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Message Boards Digest

January 21, 2021

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

AlbanyConsultant created a topic in 401(k) Plans

Stock Sale and Transitional Relief

"We were just told yesterday that effective 12/31/20 Company M sold out to Company S in a stock sale such that M is a wholly-owned subsidiary of S. We are the tpa for M's plan (401(k), safe harbor, profit sharing), and S's goal is to terminate M's plan in 2021.

M's employees are still being treated as belonging to a different entity, and are still deferring into M's plan.

Obviously, we want to take advantage of the transitional relief rules so that we don't have to deal with S for testing in 2020 or 2021. This brings up a few questions: [1] Can M as a corporate entity be the plan sponsor of M's plan post-12/31/20? [2] Can the trustees of M's plan (who were the former owners of M) stay on as trustees of M's plan? I don't see why not, though they may not particularly want to.

If we amend, we lose the transitional relief, so I'm wary of that. It's funny--the articles about this topic all seem to be written from the point of view of the purchaser, not the seller. Maybe I should be dumping this all on S and telling them to have their TPA figure this out! Oh, wait--they don't really have one; they use a bundled low-cost product, so they have no one to give them any advice (except their attorney, who I'm sure charges much more per hour than I do!)."

5 replies   |    77 views   |    Add Reply

gc@chimentowebb.com created a topic in 409A Issues

Freezing Employer SERP Contributions Mid-Year

"Employer has committed to a 20% contribution to a defined contribution SERP. The time and mode of payment are fixed in the document.

The employer wishes to freeze contributions mid-year, and the plan document permits this. The reason is that the employer intends to substitute 409A-exempt stock options and bounuses for the amounts it would have contributed to the SERP.

I don't see a problem with this, but would appreciate input: [1] Substitution is not really the issue. The accrued amounts will be paid as scheduled and the employees are not relinquishing rights. As stated, the plan allows for a freeze with advance notice. [2] Changing a deferral amount mid year should also not be a problem. Although mid-year changes are prohibited for elective deferrals, absent hardship, this does not seem to apply to plans funded solely with contributions by the service recipient. Thoughts?"

2 replies   |    21 views   |    Add Reply

JustMe created a topic in Retirement Plans in General

How to Handle Fee Changes with the Change of TPA?

"The 404a-5 regs. require that plan participants be notified of any fee changes 30-90 days prior to the effective date of the change. From a practical standpoint, how are TPAs handling this requirement if you takeover a plan and the distribution/loan fees are different from what you charge? Do you make a note in your system not to change the fees until XX date?"

2 replies   |    38 views   |    Add Reply

401king created a topic in 401(k) Plans

First 5500 for 3-Year Old Solo 401(k) -- Beginning Assets to Report?

"A Solo 401(k) Plan effective 1/1/2017 crossed the $250k threshold as of 12/31/2020. When reporting on the Form 5500-EZ for 2020: The plan year will be 1/1/2020--12/31/2020 (not the effective date through 12/31/2020, right?). The beginning assets are actual assets on 1/1/2020 (as opposed to potentially $0 assets because it's the first return)."

1 reply   |    25 views   |    Add Reply

BG5150 created a topic in Retirement Plans in General

What If Plan Uses Employer's EIN for 1099s and/or Accounts?

"We have some plans done by a former administrator that have individual brokerage type accounts. I believe these accounts were set up using the employer's EIN instead of a Trust EIN. What are the ramifications of this, if any? I always get a separate TIN when the accounts are either in a pooled account or individual brokerage accounts. The former admin ceased doing that because he got tired of the pushback when the TIN was retired due to inactivity. I was setting up a new plan, and was told it was OK to just have the sponsor's EIN as the Trust EIN in the doc."

2 replies   |    31 views   |    Add Reply

Jpagano created a topic in Retirement Plans in General

Plan-to-Plan Transfers for a Union Population

"We have a client who has a group of employees that are now under a union contract. They are still employed by our client. New contributions are being sent to the union plan which is administered by another vendor. The broker has requested that we amend the plan they have with us to exclude this group of employees from being eligible to participate in the plan and transfer these assets to the union plan. There are fringe wages and deferrals in this plan - don't know if this matters, but wanted to mention it.

Our base document states:

3.4 TERMINATION OF ELIGIBILITY In the event a Participant shall go from a classification of an Eligible Employee to an ineligible Employee, such Participant shall continue to vest in the Plan for each Year of Service (or Period of Service, if the elapsed time method is used) completed while an ineligible Employee, until such time as the Participant's Account is forfeited or distributed pursuant to the terms of the Plan. Additionally, the Participant's interest in the Plan shall continue to share in the earnings of the Trust Fund in the same manner as Participants

We are not convinced that changing the eligibility status of the participant population, while still remaining employees of the same company, permits a plan to plan transfer. Our attorney agrees but we're getting push back. The broker has stated that one of his colleagues had this exact situation and that's what his client did. Is there any code that anyone can direct me to that would help us resolve this?"

2 replies   |    26 views   |    Add Reply

Shuo created a topic in 401(k) Plans

Is There Any 401(k) Rollover Service?

"Is there any service that helps clients rollover their 401ks into IRA on their behalf? A lot of people don't want to do it themselves."

12 replies   |    71 views   |    Add Reply

khn created a topic in 401(k) Plans

Converting Plan with Self-Directed Brokerage

"Due to an acquisition, a small plan that has a self-directed brokerage account option for participants is merging into a larger plan that does not have self-direct. The purchasing company does not want to amend the larger plan to allow for self-directed brokerage. Would it be permissible to map the funds in the self-directed brokerage account into the age-appropriate target date funds, which are the plan's QDIA, upon conversion?"

1 reply   |    23 views   |    Add Reply

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