Message Boards Digest

January 12, 2021

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

still learning created a topic in Retirement Plans in General

Trustee/Owner/Participant to Be 50% Owner of Restaurant; Plan to Own Remaining 50%; Prohibited?

"Husband & wife own 100% of business that sponsors a DB plan. They are the only employees, the only participants, and the plan's trustees. Husband wants to buy an investment property (a building housing a fast food restaurant, but I don't think that's relevant) 50/50 with the plan as tenants in common. I believe this is a PT. Does anyone disagree?"

0 replies   |    24 views   |    Add Reply

Chippy created a topic in Retirement Plans in General

Changing Fiscal and Plan Year-End from 9/30/2020 to 12/31/2019

"I was just notified that a client is changing their fiscal and plan year-end from 9/30 to 12/31, effective 12/31/2019. It's too late to prepare a 12/31/2019 Form 5500. Should I prepare a 9/30/2020 valuation and 5500 and then do a short plan year of 10/1/2020 to 12/31/2020? Can I still amend the plan retroactively for a 12/31 fiscal and plan year end effective 12/31/2020?"

3 replies   |    45 views   |    Add Reply

Cowgirl83 created a topic in Nonqualified Deferred Compensation

Non-Qualified Plans for Federal Credit Unions

"A federal credit union wants to offer its executives a non-qualified plan. As a tax-exempt employer, they had inquired about creating a 457(b) plan. After an initial discussion regarding the deferral limits applicable to 457(b) plans, they wanted to explore either 457(f) or 409A. During my research, I have come across discussions regarding the issue of how FCU's should be classified (PLR 200430013 and IRS Notice 2005-58) and that effect on what type of NQ plan they can sponsor. It is not clear to me as to whether or not this issue has been resolved, particularly if the plan is just now being created. Can a FCU create and sponsor a new plan under 457(b)? 457(f)? 409A? If so, is there a good reference source for guidance on the best options available?"
0 replies   |    21 views   |    Add Reply

thepensionmaven created a topic in Form 5500

'One Participant Plan' in Context of Family Attribution

"The instructions to Form 5500-EZ make it pretty clear that IRS considers a plan wherein the husband AND wife together own 100%. What about attribution -- wouldn't the spouse of the owner be included as an owner? Or the daughter of an owner if she is a stockholder?"

2 replies   |    43 views   |    Add Reply

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

Plan Refuses to Withhold Federal Income Tax from My Distribution

"My employer's plan is terminating and I'm taking a small cash distribution and rolling over the rest to an IRA. My employer will NOT take federal withholding taxes from the cash portion. Isn't this required when taking a distribution? is there any repercussion for not taking the withholding? I guess I could up my deduction each pay to make up for it so I don't owe it all at the end of the year."

1 reply   |    32 views   |    Add Reply

#toomanyrules created a topic in 401(k) Plans

Top Heavy Calculation in Multiple Employer Plan

"Company A and Company B constitute a brother-sister controlled group. Co. A sponsors a calendar-year end 401(k) plan, which Co. B has adopted.

In June 2019, a business transaction occurs and Co. A and B are no longer a control group, but there remains shared level of ownership (just not enough to be considered a single employer plan). Employees of Co. A are 'shifted' to Co. B; thus, in 2019 some employees begin to have account balances attributable to Co. A and Co. B.

As this is a takeover plan, I don't have ALL the details for 2019 (such as the Top Heavy Test results as of 12/31/19). I do know the plan was not top heavy as of 12/31/2018.

I am working on the 12/31/2020 compliance testing and Form 5500. I am trying to back into the 12/31/19 top heavy account balances to determine if a top heavy minimum contribution is required. I know for a Multiple Employer Plan, Top Heavy, ADP,/ACP, coverage is calculated separately for each employer. I don't know how the testing was run in 2019, but my main concern is whether a 2020 TH minimum is required.

For participants who were employed by Co. A and B in 2019, how do I treat their account balances for Top Heavy determination? Initially, I intended to split out the accounts such that each affected participant has two accounts--one from Co A and one from Co B. as of June 2019 (and pro-rate earnings after June 2019). But, then I started thinking, since they were controlled for part of the year, can I split out the accounts as of 1/1/2020 for top heavy testing? I don't believe there is any formal guidance from IRS on this issue -- it's just any 'reasonable' approach. Thoughts/opinions?"

0 replies   |    22 views   |    Add Reply

khn created a topic in Mergers and Acquisitions

'Related' Employer Even with Separate Plans?

"Company A acquired Company B via a stock purchase effective 1/1/2020. Company B has a 401(k) plan that merged into Company A's plan 1/1/2021. Company B's former recordkeeper is asking Company A to complete some questions in regards to upcoming non-discrimination testing, as the new owner.

One question they are asking for the 2020 plan year is 'Does your Company (Company B) have any related employers?' Because Company B was newly purchased by Company A in 2020, is it a related employer?"

1 reply   |    24 views   |    Add Reply

Tedterrific created a topic in Retirement Plans in General

Former Participant Sorta-Never Received Distributions After Attaining NRA

"Former employee attained the age 65 normal retirement age a few years ago. She never received any distributions -- or maybe she did.

She was a participant in a DB plan and 401k plan. Plan sponsor says they paid a monthly benefit once she reached age 65 based on 50% joint and survivor. But those checks were never cashed, so the plan sponsor assumed she had died.

Now she's asking for a lump sum payment, because she insists she asked for a lump sum payment at NRA when she terminated employment several years prior to her NRA.

What is she entitled to now?

Employer is a large insurance company that obviously has vast experience administering qualified plans, including their own. Employer insists she was contacted by mail but never responded. So it's possible some fault for all this lies with the former employee. Nevertheless she should be entitled to something, yes? She has communicated she would accept the lump sums determined as of her NRA without additional earnings. But I'm not sure that a plan administrator is allowed to unilaterally approve that."

4 replies   |    62 views   |    Add Reply

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