Message Boards Digest

September 28, 2020

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

pixiebear created a topic in Form 5500

Reporting a Missed DB Plan Contribution

"I have a client with a DB plan who has decided to delay their contribution until 1/1/2021. Because there is an unpaid minimum contribution on line 11a, how would I answer line 11b about the reporting of missed contributions to the PBGC?"

2 replies   |    32 views   |    Add Reply

chibenefits created a topic in Health Plans (Including ACA, COBRA, HIPAA)

Can File a Late 1094-C Without a Letter 5699?

"Client discovers that 1094s have not been filed since 2016. They want to come forward and file and pay any penalties, but hopefully negotiate them down if possible. (We estimate that if the IRS actually imposes the full penalty, the number will be in the low 6 figures.) Any thoughts on how to do this? Just file the forms and wait to see what happens? Or try to do some type of 'submission'? Where would one even submit it?"

1 reply   |    37 views   |    Add Reply

401 Chaos created a topic in Cafeteria Plans

Companies within a Controlled Group Have Different Welfare Benefit Programs; Permitted by Section 125?

"Sorry, I'm not a health and welfare plan expert but I've come across a couple of situations recently that have me confused. In both, there clearly has been a controlled group with at least 2 different companies set up and with different welfare benefits at the different companies.

In the first group, they offered the same health plan and 401(k) plan across different companies but the company with all the execs also had group life insurance, vision, disability, etc., some of which was partially paid through a group cafeteria plan. Other companies in the group, however, did not offer welfare benefits beyond the group health but had folks, of course, participating in the cafeteria plan for health insurance premiums.

In the second group, they offered a robust, highly-subsidized health plan to the one company with all the executives and longer term / permanent employees along with a full suite of other welfare plans. The other company within the group, however, has only bare-bones group health plan with less employer contribution and no other welfare benefits. Apparently that company often employees individuals on a full-time but less long-term / permanent basis. Some individuals have been there years though. And they do get to participate in the same group 401(k) plan (which is how I came to this issue) but not at all the same welfare plans (including no ability to participate in the health FSA under the cafeteria plan that the parent company offers).

Assuming the different medical plans at the two companies both pass ACA muster (which is probably questionable on affordability), surely these arrangements cannot pass the Section 125 tests? When I asked about 125 testing though they all look like I'm from another planet. (That doesn't surprise me as I know that testing often gets ignored but I'm curious how brokers are setting up such disparate benefit offerings without a concern over various testing issues.) Am I missing something?"

3 replies   |    37 views   |    Add Reply

KdGal created a topic in Health Plans (Including ACA, COBRA, HIPAA)

Cash in Lieu of Group Health Plan Benefit?

"I have a client that offers group health insurance to its employees. The employer contributes up to $500 per month toward the cost of the benefit for each eligible employee. One employee does not enroll in the group health plan because he is covered by his wife's group health plan through her employer.

The employer has decided they want to pay this employee the $500 benefit that he is 'missing out on.' The employee and employer insist that this should be considered a non-taxable health insurance reimbursement. Their argument is that all the other employees receive the $500 employer paid benefit non-taxable.

From everything I have read, that's wrong, and it's considered cash in lieu and is taxable to the employee on his W-2. Agree?"

1 reply   |    31 views   |    Add Reply

TPApril created a topic in 401(k) Plans

415 DC Limit for Employee Becoming Participant in Mid-Year

"Employee enters calendar year plan on 7/1. 401(k) limit remains the max (based on age) as long as the pay supports it within the partial year of participation 7/1-12/31. Regarding the PS limit, I believe it also remains the max as long as the pay supports it within the partial year of participation. Correct? The comp limit would not be prorated in the participation period, because it's just when there is a short fiscal year that comp and 415 are prorated, correct?"

0 replies   |    30 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

Set Up a Qualifying Safe Harbor Plan by October 1 with Nonelective Contributions Not Effective Until November 1?

