Message Boards Digest

January 5, 2021

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

LostInPension created a topic in 401(k) Plans

Vesting Service Question

"I have a question about some plan language I have seen. The plan provides 3 year cliff for matching contributions based on "Years of Participation". Years of Participation are defined as, "Any Plan Year during which you both complete at least one thousand (1,000) Hours of Service and receive a match for at least six different months of the Plan Year." An employee receives matching contributions for a payroll period if he/she defers at least 3% of compensation. Eligibility is date of hire and entry date is the date is based on the date you elect to defer. I believe that minimum vesting requirements under 411 require counting all years of service for all Plan Years in which an employee earns at least 1,000 hours of service, unless the year of service is can be excluded. The closest language I can find for this situation is Treas Reg 1.411(a)-5(b)(2), which states, "In the case of a plan utilizing computation periods, a year of service completed by an employee under a plan which requires mandatory contributions (within the meaning of section 411(c)(2)(C) and ยง 1.411(c)-1(c)(4)) to be made by the employee for such year, if the employee does not participate for such year solely because of his failure to make all mandatory contributions to the plan for such year. If the employee contributes any part of the mandatory contributions for the year, such year may not be excluded by reason of this subparagraph." (emphasis added) My reading of Treas Reg 1.411(a)-5(b)(2) is that a year of service for vesting cannot be excluded for any computation period in which some mandatory contributions (matching contributions in this case) are made (i.e., even if just for one payroll period), so that there may be an issue with requirement that an employee receive matching contributions for at least 6 months in the computation period (Plan Year in this case). My question is, am I misreading Treas Reg 1.411(a)-5(b)(2), or is there some other guidance that permits the requirement stated by the plan?"
4 replies   |    55 views   |    Add Reply

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

Prepayment not allowed on loans?

"Never seen this one... client wants to NOT allow prepayment on participant loans. Not seeing anything in 1.72(p) or 2550.408(b)-1 specifically prohibiting this, but it seems wrong on so many levels that I've got to assume this has been addressed somehow before. First, it doesn't seem like ERISA would pre-empt state law on this question, so if state law doesn't allow for such a provision on loans, then that nixes it, perhaps. Then I start thinking about fiduciary issues - if a participant wants to pay it off early, and the plan/fiduciary won't allow it, then the participant is, in essence, being forced into an investment that is perhaps "underperforming." Etc., etc., - anyone ever heard of this question coming up?"
4 replies   |    69 views   |    Add Reply

LawnBoy created a topic in 401(k) Plans

Advisor Access to Participant Transactions

"Happy New Year! Wondering if anyone is aware of functionality that allows the plan's advisor to view participant-level transactions and, if permitted, execute transactions or act on behalf of the participant? Do providers allow advisors to view participant-level transactions? If so, is this something that's common? I received an inquiry today and was unfamiliar. Thank you! LawnBoy"
4 replies   |    40 views   |    Add Reply

mehmgo created a topic in 401(k) Plans

coverage test

"if a plan is reallocating forfeitures only to all active employees (hce & nhce) and 70% coverage does not pass but abt does pass, can you use the active employee status as an allowable determination class to use this option to pass coverage."
3 replies   |    55 views   |    Add Reply

Benefits 101 created a topic in 401(k) Plans

Waive Eligibility for New Plan

"When starting a new plan, must eligibility be waived for ALL employees? Or can we say "eligibility is waived for ALL full time employees"? However full time is defined."
0 replies   |    22 views   |    Add Reply

stephen20 created a topic in 401(k) Plans

Key Determination - Officer, need advice

"There are three threshold for key determination- Key Employees 1. An officer of the company earning $180,000 or more annually; 2. 1% owner with a salary of $150,000 or more; and, 3. 5% (or more) owner regardless of salary. Situation 1: Mr. David got compensation in 2019 $ 140,000 and in 2020 $480,500. Question 1: Do I need to consider him as KEY Employee in 2020 plan year (plan year end 12/31/2020)? Situation 2: Mr. David Mr. David got compensation in 2020 $485,500 with 1% ownership. Question 2: What will be his key status for 12/31/2020? Thanks in advance."
4 replies   |    47 views   |    Add Reply

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

Determination letter on ESOP

"I'm a little (a lot?) confused on this. So, say an ESOP plan that was individually designed (weren't they all until relatively recently?) applied for and received a determination letter in 2014 - back when individually designed plans were on a 5-year cycle. That letter said it expired 12/31/2019. But, didn't Rev. Proc. 2016-37 eliminate the 5-year cycle, and isn't it true that you generally cannot file for a determination letter currently (except for initial qualification, plan termination, etc.)? So even if the plan sponsor wanted to apply for a determination letter, they can't? Or, is there a special situation for an ESOP that I'm missing?"
2 replies   |    26 views   |    Add Reply

mwyatt created a topic in Form 5500

2020 Form 5500SF-1 Man no longer, can now efile 2020 Form 5500EZ

"Noted that DOL/IRS have eliminated filing a form 5500EZ as Form 5500-SF (One Man) electronically. Going forward you can now file Form 5500EZ electronically. Just checked ASC/DGEM this morning and see that one of the first questions on EZ screen is whether efiling or paper. That is all well and good, but have filed several final 5500-SF (One Man) filings that had short final plan years in 2020 due to termination already (filed using 2019 series of forms as usual for short final plan years). Question is what to do about those filings given this late sea change in eliminating 5500-SF (One Man)?"

1 reply   |    22 views   |    Add Reply

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