Message Boards Digest

January 27, 2021

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

CubsFanAZ created a topic in 401(k) Plans

Treatment/Correction of Excess Employer Contribution to Profit Sharing Plan Coordinated with DB Cash Balance Plan

"I've received inconsistent responses to an issue I'm facing, and interested in the expert opinions found here on the board.

I have a Solo 401k/profit sharing plan for my business, which includes my spouse and me. In 2020, I added a DB Cash balance plan. We have both contributed the max employee deferral for 2020, including catch-up contributions. Typically throughout the year, we contribute 25% of compensation to the plan as the profit sharing contribution, rather than waiting until the end of the year.

We continued this practice even as we were exploring the adoption of the DB Cash balance plan, which we adopted prior to year-end 2020. We now find that we have made profit sharing contributions in excess of the 6% limit for combined DC/DB plans, when considering the minimum funding contribution for the DB plan will be in excess of 25% of compensation (we are both over 55). I had hoped that since we were in the same plan year, and the contributions affect both my spouse and I equally, that we could transfer the amount exceeding the 6% of employer profit sharing contributions to the DB plan as part of the minimum funding DB contribution for the same plan year. However, it appears more likely that we need to keep the contributions and any earnings in the DC plan, and report them via 5330 to liquidate against future year contributions.

Has anyone dealt with a similar situation, and what was your solution? Ideally, I'd hope to transfer the excess 2020 profit sharing contribution to the DB/Cash Balance plan as part of the minimum contribution for 2020, as a correction. Open to any suggestions (the one I'm taking for sure is to let someone handle this going forward as it's too much to do this and run a business)."

6 replies   |    46 views   |    Add Reply

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

415 Limits & Bifurcated Benefits

"DB plan participant has an annuity benefit that is less than his/her 415 limit but their lump sum exceeds the maximum allowable. Can the plan pay the maximum lump sum which, for example, converts to 90% of the accrued benefit using statutory assumptions and then pay the remaining 10% of accrued benefit as an annuity (assuming the plan document allows for bifurcated benefit distributions in general)?"

2 replies   |    38 views   |    Add Reply

Tom created a topic in 401(k) Plans

Controlled Group -- Double Family Attribution? Double Family Attribution?

"Jack and Jill are a married couple who both own 50% of company A. Their adult son works for them and is considered a 100% shareholder through family attribution. Son owns Company B 100%. Company A and B have completely unrelated services and clients. Are Company A and Company B a controlled group? Or is this double attribution?"

2 replies   |    40 views   |    Add Reply

ESOP Guy created a topic in Form 5500

IRS Unhappy About Late Form 8955-SSA That Wasn't Even Required

"Our firm normally files an extension for the Form 5500 and the Form 8955-SSA at the same time. We always extend the due date for both of them. We did that last summer for a 12/31/2019 PYE ESOP. We later determined that they didn't need to file an 8955-SSA, so we didn't file one. The Form 5500 was filed timely. In the past that would have been the end of it. But the client just forwarded to us a letter from the IRS saying the Form 8955-SSA is late and that it should have been filed by 10/15/2020. Is this a trend? Do we really need to know by 7/31 whether a Form 8955-SSA will be needed? If any of your clients have received this kind of letter before, was the IRS satisfied with a simple response saying "no form was due"?"

2 replies   |    28 views   |    Add Reply

Griswold created a topic in 401(k) Plans

Contribution of Deferrals Is Late Even If Delay Is Due to Reconciliation?

"A few times in the past year a client has made the payments to TPA on time but TPA did not allocate them to the participants' accounts right away. It seems it's because the file sent by the payroll provider did not match the amount paid. When this happens the TPA holds the funds until they can reconcile, at which point they apply them. Most often happens when a new loan is taken out and it's not yet reflected in the payroll provider file. It seems like these shouldn't be late contributions. Any authority for this conclusion? Just the safe harbor under 29 CFR 2150.3-102?"

2 replies   |    55 views   |    Add Reply

Becky Schwing created a topic in Cross-Tested Plans

3% to All But HCE Fails Due to Young Whippersnapper

"Employer wants to give 3% PS contribution to everyone in the plan, but the owner doesn't want to take a contribution at all. Owner has a son who happens to be the youngest employee in plan. Giving his son 3% will not pass rate group testing. He fails. Could I still give the son 3% and just say that the allocation in pro-rata other than the owner is taking $0? Or, becuase the owner is taking $0 do I lose the pro-rata design and have to test the plan (thus limiting the son to a smaller than 3% contribuiton to get plan to pass testing)?"

9 replies   |    52 views   |    Add Reply

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