it matter if it's a Safe Harbor plan?"

0 replies   |    22 views   |    Add Reply

Jakyasar created a topic in Retirement Plans in General

IRAs Sprinkled on Top of Huge PS Cake

"New client: a partnership, 2 partners, each making over $500k. Deducted full $56k profit sharing for 2019. Now I am told that they've been making IRA contributions as well for many years in addition to maximizing their profit sharing contributions. Are IRA contributions counted toward the 415(c) limit?"

3 replies   |    27 views   |    Add Reply

kgr12 created a topic in 457 Plans

For-Profit Subsidiary of a Non-Governmental 501(c)(3) Not-For-Profit

"A 501(c)(3) organization forms a 100% wholly owned for-profit subsidiary. The CEO of the 501(c)(3) is retiring 12/31/20, but they want to sign him to a part-time contract with the for-profit to help get it launched effective 1/1/21. His services would be provided exclusively to the for-profit gong forward, and he would be paid from its payroll and not the 501(c)(3)'s. The services would be meaningful/substantial -- probably more than 20% of full-time, but less than 40%. They want to pay a meaningful signing bonus up front, but they could be convinced to spread it out over a longer period built into the part-time salary. The contract would be for 12 to 24 months. A couple of questions/issues come to mind:

  • Would the arrangement in any way implicate section 457 by virtue of the fact that the for-profit is 100% controlled by the 501(c)(3)?
  • Would the arrangement in any way implicate section 457 by virtue of the fact that the individual previously was employed by/CEO of the non-profit parent?
  • Any other issues spring to mind?"
0 replies   |    16 views   |    Add Reply

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

Spread a 2020 Contribution Among 2019, 2020 and 2021 for Funding and Deduction Purposes?

"Plan lost $1M in investment value in 2019. Company deposited $1.25M in September of 2020, which would meet the requirements for taking a deduction for 2019. Now the Company wants to count the $1.25M deposit partially for 2019, 2020 and 2021. I know it can be used for 2019 and 2020, but what about 2021 for both deductions and minimum funding requirements?"

2 replies   |    28 views   |    Add Reply

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