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November 16, 2020

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

Cate created a topic in Health Plans (Including ACA, COBRA, HIPAA)

Can a Health Plan TPA Disclose Enrollment or Disenrollment Information About Adult Child to Subscriber (Parent)?

"I work for a TPA (covered entity), and our legal office has a disagreement over whether we can disclose to the plan subscriber if an adult child is or is not enrolled on the subscriber's (the parent's) plan. I say that their enrollment information is PHI and we need approval from the adult child. Another attorney says it isn't PHI, and we can tell the parent who is enrolled on his/her plan. Please weigh in."

3 replies   |    68 views   |    Add Reply

Bill C created a topic in Defined Benefit Plans, Including Cash Balance

Lump Sum for Late Retiree Owner

"One-participant plan, 71-year-old owner with more than 10 years of service and participation. NRA was 65. 3-year average pay is $280,000. Benefit is 100% of pay. Distribution will be made on 12/31/20. Actuarial equivalence of $230,000 limit is about $371,000. Lump sum of $371,000 based on AMT at 5.5% is about $3.8 mm. But maximum benefit is 100% of pay, or $280,000. Lump sum of $280,000 based on AMT at 5.5% is about $2.9 mm. Lump sum using 417 segment rates is about $3.5 mm. What is the maximum lump sum for this participant? I'd like to say $3.5 mm, but I'm not convinced. This would not be an issue if 417 rates weren't so low."

8 replies   |    77 views   |    Add Reply

ogilviesann created a topic in 457 Plans

457(b) Plan Participant Can Accelerate Remaining Payments in 10-Year Installment Period?

"I have a 457(b), non-governmental plan that we will answer basic questions for a 401(k) client. The document was drafted to begin distributions upon severance of employment or at age 70-1/2. They can choose a lump sum payment or 5, 10 or 15 year installments. One of the participants asks: if he is still working at 70-1/2 and chooses to take a 10 year installment payout, and then he retires 3 years into the payout period, can his remaining payout be accelerated so that he can take the balance? The document isn't clear, but there doesn't appear anything that would stop the acceleration. His financial advisor who worked with them to set this up many years ago has no clue and is asking me. We don't specialize in 457 plans so I want to ask the experts in this group."

0 replies   |    27 views   |    Add Reply

Vlad401k created a topic in Distributions and Loans, Other than QDROs

Distribution Code for Excess Roth Contributions after April 15

"Which distribution code should be used for the following distribution? The participant exceeded the 402(g) limit for the year and did not distribute the funds by April 15 of the following year. All of the contributions were with the same company, so the distribution must be processed even though it's after April 15. The contributions that the participant put in were Roth. Since the earnings on the excess should be taxable because it's made after April 15, would the Code be '8', '1', and 'B', assuming the participant is under 59-1/2?"

0 replies   |    23 views   |    Add Reply

Jakyasar created a topic in Retirement Plans in General

Combo Plan Testing -- Gateway Requirement

"Looking at a combo plan design for someone and also having a brain freeze for a change. 3% non-elective SH + PS. Gateway determine at 7.5%. DC plan eligibility is 6 months with the following month as the entry date for all sources. PS is 1000+ hours and last day rule. Allocation method is each participant is their own group.

I see a terminated employee with DOH 1/1/2020, enters the DC plan on 7/1/2020 and terminates 8/1/2020. They worked over 1000 hrs. They get the SH but they also need to get the 4.5% PS allocation for gateway, correct?

The software is forcing it to be provided. The plan will not pass otherwise excludible testing."

3 replies   |    70 views   |    Add Reply

Vlad401k created a topic in 401(k) Plans

Establishing Safe Harbor 401(k) Plan in November 2020

"A company would like to establish a new Safe Harbor 401(k) plan now (in November) that would fund a 5% Safe Harbor Non-Elective contribution. The plan would be effective 1/1/2020, and the compensation that would be considered for all purposes (including the calculation of the 5% Safe Harbor Non-Elective contribution) would be from 1/1/2020 to 12/31/2020. Is that allowed under the new rules?"

3 replies   |    68 views   |    Add Reply

Bumppo23 created a topic in 401(k) Plans

Treatment of Salary Deferrals -- How and Where to Show Deductions?

