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Message Boards Digest

November 5, 2020

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

Plan Doc created a topic in 401(k) Plans

WHOSE RMDs ARE THESE?

"Participant turned 70-1/2 in 2014 and had a required beginning date of April 1, 2015. She died April 4, 2015, 3 days after her RBD, without taking any RMDs. An RMD should also have been made for 2015, the year of the participant's death, but was not. The participant's account remains completely undistributed because no one was paying attention to it until now, and there is a designated beneficiary. Can the entire account be paid to the designated beneficiary or must the RMD amounts for the 2014 and/or 2015 distribution calendar years be paid to the participant's estate? If the estate, any idea of how, if at all, to adjust for earnings, etc.? Also, it has been suggested that the 2014 and 2015 RMDs be paid to the estate and leave the estate to file Form 5329 and ask for abatement of penalties with respect to those amounts. But we also have missed RMDs for 2016 - 2019. Regardless of whether the estate is entitled to part of the account, wouldn't it make more sense, and have a better chance of success, if the plan were to file under VCP both to correct the operational failures due to the missed RMDs and to obtain relief from RMD penalties?"
2 replies   |    47 views   |    Add Reply
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Peter Gulia created a topic in Communication and Disclosure to Participants

Do you in an SPD or SMM describe a provision that expired?

"ERISA § 104(b)(1) calls for a summary of a new or changed plan provision “not later than 210 days after the end of the plan year in which the change is adopted[.]” (Quotations from the statute and rule are in a recent BenefitsLink discussion. https://benefitslink.com/boards/index.php?/topic/66810-rmd-2020-waiver-and-sample-amendment/&tab=comments#comment-308944) For some provisions, taking that long time (and not communicating sooner) could result in describing a provision after every participant no longer has any decision she could make. Just to pick one example, if in March 2020 a retirement plan’s sponsor adopted a provision for a coronavirus-related distribution, a summary of material modifications furnished in July 2021 might describe a provision that expired a half-year ago. BenefitsLink mavens, what do you think: Should an SPD or SMM describe a provision even if the description is no more than history? Or is it better to describe the changed (and expired) provision, even if including the description confuses or otherwise burdens a reader? For this question, assume the plan’s sponsor/administrator has yet done nothing to communicate the new or changed (and now expired) provision."

0 replies   |    20 views   |    Add Reply

Philip2 created a topic in Retirement Plans in General

RMDs for survivng spouses

"The SECURE Act changed the RMD for surviving spouses to the date the participant would have attained age 72. (401(a)(9)(C)(I). What is the effective date? The Act says that the effective date for the age 72 change is participants who attain age 70 1/2 on or after 1/1/20. (The effective date for the stretch rules is participants who die on or after 1/1/20). So what about participants who died before 2020 and who would not have reached 70 1/2 by 1/1/20? Assume a participant who died during 2019 at age 68. Does his spouse get to wait until he would have attained age 72, or because he died before 1/1/20, does she have to take when he would have attained age 70 1/2?"
1 reply   |    26 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

Participant Loan

"Participant comes into plan sponsor and says I am NOT repaying this loan any longer. What is a plan sponsor/trustee to do? That's it. That's the question. I'll be darned if this question has ever been answered."
21 replies   |    90 views   |    Add Reply

BTG created a topic in Defined Benefit Plans, Including Cash Balance

Voluntary Service Crediting for Period of Lay-Off

"I am starting to see questions from employers who laid employees off this year due to COVID and are planning to hire them back as to whether they can voluntarily grant accrual service for the period of the lay-off. (Note: The terminology seems to vary by employer and state, but I'm talking about a situation where there was actually a termination and rehire, not an unpaid leave where the individual remained employed.) Even though the employers are trying to do a nice thing for these participants, granting service for a period of nonemployment strikes me as an exclusive benefit violation. I have to imagine that others are seeing this question as well. Thoughts?"
7 replies   |    43 views   |    Add Reply

Bumppo23 created a topic in Retirement Plans in General

Hours of Service Reckoning Situation: Subcontractors/Independent Contractors Situation; If Said Individual(s) Transition(s) to Unequivocal Employee Status

"Subcontractors/independent contractors seem to have a mercurial status. Perceiver(s) may perhaps recall the Darden situation. Insurance agents particularly seem affected by this taxonomy situation. https://www.irs.gov/businesses/small-businesses-self-employed/statutory-employees https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee If an individual provides services to an entity as a subcontractor, and then transitions to unequivocal employees status, perceiver(s) may ruminate as to whether the service provided while a subcontractor forms part of the reckoning of eligiblity to enter the entity's plan. Perhaps one must treat the individual as completely de novo."
2 replies   |    32 views   |    Add Reply

Isneeze created a topic in Cafeteria Plans

DCFSA - 2 Children - Divorced

"My ex (divorced) and I both work and will be splitting physical custody (50/50) of two children. We plan to alternate some of the nights such that the child we're claiming will be with us >50% of the time.. Both of our employers offer DCFSA, are we both allowed to open an account if we're claiming one child each? Both kids will be under her health insurance if that applies to anything."

1 reply   |    21 views   |    Add Reply

JAS76 created a topic in Distributions and Loans, Other than QDROs

Is an offset a distribution?

"Let's say a participant separates service, leaving behind a $15,000 balance, of which $5,000 is an unpaid loan. After the loan policy's prescribed time for repayment passes, can that loan be offset immediately if the plan document only allows for lump-sum distributions to terminated participants and there has been no request from the participant for a termination distribution? I didn't want to add a ton of hypothetical detail to muddy the waters. I apologize if there's not enough here of if this question has been previously discussed. Does a loan offset count as a distribution such that it can't happen on its own if a plan document only allows lump-sum distributions? Thanks."
0 replies   |    16 views   |    Add Reply

Peter Gulia created a topic in Retirement Plans in General

May a Qualified Termination Administrator wind up a portion of a retirement plan?

"The Labor department’s rule about an abandoned individual-account retirement plan defines a qualified termination administrator as a bank, trust company, insurance company, or other person eligible to serve as an IRA’s custodian that “holds assets of the plan that is considered abandoned[.]” 29 C.F.R. § 2578.1(g)(2). The rule does not say that a QTA must hold all, or even substantially all, of the plan’s assets. Imagine an abandoned plan for which no QTA-eligible company serves as a trustee. There are multiple custodians. Imagine one would volunteer to serve as a QTA, but only for the assets held by that custodian. Has anyone seen a situation in which the Employee Benefits Security Administration approved, or did not object to, a submission in which a QTA proposed to wind up a portion of a plan to the extent of the assets held by the QTA?"
0 replies   |    13 views   |    Add Reply

Jakyasar created a topic in 401(k) Plans

2021 401k+SH plan set up deadline

"Hi With all the changes going on, want to confirm the following just to be on the safe side: If a new plan for 2021 with SH provisions, has to be set up by 12/31/2020, correct? If a new plan but no SH provisions, can still add SH for 2021 by December 1, 2021, correct? Last, for a non-elective SH, unless I want to have a "may be" provision, no need for a notice, correct? What is the HCE's are excluded from SH, is not providing a notice still an option? Thank you"
3 replies   |    26 views   |    Add Reply

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