Message Boards Digest

December 8, 2020

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

TPA Bob created a topic in SEP, SARSEP and SIMPLE Plans

SIMPLE 401(k) Plan Converted to Regular 401(k) Plan -- 2-Year Penalty Exception?

"We're converting a SIMPLE 401(k) plan as of January 1, 2021 to a regular 401(k) plan. If we convert a participant's balance in the SIMPLE to the regular 401(k) plan, can we avoid the 25% penalty tax if some of the monies 'converted' have not exceeded the 2 year limit for the 25% penalty tax?

We will continue to maintain separate accounts for the SIMPLE 401(k) deferrals and the SIMPLE Employer Contribution accounts in the new regular 401(k). Both plans (the old SIMPLE and the new 401(k)) will be maintained by the same employer. Sources of money in the new 401(k) plan would be SIMPLE 401(k) contributions, SIMPLE Employer Contributions, Employee pre-tax 401(k), Employee Roth 401(k), and Employer Matching Contributions. Also, this is not a SIMPLE IRA."

0 replies   |    21 views   |    Add Reply

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JustMe created a topic in Employee Stock Ownership Plans (ESOPs)

Ownership Interest of ESOP Affects Controlled Group Determination?

"An ESOP owns 80% of 2 different corporations. Ownership is as follows:

Company A: 80% ESOP, 10% Individual 1. 10% Individual 2

Company B: 80% ESOP, 20% Individual 3

Based on the 80% ownership, is there a controlled group, or is the ownership interest by the ESOP disregarded for controlled group purposes?"

2 replies   |    28 views   |    Add Reply

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

What's the Revenue Procedure That Specifies Need to Assume Same Hours as Prior Year?

"I believe there is a Revenue Procedure that specifies that if a participant had less than 1,000 hours in the prior year (and therefore no benefit accrual according to terms of the plan), you MUST assume they will have 1,000 hours in the current year. This is for purposes of a Beginning of Year actuarial valuation. I thought it was in Rev. Proc. 2017-56 or 2017-57, but I cannot seem to find it. I'm asking because client (of owner only plan) wants to minimize cost for 2020 and if they confirm <1,000 hours in 2019 we can assume same for 2020 and not have a normal cost."

1 reply   |    35 views   |    Add Reply

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

Old Beneficiary Designation Effective?

"We are a RK vendor for part of a non-ERISA 403(b). A participant died naming her spouse as her primary 100% beneficiary and her parents as 50/50 contingent beneficiaries. Her spouse died 2 days later.

Initially, we believed that he passed without having made a designation himself. Per the plan document, the default is spouse, then estate. This would mean his assets now belong to his estate, who wants us to roll it over into an IRA the estate seems to have setup (I know this isn't correct, but it's a topic for another post). It has since been discovered that the spouse was a former participant of the plan on his own and he did have a beneficiary designation dated in 2009. His form named his spouse as 100% primary and his brother as 100% contingent. He took a full distribution of his account in 2016.

The TPA firm, and to an extent the client, is trying to say since he took a full distribution years ago, his beneficiary form is basically null and void as the account was 'closed'. The beneficiary form doesn't have any language that would nullify it except upon receipt of a new beneficiary form. My opinion is that his beneficiary form is still valid and in force regardless if he cashed out previously or not. It'd be no different than if someone left service, took a full distribution, and then ended up with a non-elective contribution 8 months later but died in the interim. I've tried digging through IRC and even the EOB trying to find any guidance and have not come up with anything concrete enough to prove my point. Has anyone seen anything like this or have any other places to try looking?"

8 replies   |    40 views   |    Add Reply

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