Message Boards Digest

December 29, 2020

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

Purplemandinga created a topic in 401(k) Plans

Retail Association Sponsors a MEP; One Employer Has Non-Retail Employer In Its Controlled Group

"An Association MEP exists of businesses that operate stores of a certain retailer. These stores sell products. One of its participating employers is in a controlled group with a business that cleans pools as a service but is not a member of the retail association that sponsors the MEP and couldn't be a member based on the association bylaws. Would the fact that a controlled group exists and the plan document automatically pulls in related group members allow this pool cleaning business to participate in the MEP that it otherwise wouldn't be eligible to participate in? Is anything violated by allowing this?"

5 replies   |    77 views   |    Add Reply

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DSev created a topic in Correction of Plan Defects

Deferrals Under a Now-Terminated SIMPLE IRA Were Not Timely Deposited

"The employer withheld deferrals for a small handful of participants and failed to deposit them in 2019 when the employer had a SIMPLE IRA for its employees. The SIMPLE IRA was terminated at the end of 2019. The employer began sponsoring a 401(k) plan in late 2020. The employer discovered the deferrals withheld for the SIMPLE IRA were never deposited and wishes to correct the error. What's the proper correction for deferrals withheld under a plan that has since been terminated? Can the deferrals withheld under the SIMPLE IRA and their associated lost earnings be deposited into the 401(k)?"

4 replies   |    33 views   |    Add Reply

Jakyasar created a topic in Plan Terminations

DC Plan Terminates After an Involuntary Cashout of Partially Vested Participant: To Vest or Not to Vest?

"Participant was paid out (an involuntary cashout) her balance a few weeks ago (terminated in 2018 -- never provided the completed distribution election forms). The balance was less than $500 and had 100% vested safe harbor and 50% vested profit sharing portions. 50% of the forfeited profit sharing account was transferred to a 'forfeiture account'. Plan's limit is $1,000 for involuntary payouts. Now sponsor has decided to terminate the plan, effective 12/31/2020. Resolution states, 'the accounts of the participants will be 100% as of the plan termination date.' It's signed today (December 29). Language from the document: 'in event of termination of the plan, the account balance of each affected participant will be nonforfeitable.' Do I need to go back and vest this participant 100%?"

2 replies   |    45 views   |    Add Reply

Malcolm created a topic in 401(k) Plans

Funding of Safe Harbor Matching Contributions -- Sponsor is LLC Taxed as Partnership, Owned by 3 S-Corps

"The law firm 401k plan sponsor is an LLC taxed as a partnership -- equally owned (1/3) by three different Affiliated/Participating employers, all taxed as an S-corp. The LLC employees a few non-owners, and each of the 3 S-corp partners are 100% owners of his or her respective firm.

Because the three affiliated, participating employers (S-Corps) pay their owners W-2 compensation, the W-2 compensations are eligible for deferrals and contributions for the plan. For pre-tax deferral contributions, payroll deductions are withheld for the owners (W-2 comp) and funded by the individual S-corp. It's a Safe Harbor match plan with a Plan Year/annual determination period for the match.

Because the pre-tax deferral contribution will be deducted via payroll and funded from the owners' individual S-corp, does the corresponding Safe Harbor match need to also be funded from the individual S-corp -- or does the match need to be funded by the LLC taxed as a partnership?"

3 replies   |    45 views   |    Add Reply

AlbanyConsultant created a topic in 401(k) Plans

Not Maxing Deferral in Non-Calendar Year Plan -- Effect on Maximum Allowed Profit Sharing Contribution

"I'm looking at a PYE 9/30 401k/PS plan, and for the first time, the deferrals for the owner (who is 50+) are substantially lower then they have been in the past:

10/1/19 - 12/31/19: $2,200

1/1/20 - 9/30/20: $16,800

10/1/20 - 12/31/20: not received from client yet

He wants to max his profit sharing for the 9/30/20 PYE in his cross-tested plan. What is his DC allocation limit for the plan year?

I know, without that last bit of information there's no exact answer yet, but this is why I hate off-calendar 401k plans. Does he have to actually have deferrals over $19,500 in calendar 2020 to take advantage of the catch-up provision? Meaning if he deferred $4,000 in the last quarter of 2020 for a total of $20,800, would his limit be $58,300?"

3 replies   |    53 views   |    Add Reply

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