Message Boards Digest

February 3, 2021

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

Kim created a topic in 401(k) Plans

Looking for New 401(k) Plan Service Provider

"Looking for recommendations for 401k plan service providers with good customer service and reasonable fees. Currently with large provider. Customer service is lacking."

9 replies   |    100 views   |    Add Reply

K-t-F created a topic in 401(k) Plans

Terminated Employee Already Paid Out, But Now Entitled to a Safe Harbor Contribution

"Today I learned that a plan participant terminated during the year and the financial advisor rolled out the balance to an IRA. Little did they realize that the participant is due a SH contribution in addition to a NEC employer contribution. Do they need to re-establish an investment account and roll the funds over, or can the contributions be directly paid to the rollover IRA?"

1 reply   |    24 views   |    Add Reply

waid10 created a topic in 401(k) Plans

ADP Testing -- Which Year to Use in Determining HCEs and NHCEs?

"I'm confused on which year's compensation to use in determining HCEs and NHCEs. We are doing the testing for the 2020 Plan Year. We use the Prior Year method. To determine 2020 HCEs, do we look to see who made over $125,000 in 2019? And ignore 2020 comp altogether?"

3 replies   |    35 views   |    Add Reply

cheersmate created a topic in 401(k) Plans

Employer Withheld Too Much in Salary Deferrals -- Correction Required?

"For 2020, a Participant elected to have $1,625.00 in 401(k) deferrals plus $541.66 catch-up contribution withheld per pay period.

On December 29, 2020, the Participant completed a new election form electing $19,500 annual 401(k) deferrals plus $6,500 annual catch-up, to be withheld proportionately from each pay period. The employer provides 24 payrolls per year, so the 2021 per pay withholding should change to $812.50 + $270.83 respectively. Unfortunately, it was not changed and for both of January 2021's payrolls the previous election stood.

Both of January 2021's 401(k) deferrals have been remitted over to the plan (same day as pay dates) making this not only a payroll issue but a plan correction issue.

How should this be corrected? Should the employee be provided a special paycheck equal to the overcontributions with taxes withheld (recognizing FICA will be overpaid)? And then, to correct the plan, should the contributions to the participant's account be removed and placed in a forfeiture account?

The employer realized the error and spoke with the participant, who is OK with what's happend and does not want a correction. He'd simply skip 401k deferrals for the month of February and restart again in March. (The plan does permit changes to be made that frequently.) Would that be acceptable?"

6 replies   |    58 views   |    Add Reply

EdP created a topic in Health Savings Accounts (HSAs)

Can I Contribute to My HSA at Same Time My Spouse Contributes to Her FSA?

"I have a High Deducible Health Plan with an HSA, to which I contribute. My wife works for a municipality and has access to an FSA with her health plan. So we're on separate plans, provided by separate 'companies.' My wife has my daughter on her plan. Can I contribute to my HSA as an individual and my wife contribute to her FSA?"

0 replies   |    15 views   |    Add Reply

Rachelk created a topic in 401(k) Plans

401(k) Plan Adoption in December 2020

"I am self-employed and decided to open a 401(k) very last minute in December. I signed and submitted the adoption docs to Fidelity on 12/31/2020 with an election of $10,000 for 2020. I meant to make that election for 2021. Fidelity opened my 401(k) mid-January. Does that mean my 401(k) is active 2021 onwards and NOT for 2020? Do I still need to contribute $10,000 for 2020, or can that little bit of election on the adoption agreement be forgotten/ignored?"

1 reply   |    32 views   |    Add Reply

401(k)athryn created a topic in 401(k) Plans

Valuation Date for 401(k) Plan

"This is a plan document question and also relates to ERISA section 404(c). The plan allows participants to self-direct investments in individual brokerage accounts. This is NOT an investment platform, but the total asset balance in each participant's account can be obtained each day online or with a phone call as the funds are publicly traded. I believe this makes it a daily valued plan (must be indicated in plan doc) and it can be 404(c) compliant if meeting other requirements. A plan that is not daily valued cannot be 404(c) compliant. Question - The money type balances are only determined on annual basis by yours truly (TPA). Does this change it from being a daily val plan to an annual valuation plan that cannot be 404(c) compliant? I see nothing about source/money type balances in the regs, but want to be sure we are drafted documents to reflect a correct valuation date (daily vs. annual)."

6 replies   |    44 views   |    Add Reply

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