Message Boards Digest

September 24, 2020

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

Christine Roberts created a topic in Cafeteria Plans

Lifestyle Spending Accounts: Animal, Mineral, or Vegetable?

"Lifestyle spending accounts are a trending after-tax benefit consisting of employer after-tax reimbursement of lifestyle products and services such as personal coaching, fitness wear and gear, pet boarding, personal training, etc. Employers choose a yearly maximum and only pay out documented reimbursement requests, up to the maximum limit. Employer deducts reimbursed amounts as taxable compensation to employees. Just wondering if anyone out there has formally classified this 'benefit' as either a payroll practice, benefit plan, or addressed potential constructive receipt issues."

3 replies   |    39 views   |    Add Reply

katiejoseph created a topic in Employee Stock Ownership Plans (ESOPs)

How Do You Solve a Problem Like Maria? Or UBIT Shares in an ESOP?

"I am curious to hear the group's thoughts on what to do about UBIT shares (that is, shares in an S-corp that were long ago transferred from an ESOP to a non-ESOP portion of the plan in order to avoid a failing 409(p)).

Here are the ideas we've come up with so far: [1] Have the trustee sell the UBIT shares to the employer. [2] Provide NHCEs with a one-time, voluntary election to use cash allocated to their accounts in the ESOP portion of the plan to purchase UBIT shares, with purchased shares returning to the ESOP portion of the plan, and tracked so that they are not re-allocated to disqualified persons. [3] Add an in-service distribution option to the non-ESOP portion of the plan.

Do you read CCA 201747007 as precluding option 2? We had a client do something similar years ago and get a determination letter on it, but that occurred before the CCA came out.

If all of the participants in the non-ESOP portion of the plan are HCEs, we think there's a 401(a)(4) problem with option 3, since the ESOP portion of the plan will not offer the same in-service distributions. We do not think Treas. Reg. Section 1.409(p)-1(b)(2)(v)(B) addresses the problem. Other than adding the same in-service distribution to the ESOP portion of the plan, do you see a way out of the 401(a)(4) problem?

Any other ideas? If so, have you gotten a determination letter on them?"

0 replies   |    17 views   |    Add Reply

TPA Bob created a topic in 401(k) Plans

New Safe Harbor 3% QNEC; Cutting It Close on the 3-Month Rule

"Establishing new safe harbor 401(k) plan. Have established 401(k) effective for October 1, using 3% QNEC. Effective date of Plan is January 1, 2020. Employer mistook when the first payroll would be in October. Instead of being October 8, it's October 1 (actual payroll date). The enrollment meeting is scheduled for September 30, after when the October 1 payroll will be called in. Next payroll to be paid October 15 (bi-weekly). I see nothing except the '3 month rule' and find no exceptions. Because we are using the QNEC for the safe harbor, does anyone have an opinion on delaying until October 15 the first 401(k) deferral from employees' paychecks?"

2 replies   |    45 views   |    Add Reply

TPApril created a topic in 401(k) Plans

Doctors with Separate Plans; Staff in Another Plan

"Doctors' group has one main 401(k) plan for staff and each doctor has separate plan (due to historically having separate plans even though plan provisions and investment opportunities presently mimic the main plan). Eligibility requires 1 year of service. Can a doctor start their own plan in the year of hire and make contributions to that plan even though they would not have been eligible to make contributions in the main plan?"

7 replies   |    48 views   |    Add Reply

TPApril created a topic in 401(k) Plans

Self-Employed Income and Contribution Limits

"Per CPA of a married couple's plan, for self-employed, 415 contribution limit is apparently based on 'Total Income.' The Total Income includes wages and items on Schedule E such as rental and passthrough, as well as Schedule D for capital gains. The amount that was contributed for the plan exceeded what was determined to be wages. Self-Employment tax was based on the full Total Income. Can contributions also be based on the full Total Income? I haven't seen this before. Here it exceeds what was assigned as Wages."

2 replies   |    29 views   |    Add Reply

ESI2015 created a topic in 401(k) Plans

MEPs, PEPs, and Exchanges

"Has anyone found a good comparative chart that is a resource/tool for comparing the various aspects of MEPs, PEPs, and various group plans that providers might define as an exchange or a MEAP?"

1 reply   |    13 views   |    Add Reply

Scuba 401 created a topic in 401(k) Plans

COVID-Related Extension of Time for Providing Safe Harbor Notices?

"Does anyone recall whether there was any general relief concerning the timing of notices such as the safe harbor notice? I recall something general coming out in the beginning of the pandemic. EDIT: Ok I found it. It was an EBSA extension for Title I notices. I don't think applies to safe harbor notices."

0 replies   |    21 views   |    Add Reply

Peter Gulia created a topic in Operating a TPA or Consulting Firm

May a Plan's Administrator Override the Section 3(16) Service Provider?

"With those recordkeepers and third-party administrators that offer a Section 3(16) service for the service provider to decide claims for a distribution, including a hardship distribution: [1] Does an employer/administrator want a power to override the service provider's decision? [2] Does a Section 3(16) service provider want the employer/administrator to have such a power (even if the employer/administrator doesn't want the power)? BenefitsLink mavens, what's your experience about what's happening?"

5 replies   |    34 views   |    Add Reply

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