Message Boards Digest

February 8, 2021

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

imchipbrown created a topic in Form 5500

Final Form 5500 - Payables/Liabilities?

"401(k) Plan terminates as of 12/31/20. Two payrolls are receivable as of 12/31 and hit the participant's individual brokerage accounts in January. This is a partnership with Safe Harbor 3% NEC, so partners' shares and 3% amount are TBD. All rollovers/distributions are in process with a hopeful close-out date of 2/28/21. I don't think I can do a Final Return for 2020 showing 'liabilities' to zero out the ending account balances, especially when partners' final number is unknown. I think the final is a 2021 Form 5500. Anyone disagree?"

2 replies   |    45 views   |    Add Reply

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Santo Gold created a topic in Retirement Plans in General

Different Eligibility Conditions for HCEs -- Discriminatory?

"I am working with a doctors' office and their 401k plan. They currently have a one year of service/1000 hours eligibility requirement to enter the plan. However, they would like to change that to a 6 months elapsed time requirement for new doctor hires. The new doctors would not be owners. If the new doctors make less than $130,000 (2021) and are not HCEs in their first year employment, then there would not be a discrimination issue for 2021, is that correct? What if, in future years, their earnings are above the HCE dollar threshold? Is that something that could be viewed as discriminatory a year or two after they are hired? I would not think so because I think any eligibility discrimination would be applied in the year of hire. But I wanted to check if others agree."

1 reply   |    38 views   |    Add Reply

justanotheradmin created a topic in 401(k) Plans

Loan Source Restrictions on Proceeds -- How is 50% Cap Affected?

"Plan uses a common record-keeper/custodian that also processes participant loans online: Principal. The plan assets consist of only deferrals and safe harbor match (100% vested, not QACA). The plan's loan policy restricts the loan proceeds source to just deferrals. Well, I suppose that's how my interpretation has always been of this particular policy language.

'Source of Loan. Participant loans are may be made from all available contribution sources, to the extent vested unless designated otherwise under this section.'

For this plan it is designated otherwise and specifies that only Pre-tax Deferrals and Roth Deferrals are eligible.

John Doe participant has the same amount of $ in deferrals and SH match. The record-keeper is unable/refuses to process a loan for 50% of the participant's vested balance (essentially 100% of the deferral balance). They are insisting the only way it is possible would be for the plan to amend its loan policy to allow the loan to be taken from all sources.

I disagree. Loan source restrictions on proceeds are common, for a variety of reasons, I see it done a number of different ways. What I don't usually see (maybe have never seen) is a source restriction on the 50% max value part of the calculation. I don't even think that is allowed, but I'm not able to find a citation.

I remember the days when sponsors had two plans, a money purchase, and a separate 401(k) PS, and we would aggregate the balances between plans for the 50% calc, even though the loan was only allowed from the 401(k) plan.

Am I wrong? If I'm right, does anyone have suggestions for pushback to the provider? Citations?"

13 replies   |    90 views   |    Add Reply

Benefits 101 created a topic in 401(k) Plans

Fees Paid from Former Employees' Accounts But Not Current Employees' Accounts

"An employer wants to pay for all the participant-related fees, so that no fees are taken from employee account balances. However, they do NOT want to pay for the participant fees once the employee leaves employment and becomes a former employee. If the employee fails to roll out the 401k account balance, the fees will be taken from their account. Anyone see any issues with this? Is there guidance/best practices around this?"

2 replies   |    45 views   |    Add Reply

k3mkim created a topic in Distributions and Loans, Other than QDROs

Hardship for Medical Expense -- What Is Acceptable Date Range?

"I have an participant who is requesting a medical hardship and submitted a bill/invoice dated August 2, 2012 listing an amount due but no due date. What is the acceptable timeline for this type of supporting documentation?

I thought only bills could be submitted for a 6 month time period or future medical treatment that is not covered or reimbursed by insurance. Currently, I have required the participant to provide a current letter from the hospital stating the amount owed, due date, and confirmation that no further payments were or are being made to this invoice."

