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Message Boards Digest

December 30, 2020

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

justatester created a topic in 401(k) Plans

Funding of a SH Match True Up

"If a plan funds the match on a per payroll period, but the "computation/determination" period is annual per document, we calculated a "true up" calculation. The clients now owes additional 2019 SH Match. What happens if this amount is not funded by 12/31/2020? I can only find reference to it must be funded, but no real answer as to what if not funded."
9 replies   |    81 views   |    Add Reply

draper1 created a topic in Defined Benefit Plans, Including Cash Balance

4980(d)(iv) interpretation

"Does 4980(C)(iv) imply that if the amount of the transfer is not allocated by the end of the 7 year period referred to in 4980(c)(i)(II) that it can continue to be allocated through the termination of the replacement Plan? For example, in a owner and spouse only scenario, if you need more than 7 years to allocate due to the 415(c) limitations, you could continue this for additional years as necessary as long as the Plan is open and there is participant compensation to allocate it against?"
4 replies   |    47 views   |    Add Reply

thepensionmaven created a topic in Form 5500

Final Year of Plan

"We're terminating a defined benefit plan, the checks are written to the rollover institutions, all sent prior to 12/31/20. It is my understanding that the plan can not be closed and a 'final 5500" prepared until either IRAs have been established or the participant cashes a check and the 20% withholding has been paid. So, 1099s can only be prepared for 2020 only if the plan funds were deposited into IRAs mor cashed their checks in 2020; if done January, 2021 has to be a 2021 1099R. Correct???"

6 replies   |    41 views   |    Add Reply

Scuba 401 created a topic in Retirement Plans in General

Individual Owns TPA That Provides Services to Plan Sponsor Partly Owned by the Individual

"Individual A is a minority shareholder - owns 1% of Company B. Individual A runs a TPA/service provider and wants to provide services to Company B's retirement plan. Does this fall under the standard service provider exception?"

12 replies   |    74 views   |    Add Reply

Scuba 401 created a topic in SEP, SARSEP and SIMPLE Plans

Client Started 401(k) While Sponsoring a SIMPLE IRA

"Client started a 401(k) in the same year and also excluded employees from a member of a controlled group. VCP says basically for the first issue you just file the VCP and ask the IRS to allow the contributions to stay in the plan. But you also have to deal with the people you excluded and make a corrective contribution. Would IRS want you to make a corrective contribution for the improperly excluded employees to a plan the employer shouldn't have had?"

0 replies   |    27 views   |    Add Reply

kgr12 created a topic in 457 Plans

Timing of 457(f) Taxation

"Does the short term deferral rule offer the flexibility to determine the year in which a 457(f) benefit is taxed? For example, if the benefit "vests" in April 2020, and is distributed to the participant on March 10, 2021, is the benefit taxed in 2020 or 2021?"
1 reply   |    24 views   |    Add Reply

bitto86 created a topic in 401(k) Plans

Lose My 2020 Match If I Quit in 2021 Before It's Been Funded?

"After a bit of Google research, I see that this is sometimes a requirement for highly compensated employees (HCEs) such as myself. This is the same language in my employer's 401(k) summary plan description document. As an HCE, I will have worked well over 1,000 hours and will be employed on December 31, 2020.

If, on January 4, 2021, I inform my employer that I am quitting, will I lose my 401(k) match (which will be paid out at the end of January 2021), even though I satisfied the requirements for 2020? Assume that the employer will be paying out the match to all other HCEs who remain employed, are not quitting, and satisfied the 1,000 hour and last day rule for 2020.

In other words, is there another subjective, discretionary 'you must also still be employed when we declare/pay your match' requirement that the employer can arbitrarily use to deny me my 2020 match?

I don't see any language in the document to this effect, but it says I am merely 'eligible' to receive the match -- does this mean the employer can arbitrarily say 'nope!' after I quit in early January?"

1 reply   |    58 views   |    Add Reply

Gadgetfreak created a topic in 401(k) Plans

Controlled Group/Affiliated Service Groups -- Common Ownership Almost Always the Key?

"I have reviewed the regulations so many times I am afraid I am missing something. To me, it seems that there are 4 possible ways two companies can/should be combined (absent a MEP, PEP, etc.): [1] Controlled Group with Common Ownership; [2] ASG as A-org (requires common ownership - albeit only a very small amount); [3] ASG as B-org (requires common ownership - albeit only a very small amount); [4] Management Group (does NOT require common ownership).

If my understanding is correct, then only #4 requires common ownership of any kind. With that said, I am pretty sure this hypothetical situation isn't allowed but I don't know why:

I am a TPA owner with 15 employees and a DC (401k/PS plan with 3% SHNE). I decide to open a new business that my best friend (not related) will own but not take a salary. I will move all the 15 employees to that company and they will perform the TPA services. That company will pay me a consulting fee. I will open a solo401k for my consulting company and get away with excluding all my employees from the plan. There is no common ownership and one company isn't doing management for the other.

What am I missing? And is there a specific definition of what it means to provide management services?"

2 replies   |    47 views   |    Add Reply

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