Message Boards Digest

November 2, 2020

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

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

Mandatory withholding on distribution of property

"If a participant takes an in-service distribution (not hardship nor RMD) of property from a 401(k) plan, how is the 20% mandatory withholding handled? Does the participant have to also take a cash distribution equal to 20% of the property value so that can be withheld 100% for taxes?"
2 replies   |    66 views   |    Add Reply

Gilmore created a topic in 401(k) Plans

3% NonElective Safe Harbor Allocated with Each Payroll

"I am curious to see what opinions there are on the following scenario. A 401(k) plan uses a 3% non-elective safe harbor, that is limited to non-Highly Compensated Employees. The employer wants to allocate the safe harbor with each payroll. They realize it goes to everyone, and is not a match. They may, and likely will, also make a profit sharing contribution, allocated at year end. Does anyone see a problem with the the NHCEs receiving their 3% throughout the year, and the HCE receiving their profit sharing at a different time? Worst case scenario (I think), the 3% SH is allocated all year in a terrible market year, and at the end of the year the 3% SH that was allocated is now something less then 3%. The year ends and the when the market is at it's lowest the Owners (only HCEs) decide to make a 3% profit sharing contribution for themselves, or maybe even 9% if it passes testing. I like the idea of not having the HCEs receive the non-elective safe harbor, but I'm not sure I'm comfortable with the different allocation timing. Thanks for any opinions."
2 replies   |    54 views   |    Add Reply

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