1 reply   |    38 views   |    Add Reply

John Feldt ERPA CPC QPA created a topic in Cross-Tested Plans

Two DC Plans -- Gateway Coordination

"Suppose an employer had a 3% safe harbor nonelective 401(k) plan in 2020 with pro-rata profit sharing. In 2021 they adopt a second plan, a new PS plan, retroactively to 1-1-2020 and it has each person in their own rate group. Can this new plan offset the minimum gateway by the 3% safe harbor nonelective provided to those same participants in the 401(k) plan?"

2 replies   |    44 views   |    Add Reply

AdKu created a topic in 401(k) Plans

Top Heavy Determination Issues

"A 401(k) plan had a safe harbor match provision with a 1 year (1,000) eligibility requirement when it was established in 2014. It has been TH for all year including the 2014 plan year. There was a one time eligibility requirement waiver amendments in 2016. Because of the eligibility waiver, an existing employee (EE1) who works under 500 hours each year entered into the plan in 2016. However, this employee never deferred any 401(k) money to receive any safe harbor match.

The plan was amended in 2018 changing the safe harbor match to 3% safe harbor non-elective when the employer established a Defined Benefit plan in addition to this existing 401(k) plan. The eligibility requirement stayed the same (1 year of service) with 3% safe harbor non-elective allocation requirement of 1,000 hours during the plan year. the The aggregate plan has been TH for all plan years.

Is it safe to assume the 401(k) plan was exempt from TH from 2014 through 2017 if the only contribution were deferrals and safe harbor match regardless of the one active employee who never deferred didn't receive any matching contribution?

Is it also safe to assume the aggregate plan is not exempt from TH starting the 2018 plan year because of the DB accruals?

If so, do I have to determine the plan TH status as of 12/31/2017 while the plan had deferral and safe harbor match contributions only (assuming calendar year plan) for the plan year beginning 1/1/2018 and provide TH min for EE1 for 2018 plan year and thereafter? Or, do I have to determine the plan TH status as of 12/31/2018 as the aggregate plan had additional contribution besides deferral and 3% safe harbor non-elective (DB accrual) for the plan year beginning 1/1/2019 and provide TH min for EE1 for 2019 plan year and there after?

My biggest confusion is when should the TH min should start 2018 or 2019."

1 reply   |    36 views   |    Add Reply

JRN created a topic in Plan Terminations

Partnership Dissolution Mid-Year -- Safe Harbor 401(k) Plan -- What Is Maximum Contribution?

"Partnership sponsors safe-harbor 401(k) plan -- non-elective 3% employer contribution. Partnership is dissolving effective 02/28/2021. What is the maximum amount that can be contributed to the Plan for a partner for 2021? Is the answer simply the pro-rated 415(c) limit (i.e., $58,000 x 2/12 = $9,667) plus $6,500 catch up if age 50 or older? Total = $16,167 (assuming partner's Earned Income for the 2-month short plan year is at least $16,167).

Does the Plan termination date necessarily have to be 02/28/2021? Although the partnership will dissolve on 02/28/2021, the partnership will still exist in some form after that date to collect account receivables, pay bills, etc."

1 reply   |    37 views   |    Add Reply

Peter Gulia created a topic in Form 5500

Does Anything in Form 5500 Call for a Second Organization's EIN?

"Before 2020, partnership A maintained a single-employer individual-account retirement plan for its employees (including those of its partners who are deemed employees). In 2020, partnership A amended its plan to allow participation by partnership B (for those of its partners who are deemed employees and for employees, if any). Partnership B is a new-formation startup. There is no transfer of assets or liabilities from a plan of B into A's plan. The two partnerships -- while separate artificial persons--are a Section 414(m) affiliated service group. The plan's governing documents specify partnership A as the plan's sponsor, administrator, and trustee. The documents admit partnership B as a participating employer.

Is there anything in Form 5500 that calls for reporting the Employer Identification Number of partnership B?"

3 replies   |    29 views   |    Add Reply

Jakyasar created a topic in Plan Document Amendments

Can I Add an Adopting Employer After Year-End?

"New plan was signed/adopted by 12/31/2020, sponsored by sole-proprietor (husband). Now they want to add another sole proprietor (wife) for 2020 as an adopting employer. Can this be done retroactively?"

1 reply   |    16 views   |    Add Reply

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