"Can I set up a new profit sharing-only plan effective 10/1/2020, and then have the 401(k) and Safe Harbor Nonelective Contributions not be effective until 11/1/2020? This would ensure that my plan year is at least 3 months long. I believe the answer is no, but many articles say "the plan year still must be at least 3 months" without being any more specific. Really the same old requirement that CODA must be effective for 3 months still applies. Although the SECURE Act amends the tax code, it's the regs that include the 3 month minimum."

3 replies   |    52 views   |    Add Reply

Jakyasar created a topic in 401(k) Plans

2 W-2's, 2 Full Deferrals in the Same Year

"I was asked the following by one of my CPA's for 2019. 'I have a client who has two W-2s and who is allowed to make catch-up contributions on her 401(k) contributions. On one W-2, she made traditional contributions of $25,000. On the other W-2, she made Roth contributions of $25,000. Because she is limited to the $25,000, can she just have the money distributed to her in 2020 and have a 1099-R prepared?'

Because one is deductible and the other is after-tax, how is this handled/corrected? I believe it is all for 2020 but which deferral is to be corrected?"

5 replies   |    68 views   |    Add Reply

alexa created a topic in 401(k) Plans

401(k) Plan -- Exclusions in Definition of Compensation

"In our adoption agreement we exclude, for deferral, match and employer discretionary contributions, 'all fringe benefits (cash and non-cash), reimbursements or other expense allowances, moving expenses, deferred compensation, and welfare benefits."

I am a new employee (having just started in July) and I'm working with our plan's auditor. They've picked a sample participant, who was paid short-term disability for about half of 2019. They're questioning us as to why she did not get a match true-up.

We're self-insured and pay the employee's STD through payroll. She had 401(k) deferrals withheld on the STD pay. The plan was amended 1/1/2019 to exclude this from all plan contribution types (i.e, 401(k), match and employer discretionary). The employer discretionary did include the STD pay for compensation purposes as well.

[1] What is meant by 'welfare benefits'? [2] Would employer paid STD pay be included in this welfare benefit exclusion?

A follow-up: we do exclude, in another section of the plan pertaining to compensation, 'long term disability payments,' but STD is not mentioned there."

0 replies   |    33 views   |    Add Reply

cdogstu99 created a topic in Distributions and Loans, Other than QDROs

Ex-Employer Says I Must Repay a 401(k) Distribution

"So, my ex-employer from 5+ years ago just sent me a letter asking for the return of $6400 that it says was distributed from my old 401K plan, in a nutshell that the amount wasn't vested. I left in 2015, and officially rolled over my 401K balances/funds into a Rollover IRA in 2018. This is official text of letter:

"...we discovered you have an overpayment from your account in the XXX 401K Plan....we determined the vested amount in your 401K plan account was overstated when we processed your distribution request. As a result the overpayment is not eligible to be distributed because it is not vested" ...

"The overpayment is $6426.10 and must be returned to the plan excluding any additional interest" ...

"In addition the Plan must notify you that the overpayment amount was not an eligible rollover distribution if your distribution was rolled over into a qualified retirement plan or IRA... you may request that the plan administrator or your IRA trustee transfer the overpayment funds back to the plan" ...

"You will receive updated 1099's for the original tax year of the overpayment by the end of November"

What should I do with this? I figure that at the very least I'm going to owe the IRS an early distribution penalty on that $6,400. Agree? But isn't that admitting that I made a mistake, when this was the error of the 401K plan? Do I need to pay back this amount? Any advice is appreciated."

1 reply   |    44 views   |    Add Reply

austin3515 created a topic in 403(b) Plans, Accounts or Annuities

Exclusion of Pre-January 1, 2009 Contracts

"Is it too late to decide to exclude pre-1/1/09 contracts? Taking over a new client approaching the audit and they have 10 or 15 pre-1/1/09 contracts. I would just report them as a distribution I guess (if it is doable)."

6 replies   |    30 views   |    Add Reply

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