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Message Boards Digest

October 13, 2020

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

DLavigne created a topic in 401(k) Plans

402(g) Excess for Self-Employed Individual

"If a self-employed individual exceeds the 402(g) limit, is he subject to the refund correction? He didn't get a W-2 and his tax return hasn't been filed yet so he really hasn't taken the deduction at this time. Could his accountant change the deferral on his tax return to $25,000 (2019 limit) and then we could apply the excess to another contribution type for 2019 (i.e., match true-up or PS)?"

1 reply   |    33 views   |    Add Reply

shERPA created a topic in Retirement Plans in General

Discriminatory Timing? No Longer a Controlled Group

"Jane starts out 2020 owning 100% of both Company A and Company B. Both companies make and sell products, they are not service orgs and they do not provide services to each other. Company A has about 50 employees and a 401(k) plan. Company B just employs Jane and her husband (B's actual production is outsourced) and B has no retirement plan. In July 2020, Jane sold 23% of A to a private equity firm, so now she owns 77% of A and 100% of B. So effective with the transaction they are no longer a CG. Can they now establish a plan in B for just Jane and husband for 2020?

My first reaction is that if the plan is set up for calendar year 2020 this would not work due to the CG. Coverage testing would be based on the plan year and they have former NHCEs > 500 hours in the testing group. If they set up a plan in B effective 10/1/20, then the plan never exists while there is a CG, and the testing year would not include any NHCEs so presumably they would not have to consider company A in coverage. But does this raise a potential 1.401(a)(4)-5 discriminatory timing concern?"

1 reply   |    47 views   |    Add Reply

Molgilny89 created a topic in Retirement Plans in General

Can You QDRO an Alternate Payee Account?

"Husband and wife were divorced 10 years ago and a QDRO was issued awarding the wife 50% of husband's account. Wife, as the alternate payee, chose to keep the funds in the plan. Husband had primary custody of children and was due child support payments from the ex-wife.

Fast forward ten years. The ex-wife has made no child support payments. Husband obtained garnishment order from the court going after ex-wife's alternate payee account. The order also mandated that the garnished amounts be rolled over to the husband's account under the plan.

The only way I see this being accomplished is if a QDRO can be issued for the child support arrearages allowing for such a rollover to be accomplished. The plan document is silent on the rights and status of alternate payees.

With that being said, can you QDRO an alternate payee's account? Also, this is more of a family law question, but can the husband use this backdue child support for his own retirement purposes?"

6 replies   |    35 views   |    Add Reply

JOH created a topic in Retirement Plans in General

Beneficiary Wants to Leave Benefit in the Plan

"Sole spouse is the beneficiary of a qualified plan. Participant passes. The sole spouse wants to keep the funds in the plan. (Spoke with plan administrator, and they are okay with solo spouse staying in the plan.) We are updating the titling to "John Doe deceased, FBO Jane Doe" (she doesn't want to do an assumption because she is under 59-1/2). Here's the question. If we are re-titling the account as a decedent's account, is it still considered a rollover and do we need to report it on a 1099-R with a Code G or maybe G4? Because she rolled it over to an IRA, a Form 1099-R would be issued."

1 reply   |    11 views   |    Add Reply

BG5150 created a topic in Form 5500

No Phone Number on Form 5500-SF

"Filings for 2016, 2017 and 2018 did not include the plan sponsor's phone number. Client insists she wants it that way. 5500 software validates all the way without it. Is the phone number somehow optional?"

2 replies   |    15 views   |    Add Reply

Peter Gulia created a topic in 401(k) Plans

Do Your Clients Get Source Documents for a Hardship Claim?

"The Internal Revenue Manual describes a method for a plan's administrator to decide a claim for a hardship distribution using only the participant's written statements, including some that 'summarize' an expense incurred. Under this method, the administrator need not read, nor even immediately collect, a source document that shows the claimed hardship expense: https://www.irs.gov/irm/part4/irm_04-072-002#idm140377115475856

How many of your clients use this method and do not ask for any source document? How many of your clients require a source document? Do your clients' methods vary with the plan's recordkeeper?"

0 replies   |    10 views   |    Add Reply

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