Message Boards Digest

February 1, 2021

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

kmhaab created a topic in Litigation and Claims

Liability for Accepting Invalid Beneficiary Form?

"What liability does a plan sponsor have for accepting an invalid beneficiary designation form? 401(k) participant submitted a beneficiary form in 2018 naming wife and 3 children as equal beneficiaries (25% each). Participant signed his own name on the line for the spouse's signature for the spousal waiver. It is possible he had POA for the wife at that time, but that is not noted on the form and the plan administrator has no record of a POA. There was no witness signature. Form was accepted by plan sponsor. Participant died in January.

My opinion is this was not a valid spousal waiver and therefore the spouse is his beneficiary. One of the children is threatening a breach of fiduciary duty claim against plan sponsor for 'recognizing the propriety' of the beneficiary designation form and leading participant to believe it had been properly submitted and was accepted.

Does plan sponsor have any liability here?"

10 replies   |    101 views   |    Add Reply

ABC empl created a topic in 403(b) Plans, Accounts or Annuities

403(b) Employer Contribution Miscalculated Over 10 Years. Correction?

"Employer contributes to NHEC employee % of salary, based on years of service. After internal audit, employer discovered they had miscalculated years of service (over and contributed at this higer rate based on this mistake... going back 10 years. Is the only appropriate correction to adjust years of service back to the initial error, and remove difference in contribution plus interest and earnings for the full 10 years from empoyee RSP account? This would represent a significant percentage of the employee's RSP balance. Are there any alternative approaches to correct?"

0 replies   |    25 views   |    Add Reply

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

Inconsistent/Incomplete Late Retirement Language - What's the Default?

"Question on late retirement increases. Assume everything above board re: more recent DOL guidance (late retirement increase required for TVs, and for actives where plan either [1] doesn't have suspension of benefits language, or [2] has the language but notice not provided.

In this case, the plan has SOB language (touching only on the rehire circumstance and suspending benefits then but treating the benefits for actuarial adjustment purposes as if they've stayed in payment) and client has been providing notices to participants past NRD, but only restarted doing so in recent years.

The case circulated through a few different actuaries, administrators after splitting from another plan eons ago. Other plan stayed with same counsel the entire time and language is clear (This is for background, not implying that another plan's language has bearing on this plan)--benefits suspended at normal retirement date if participant continues to work and benefits at a later date will be those earned at actual retirement, including service and pay).

However, the subject plan has been 'boilerplated' and sloppily so by previous actuary/administrator (I can't imagine legal counsel put the doc together). SPD and document only discuss rehire for SOB, and plan document says late retirement (again, boilerplate language) will be NRD benefit plus greater of new benefits earned or 'Late Adjustment' required under the plan. Late Retirement is not capitalized, no verbiage elsewhere and assuming that's also boilerplate as it wasn't in the original doc before split. No definition of Late Adjustment method that's capitalized -- assuming either the description was taken out elsewhere since no definition or detail refers to this anywhere else.

SPD in this case is short, also boilerplate in nature (looks like bits and pieces thrown together). SOB language is old school 'if you return to work, your benefit will be suspended', and no mention of what participant will get except for early and normal retirement.

Please pick apart my conclusion (waiting for green light to get opinion from legal counsel). More important in this plan than some others (in terms of the decision) due to the proportion of over 65 participants.

SOB language only talks about rehires, but in general, that still counts in determining if plan allows SOB at normal retirement and no actuarial increase

  • since the mother plan more clearly describes no late increase until 401a9 required, I'd like to see far more in terms of intentional adding of a late retirement adjustment (including an actual adjustment description or method that appears to be missing)
  • with a combination of the two, applying actuarial increase through the date that SOB notices were restarted, and then for older participants who work well past 70, starting again at what would have been RBD (4/1 after CY that 70-1/2 is attained)."
4 replies   |    53 views   |    Add Reply

Dick created a topic in 403(b) Plans, Accounts or Annuities

How Do I Move My 403(b) Investment to My Personal Roth Account in Order to Pay the Taxes Due Out of Pocket?

"I'm 60 years old. I have a 403b that is currently invested in a 6-year shield annuity. I'm in year three of the shield. I retired from teaching here in Milwaukee and now have a private sector side job that I've opened a tax deferred 401k with. I also have my own personal Roth account. How do I move my investment in the shield annuity to my Roth account so that I can pay the taxes due out of my own cash savings to maximize what I can put into my Roth account. Do I need to surrender the shield annuity?"

1 reply   |    28 views   |    Add Reply

Ken McDonnell created a topic in Other Kinds of Welfare Benefit Plans

New Warnings About COVID-19 Vaccine Scams

"As the COVID-19 vaccine roll-out continues, it's important to be on the lookout for scams. The Financial Crimes Enforcement Network (FINCEN) recently issued a new warning about vaccine scams:

  • Beware of scams offering early access to vaccines for a fee.
  • Keep an eye out for phishing scams where scammers email or text you with phony vaccine information.
  • Steer clear of scammers trying to sell fake versions of vaccines.

Here are the facts:

  • You can't pay to get early access to the vaccine.
  • Medicare covers the cost of the COVID-19 vaccine. COVID-19 vaccines are also free to others throughout the country, although providers may charge an administration fee.
  • Don't share your personal or financial information if someone calls, texts, or emails you promising to get you the vaccine for a fee.

To learn more about how to manage your finances during the pandemic, visit:

0 replies   |    21 views   |    Add Reply

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

ESOP Plan Termination -- Differs from a 401(k) Plan Termination?

"One of my client is terminating the ESOP plan, this is the first time I'm assisting a ESOP plan termination. Could you help me understand how different is a ESOP Plan termination from a 401(k) Plan Termination.

  • Terminating due to acquisition. Part will be moving to the acquiring company plan. Can participants move the funds in-kind to the acquiring company's 401(k)?
  • The plan does not have any stock assets. Does the sponsor have 6 months to distribute assets, or is there no 6 month rule?
  • If the participants do not take action can these be liquidated and rolled over to an IRA like we would normally do in a 401(k) plan?"
6 replies   |    23 views   |    Add Reply

Ahuntingus created a topic in 401(k) Plans

Revise Document to Eliminate Credit for Prior Service Because Nobody Knows About the Provision?

"We have recently been brought in to consult on a 401k plan. Client is ABC Company for our purposes. ABC Company bought a number of businesses that were in foreclosure. Let's call them Company XYZ. The employees of XYZ started for ABC on 1/4/2021. The current recordkeeper redrafted the documents effective for 1/1/2021 to recognize service for Company XYZ. The document now states that ABC Company 401(k) plan recognizes Company XYZ for eligibility and vesting. The client is now saying this was a mistake and they didn't want that those exemptions in the document. No communications have been made to the employees of Company XYZ even though those employees would of been eligible on 1/4/2021. Please note that no deferrals started for those employees and the plan has a 90 day wait and 1st of the month Eligibility. Can ABC Company have the recordkeeper redraft the documents and remove this since no communication was given to the employees?"

1 reply   |    36 views   |    Add Reply

coleboy created a topic in 401(k) Plans

Contributions Based on Compensation Over the Limit -- Keep Accepting But Count as After-Tax?

"The payroll system for this client capped the compensation at the annual of $285,000 for 2020. Instead of contributions stopping because the compensation limit was met, the contributions are still deducted but as after-tax. Wouldn't the client had to have something in the document allowing for after-tax contributions in order for this to happen?"

2 replies   |    36 views   |    Add Reply

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