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September 25, 2020

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

Pammie57 created a topic in 401(k) Plans

Safe Harbor Match for Owners Must Get True-Up at Year-End?

"We have a plan where the owners did not contribute the full allowable safe harbor match for themselves for 2019 (4% basically). They did max out deferrals for 2019. We have always thought that the owners' SH was just like everybody else's -- it had to be trued up at year end. They get K-1s. Has that changed? I was thinking I heard a discussion recently on a Relius webinar."

4 replies   |    49 views   |    Add Reply

thepensionmaven created a topic in 401(k) Plans

Handling Excess Contributions to a SIMPLE IRA

"Broker came to me with a question. I have not been involved with the SIMPLE. (Years ago, we heard the expression 'SIMPLE plans for simple minds.') His client has a SIMPLE IRA with the 3% match. Apparently the owner already has contributed more than the maximum deferral. Can a safe harbor match be set up to fund the difference for 2020 so the owner does not have to take any money back? Or would the excess need be returned?"

0 replies   |    13 views   |    Add Reply

Bill D. created a topic in 401(k) Plans

Eligibility for Safe Harbor Contributions Under These Two Rehire Scenarios

"Plan has dual elig. & entry, 3 months svc. & quarterly entry for deferrals, and 1 year, semi-annual entry for safe harbor match, safe harbor added in 2019. Two scenarios I'd appreciate some help with:

  1. Former participant terminated 2018, rehired 8/1/2020, was a participant for several years prior to 2018 termination. Is this person eligible to defer and receive safe harbor immediately starting on rehire of 8/1/2020?
  2. Similar scenario, but this employee has been working for several years, was eligible in past, but never wanted to defer. He now wants to. Can he start deferring now on paydate 9/25/2020, and also receive the safe harbor for 9/25? Or would he be required to wait until the 1st paydate after 10/1 deferral entry, and would he have to wait until 1/1/2021 to start receiving safe harbor?"
1 reply   |    31 views   |    Add Reply

ratherbereading created a topic in Form 5500

Late Deposits Reported on the Schedule H

"Large plan with late deposits in 2017. Corrected in 2018 with applicable earnings deposited in 2018 and 5330 submitted in 2018. All done. According to the following 5500 instructions, these late deposits go on the 2019 5500 for the last time, correct?

'The total amount of the delinquent contributions must be included on line 10a for the year in which the contributions were delinquent and must be carried over and reported again on line 10a for each subsequent year (or on line 4a of Schedule H or I of the Form 5500 if not eligible to file the Form 5500-SF in the subsequent year) until the year after the violation has been fully corrected by payment of the late contributions and reimbursement of the plan for lost earnings or profits.'"

4 replies   |    50 views   |    Add Reply

Jakyasar created a topic in Retirement Plans in General

Employee/Owner Terminates in Mid-2020; Still an HCE at End of First Plan Year?

"Looking into designing a new CB plan for an existing 401k plan and trying to determine if Joe is an HCE or not for 2020. Joe was 50% owner in 2019 and received $75k in salary. Joe terminated in 2020 (not informed about the hours yet but let's say over 500) and sold his share to the other owner on 5/15/2020. The new plan will be effective 1/1/2020 but will be adopted in November 2020. The val date will EOY. Because Joe was an HCE as of 1/1/2020, is he an HCE for all years by ownership? Anything I'm not thinking of? Maybe the top 20% rule (I'm not sure how it would apply here and effectively when)?"

3 replies   |    36 views   |    Add Reply

MikeOD created a topic in 401(k) Plans

Eligible for a Second 401(k) COVID Hardship Withdrawal?

"About 4 months ago I took out a COVID-related 401K hardship withdrawal through my employer. It was for $28,000. I took a large pay cut and my wife lost her job.

It helped greatly but I worry about the future and would like to take a 2nd withdrawal for the amount of $13,000. It pains me to do it, but I want to be better safe than sorry.

Is a second withdraw even possible? I understand the max amount is $100,000. My wife is still out of work and I am still at a lower wage. I also totally understand all the tax repercussions involved in withdrawing the money early. I plan on talking to my employer about this, but was looking for a little outside input first."

