Message Boards Digest

November 13, 2020

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

AndyH created a topic in Retirement Plans in General

410(b) and Determination Letters

"One plan of a controlled group fails the safe harbor percentage test of the ABT but meets the unsafe harbor percentage. It would seem to meet much of the 'Facts and Circumstances' criteria of 1.410(b)-(4)(c)(3) but that is uncertain unless 'the Commissioner finds....' that it passes. Am I correct that a Determination Letter still cannot be requested on this issue for an ongoing plan? What if an options exist, a Private Letter ruling? Is that practical?"

1 reply   |    29 views   |    Add Reply

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

DB Plan Termination When Overfunded -- Amend to Provide Reversion to Sponsor?

"I was approached to do a termination for an overfunded DB plan (non-PBGC).... Unfortunately, the provisions require that the excess be distributed to the participants (always a bad choice, at least in my opinion). To confirm my understanding, this is a protected provision and cannot be amended to 'revert to company' prior to termination date. The idea is to transfer the excess to a QRP. Also, there are 2 terminated participants. If the excess distributed to the participants, do the terminees get additional allocation? Assume no 415 issues."

6 replies   |    60 views   |    Add Reply

EBECatty created a topic in 401(k) Plans

Exclude Non-U.S. Source Income from Compensation

"Assuming the compensation-ratio test is passed, can a plan exclude non-U.S. source income? For example, a U.S. citizen employed by (and getting paid by) a U.S. employer but who spends working time in and out of the US during a plan year. Can the plan allow deferrals from, and/or base allocations (including SHNEC) on, only U.S. source income?"
0 replies   |    22 views   |    Add Reply

Gilmore created a topic in 401(k) Plans

Implementing a Safe Harbor Plan; When to Change from Non-Calendar Plan Year to a Calendar Plan Year?

"So a last minute client would like to set up a safe harbor 3% in order to make deferrals for 2020. If we set up a plan with a plan year end of 11/30/2021, when can it be amended to a calendar year plan? Can it be amended 3/1/2021 for a short plan year to 12/31/2021, thus providing for a 3 month initial plan year? Or does the first plan year need to run for 12 months before a short plan year can be created, meaning a short plan year starting 12/1/2021 and ending 12/31/2021, and the calendar year plan starting 1/1/2022?"

0 replies   |    14 views   |    Add Reply

Francis created a topic in 401(k) Plans

QACA Eligibility Can't Start for 2 Months?

"Recordkeeper is requiring a new QACA 401k to add a 2 month eligibility waiting period for new hires so they can distribute notices to them. Is this correct or is it possible to implement a shorter eligibility period such as 30 days? Because QACA allows an employee to retroactively opt out, it seems a lengthy notification period isn't needed, but maybe I'm wrong and the recordkeeper is right. I couldn't find IRS guidance on this."

1 reply   |    24 views   |    Add Reply

AbsolutelyOkayPossibly created a topic in 401(k) Plans

Overlapping Related Groups and Coverage Testing

"Let's say there are two controlled groups. Controlled group 1 contains employers A, B and C, and controlled group 2 contains D, E and F. In addition, employers B and E are an affiliated service group. Both controlled groups sponsor a retirement plan with each of its controlled group members. The two plans provide for different benefit arrangements; controlled group 1 is a profit sharing only plan, and controlled group 2 provides only deferrals and matching contributions.

I assume that when testing coverage for controlled group 1 I would need to consider employees of employer E in my analysis. If coverage fails without employer E for average benefits purposes, would I aggregate the entirety of both plans together, or would I just include employer E employees into the controlled group 1's plan?

I'm ignoring coverage testing of controlled group 2 because I'm assuming the same procedure applied to controlled group 1 would apply to controlled group 2."

2 replies   |    27 views   |    Add Reply

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