Message Boards Digest

December 11, 2020

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

dmwe created a topic in Cafeteria Plans

Dependent Care 55% Average Benefit Test Failing -- Can the 'After-Tax' Reclassified Amount Be Pulled Out of the Plan?

"For those owners who are having some DCA contributions reclassified as after-tax in order to pass the Average Benefits Test, can the employer pull that money out of the funding account and just give it back to the employee? Or, does the employee still need to use those funds for qualified DCA expenses? It sort of makes sense to give those dollars back to the employee since they aren't really getting any pretax benefits from it anymore."

2 replies   |    22 views   |    Add Reply

Jakyasar created a topic in Retirement Plans in General

Combo Plans -- Applying the Gateway Requirement

"Looking at a combo plan (both 401k and cash balance plans are top heavy) where the existing 401k plan has safe harbor match (changed to non elective for 2021) and PS allocation is last day+1000 hours and everyone in their own group. Top heavy also requires last day rule. The cash balance will be a new plan effective 1/1/2020. One employee (DOP 1/1/2019 and non-HCE) terminated 1/10/2020 and rehired 10/4/2020. He deferred a bit in the year and gets the safe harbor match. He is excluded under the CB plan. Gateway requirement is 5%. Performed the combo testing and the system did not require a gateway allocation to him and passed the testing (I have others who satisfy the combo test and helping to pass the test). He should get at least 3% as the 401k plan is top heavy and did not get a warning on that either, correct? As it is safe harbor match, should have 3% of allocation, at least. Something does not smell right. I don't believe it matters whether he worked under or over 500 hours."

8 replies   |    46 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

Asking for a Waiver of Excise Tax on Late Refunds

"Non-profit is in blackout and ADP refunds are due. This is a non-profit that has definitely been impacted by COVID. The refunds are significant, as is the amount of the excise tax. Now, we can write an amazing 'sob story' because this entity is definitely COVID front-line. So for example, the budget is really taking a heavy COVID hit for PPE and testing, etc. If one were to ask the IRS to abate the penalty, how would one go about it? We're thinking about completing the 5330 as normal and then, in lieu of sending a check, attach a cover letter. Has anyone ever been in this situation before?"

0 replies   |    24 views   |    Add Reply

401(k)athryn created a topic in 401(k) Plans

$25,000 ERISA Plan Expense Account Unused for Five Years

"We have discovered that a plan has been accruing funds in an ERISA Plan Expense Account since 2016 and none has been used to pay expenses or reallocated back to participants. The amount is over $25,000. I'm not exactly sure when this type of account would NOT be considered a plan asset, but, in this case, it seems to be plan assets (although not included in prior year 5500 reporting) and the amounts should have been allocated to participants each year. Does this need to be corrected similarly to improperly carried over forfeitures, where the extra revenue each year has to be allocated to those who would share in each of those years, meaning we must go back to 2016, 2017, 2018, etc. to do a separate allocation for each year?

Obviously, I would love to allocate only based upon current participant balances. Any option here without submitting through VCP? There are no fees that can be paid with this because advisor and TPA are already paid in full through asset-based payments from the Plan. Thank you!"

2 replies   |    28 views   |    Add Reply

rocknrolls2 created a topic in Retirement Plans in General

Has Anyone Seen a Copy of Legislative Text of New Coronavirus Relief Bill?

"I have been searching for the latest bipartisan agreement on the Coronavirus Relief bill in legislative language format. Has anyone been able to access a copy? If so, could you please attach a link to it?"

1 reply   |    17 views   |    Add Reply

rocknrolls2 created a topic in Distributions and Loans, Other than QDROs

Is a Participant's Child Always an Eligible Designated Beneficiary?

"Under the SECURE Act's changes to post-death required minimum distributions, the legislation considers a child to be the participant's eligible designated beneficiary (and thus not subject to the 10-year payout rule) until the child attains majority (whatever that means). However, another category of eligible designated beneficiary considers an individual (regardless of relationship to the participant) to be an eligible designated participant if s/he is at least 10 years younger than the participant. Going back to the child, would the child remain the participant's eligible designated beneficiary because s/he is at least 10 years younger than the participant once the child attains majority? I know of no individual having a child (unless s/he adopted an adult) who is fewer than 10 years younger than the participant. Or is the child, at the point at which s/he attains majority forced onto a 10-year payout from that point?

Let's say participant dies at the age of 60 and designates a child who is then age 15 as his/her beneficiary. Once the child attains majority, does the child remain an eligible designated beneficiary because s/he is at least 10 years younger? Or does the child lose his/her status as an eligible designated beneficiary and become merely a designated beneficiary, in which case, remaining amounts payable to such beneficiary must be paid out withint 10 years of the date the child attains majority?"

0 replies   |    9 views   |    Add Reply

Jeff V created a topic in 401(k) Plans

Top Heavy Exemption When Plan Formerly Was Not Safe Harbor

"A 401(k) plan sponsor formerly had only key employees eligible to participate, so top heavy testing wasn't an issue. The plan included profit sharing contributions. Next year, a non-key employee will become eligible. To get out of top-heavy testing, they just want to cease profit sharing contributions, allowing only the elective deferrals and safe harbor NECs (safe harbor NEC provision for non-HCEs had already been adopted when the plan was first adopted, but was basically moot until now because there were no non-HCEs).

Under IRC 416(g)(4)(H), is the plan considered exempt from top heavy testing? Going forward it 'consists of' only the elective deferrals and the NEC, although it contains 'old' profit sharing contributions made during the prior era."

2 replies   |    21 views   |    Add Reply

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