0 replies   |    21 views   |    Add Reply

Rebecca Kistler created a topic in 401(k) Plans

Immediate Participation for Owners at Cross-Tested Plan Start-Up

"We have a brand-new cross-tested plan. For the 401(k) portion, the eligibility requirements are 21/1 YOS (1000 hours). However, the owners would like a special participation date for immediate participation for themselves (no employees in either adopter). This is a plan for two new adopting employers, and the business entities were established in 2019 and 2020 respectively. For one owner, he has been performing services and on payroll since 2019. For the other owner, he started performing services on 1/3 and will be on payroll 10/1 of this year. The document has a specified place for special participation dates, but I wasn't sure what the date should be.

My question is, when can this special participation date be? Does it follow with when they started performing services for the business entity or when they started on payroll? In other words, with an owner who has performed services 1/3, but not on payroll until 10/1, what special participation date would I need to use?"

4 replies   |    34 views   |    Add Reply

EBECatty created a topic in 409A Issues

409A Alternate Payment Amounts

"I'm hoping to get input on an atypical nonqualified plan design. Say you have a standard NQDC plan that allows for employee deferrals, employer contributions, etc. All distributions would be in a lump sum on the earliest of termination, death, disability, or change in control. The participant would have no control over investments in their account.

However, the amount of the payment would differ based on which event triggers the payment. Termination (for any reason), death, or disability would result in a payment of the participant's account plus a specified and reasonable rate of interest. But a change in control would result in a payment of the participant's account plus a rate of return based on the increase/decrease of the employer's stock over the period of the employee's participation in the plan.

So, for example, a participant is in the plan for five years and has an account balance of $100,000, then retires. The payment amount would be $100,000 with a prespecified interest rate of, say, 5% applied over the five years of participation.

But if the same participant is employed at a change in control, the payment amount would be $100,000 increased (or decreased) by the increase (or decrease) in the value of the employer's stock over the five years preceding the change in control.

The 409A Handbook has an example in the anti-toggling section stating a 'toggle' between amounts is compliant because it doesn't change the time or form of payment. I don't see anything else that immediately jumps out at me as impermissible, but would appreciate any thoughts."

4 replies   |    26 views   |    Add Reply

BG5150 created a topic in Form 5500

Book ADP Refund as Liability?

"Do you book ADP refunds as a liability on the 5500? I have an auditor who insists on having the ADP refunds for 2019 booked as a payable on the 5500. I've never done this. What do you guys do?"

3 replies   |    23 views   |    Add Reply

BG5150 created a topic in Retirement Plans in General

Plan Termination Scenario --Is This Particular Participant 100% Vested?

"Participant left employment July 2019 and is/was 60% vested. Employer terminating the plan on November 1, 2020. If this person takes a distribution next week, will they have to be 100% vested? From the IRS website: All affected participants become fully vested in their account balances on the date of the full or partial plan termination, regardless of the plan’s vesting schedule. (Emphasis added.) So, the date of the Plan Termination is after the date he is taking the distribution."

2 replies   |    29 views   |    Add Reply

thepensionmaven created a topic in 403(b) Plans, Accounts or Annuities

403(b) and 401(k) -- Alphabet Soup

"I have not dealt with 403(b) plans for at least 30 years.

We set up a corporate profit sharing plan for an employer who is a 501(c)(3) back in 2000; were told by the insurance agent, now known as a 'financial advisor', at the time the client had an old 403(b) plan (an old Equitable contract that is no longer marketed, that they terminated and were going to roll over into this new profit sharing plan.

The client has been making a 3% contribution each year to the profit sharing plan.

The 401(b) was employee only, so no 5500s. This was plan #001, which we were told was terminated.

I pulled the trust report from Equitable for 2019 for the profit sharing plan, and noticed employee contributions for the first time, called the client who told me the old 403(b) is still active and those contributions should have been made to the old 403(b) annuity accounts.

I was about to suggest to the client that the plans be merged. Since no 5500s were done or needed as there were no employer contributions, (IRS would have no record) a 'silent' termination -- i.e., rollover to plan #002 and show as a transfer in on From 5500-SF. In so doing, however, I would need amend the profit sharing to a 401(k) going forward, but the plan would need to be ADP tested or the employer 3% profit sharing contribution would need be the 3% SHNE with 100% vesting. Currently the profit sharing is 100% after 2 years. Any thoughts going forward?"

0 replies   |    12 views   |    Add Reply

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