Message Boards Digest

October 27, 2020

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

401kSteve created a topic in 401(k) Plans

Profit Sharing Allocation for Terminated Unvested Participant

"Ran across a situation where in order to avoid a 410(b) failure, must make a profit sharing contribution for a terminated participant who is 0% vested. The plan is top heavy and has never made a profit sharing situation before. The required contribution is over the $5k involuntary cash-out threshold. What are the options for how should the plan handle this circumstance? Hope that the balance falls below $5k so they can force the participant out? Wait until the plan someday terminates and the funds become 100% vested?"

5 replies   |    121 views   |    Add Reply
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BG5150 created a topic in Retirement Plans in General

Top Heavy Contribution Subject to Coverage Testing?

"Are Top Heavy contributions subject to coverage if that's the only employer contribution? Hypothetical: Plan is 401(k) only. Does not allow for match or employer discretionary contributions. 1 owner, 10 NHCE/non-keys. Everyone eligible for 401(k) at beginning of year. 4 NHCEs quit in summer. Plan is Top Heavy. So, only 6 out of 10 employees get Top Heavy. Do I have a coverage issue? If so, how do I get around it?"

3 replies   |    55 views   |    Add Reply

Belgarath created a topic in Retirement Plans in General

Eligibility for Furloughed Employees Due to COVID

"Suppose a plan has an eligibility requirement of X hours in the first 6 months of employment, and if not met in the first 6 months, the employee becomes subject to the 1 Year of Service requirement.

Now assume the employee works 5 months, then due to COVID economic issues, the employer furloughs this employee (and others) for a period of time -- let's say 3 months.

What's your opinion on an employer granting eligibility service while furloughed due to COVID, operationally, and allowing them to enter as soon as reemployed?

My point in all this is to see if there is a way around amending plan to use elapsed time. I don't see that the pre-approved document language is flexible enough to handle an amendment to credit hours of service service while furloughed, other than sideways through elapsed time if they aren't furloughed too long.

And FWIW, just doing it operationally without appropriate document language, while 'nice' of the employer, doesn't seem like an acceptable option. I suppose it could be submitted under a 5307, and I'd be surprised if the IRS would reject it, but it's a pain, costs more money, and hard to know how long it would take."

2 replies   |    55 views   |    Add Reply

EBECatty created a topic in Nonqualified Deferred Compensation

Reporting Distributions from Rabbi Trust

"I know the general rabbi trust template (and many others based on it that I have seen from trust companies) says the trustee will make all distributions to participants and report/withhold. Others say (and in my experience this is what the sponsors often do, regardless of the trust terms) the sponsor may pay the benefits directly and request reimbursement from the trust. Sponsors paying directly and requesting reimbursement usually cite the inability for the payroll systems to accurately record a direct payment from the trustee for W-2 reporting. In the former case, where the trust makes the payment directly, what exactly do they report to the IRS and how does that information get reconciled with the sponsor's payroll system?"

6 replies   |    39 views   |    Add Reply

Sharon Gregory created a topic in Qualified Domestic Relations Orders (QDROs)

QDRO Paperwork Is Filed with Ford and Process Starts; Funds Set Aside During Process

"My ex and I divorced 8 years ago. He never would file QDRO paperwork so I, as alternate payee, could receive my portion of benefit set out by law in divorce decree from Ford directly. Instead he pays me every month for 8 years. His benefit is reduced when he reaches 62. Finally he begins the process and files paperwork with Ford.

QDRO department tells me my portion is being held aside every month it takes during approval process. They tell me twice that my funds are there for me. It's been a year. Ex stopped paying me when paperwork filed and said my amount was being held aside for me, as QDRO department says. It finally gets to pension department for the payment and they see employee amount has been reduced since 2019 and it shouldn't have been and send check to him. His amount was reduced by virtue of the QDRO process.

Why would pension department change what QDRO department set in motion? I believe they got dates mixed up. My amount started accruing for me in Oct 2019 and it's been a year and finally it went through all departments and pension sends MY accrued benefit to my ex...WHAT? It's like the departments do not talk, but to straighten this out, QDRO needs to communicate with Pension. Can anyone please help me?"

2 replies   |    33 views   |    Add Reply

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