"Regarding the Form 1040:

  • Schedule C Part II Section 19: Pension and profit-sharing plans
  • Schedule 1 Section 28: Self-employed SEP, SIMPLE, and qualified plans
  • Schedule 1 Section 25: Self-employed SEP, SIMPLE, and qualified plans

Publication 560 indicates:

Maximum Deduction: 25% of all participants' compensation, plus amount of elective deferrals made.

Does one deduct for all deferrals, or only the deferrals made by the entity's owner, in contrast to those made by hired employees? Where does one make such deductions? Does one log one deduction in one particular area while another logs for a separate section? Refer to the aforementioned sections.

Conversely, does filing a Form 1120-S or Form 1120-C reduce or inhibit deducting for deferrals?"

  • https://www.irs.gov/pub/irs-pdf/p560.pdf#page=3
  • https://www.irs.gov/forms-pubs/about-publication-560
  • https://www.irs.gov/publications/p560
  • https://www.irs.gov/pub/irs-pdf/f1040s1.pdf
  • https://www.irs.gov/pub/irs-prior/f1040s1--2018.pdf
  • https://www.irs.gov/pub/irs-pdf/f1040sc.pdf
  • https://www.irs.gov/pub/irs-pdf/f1040s1.pdf
1 reply   |    50 views   |    Add Reply

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

Individual Cash Balance Plan for Physician in a Controlled Group?

"I believe the answer to this situation is no, but thought I'd run this question on here: Medical group; each doctor has own plan. Staff is in a PEO Plan. All provisions and investment options are similar to this longstanding setup that the doctors prefer, and cross testing is run including all of the above. One individual doctor is asking if she can have a Cash Balance Plan."

1 reply   |    46 views   |    Add Reply

TPApril created a topic in Retirement Plans in General

Attribution of Ownership in This Marital Situation

"Husband and wife each own their own separate companies. Wife provides accounting services for husband's business, but does not take a paycheck. Her business is not accounting; it's just that she's the one who's good at numbers. She signs off on documents. Does this make these two companies one controlled group? Does this cause ownership attribution of some kind?"

3 replies   |    68 views   |    Add Reply

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

Application of 3-Year Tax Deferral Under CARES Act

My old companym where I had 10 years of retirement service, has made a lump sum distribution offer for $176,600. They've given me the options of a direct rollover to an IRA (Roth and traditional) or a cash payment.

My current employer has reduced my pay by 10% due to the COVID downturn.

Would I qualify under the CARES for 3-year deferred tax treatment for $100,000? What I want to do is roll over the entire $176,600 into a Roth IRA while taking advantage of 3-year tax deferment. I would claim only $76,600 + 1/3 of $100,000 as income this year (it may be a complicated form that I would have to fill out, but that would be the net effect);and then I would add 1/3 of $100,000 as my income in subsequent 2021 and 2022 tax years. Is that permitted?

Also, if so, what would be the addition to my taxable income for state taxes -- the same as federal (i.e., $76,600 + 1/3 of $100,000), or the entire $176,000?"

2 replies   |    32 views   |    Add Reply

SCD created a topic in Governmental Plans

Non-QEBA Alternatives?

"Are there any alternative payouts other than QEBA? My state's pension plan does not participate in QEBA."

1 reply   |    27 views   |    Add Reply

Stash026 created a topic in 401(k) Plans

Due Date for Deposit of 401(k) Deferrals -- Plan Has Over 100 Plan Participants

"For plans with less than 100 people, I know the DOL requires contributions to be deposited within 7 business days of being withheld from payroll. I have a multiple employer plan with more than 100 participants, although no single employer has more than 100 employees in the plan. [1] Does the employer need to make the contributions within 7 business days? [2] Or, because the plan as a whole has over 100 participants, does it fall under the 15th business day of the month following the month in which the amount was received by the employer (so. if something was withheld on October 31, I guess that means it's due 11/15)?"

5 replies   |    51 views   |    Add Reply

Santo Gold created a topic in Retirement Plans in General

Deadline for Depositing After-Tax Employee Contributions under LLC's 401(k) Plan

"We have a 401k plan that allows for after-tax employee contributions. The plan sponsor is an LLC that is taxed as a sole prop. Can the owner deposit the after-tax contributions up until his tax return due date, or does he need to deposit those by 12/31?"

3 replies   |    40 views   |    Add Reply

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