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Message Boards Digest

March 2, 2021

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

mattmc82 created a topic in 401(k) Plans

Applying the 410(b) Failsafe to the Employee with the 'Greatest Amount of Service'

"Plan has last day and 1000 hour for PS allocation. Not passing coverage. So it says to add those still employed but under 1000 first, then to those with 'greatest amount of service during the Plan Year before terminating' and similarly situated employees will be treated the same. So need to add one employee out of those terminated to pass coverage. There are two options:

Terminated employee A -- terminated 09/28/2020 with 200 hours

Terminated employee B -- terminated 9/15/2020 with 480 hours

Which employee from above has the 'greatest amount of service'? I could make an argument for A, B or for both being 'similarly situated' since service conditions are based on both time and hours."

4 replies   |    58 views   |    Add Reply

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

Adding a Minimum Amount Requirement for In-Service Distributions

"We've administered this non-safe harbor 401k plan for years, and now they are moving to a new asset platform that insist on using their plan document, to which we grudgingly complied. One of the provisions they say they need to have is a $500 minimum on in-service distributions and hardships.... but there wasn't a minimum in the plan before. That sounds like a cutback in available benefits to me. Am I reading too far into this?"

4 replies   |    50 views   |    Add Reply

rocknrolls2 created a topic in Retirement Plans in General

Coronavirus-Related Distribution Tax Question

"Participant A retired from Company X nearly 10 years ago. He participated in X's defined benefit plan (from which he is currently receiving a pension under a joint and 100% survivor annuity) and 401(k) plan. The pension is equal to $36,000 per year, payable in monthly installments.

During 2020, Participant A also received distributions of his remaining account under X's 401(k) plan (which had both Roth and non-Roth portions), rolled over the vast majority of it into traditional and Roth IRAs and later received distributions of the balance from both IRAs.

During 2020, A was also laid off by Company G, which is unrelated to Company X.

A would like to treat the portion of the 401(k) plan distribution which was not rolled over but otherwise subject to tax as well as the taxable portion of the traditional IRA distribution as a Coronavirus-related distribution and pay the resulting tax over the next 3 years. A would like the pension amount received to be subject to the regular tax rules, which would subject the entire $36,000 to tax during 2020 (otherwise, A would be subject to tax on the pension during 2020 on $12,000, but would have to pay tax on $48,000 ($36,000 + $12,000) in each of 2021 and 2022).

However:

'If more than one distribution was made during the year, you must treat all distributions for that year the same way.' Form 8915-E Instructions, page 1; IRS Notice 2020-50, Section [1] IRS Notice 2020-50, Section 4.B. ('All coronavirus-related distributions received in a taxable year must be treated consistently (either all distributions must be included in income over a 3-year period or all distributions must be included in income in the current year').

Seemingly inconsistent with the preceding paragraph are the following:

Instructions to Form 8915-E, page 2, 'Types of Qualified 2020 Disaster Distributions,' 'Coronavirus-related Distributions' -- 'you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a coronavirus-related distribution, regardless of why the distribution was made,' provided that the aggregated distributions so designated do not exceed $100,000. Coronavirus-related distributions are permitted without regard to your need;' IRS Notice 2020-50, Section 1.C ('In general, a qualified individual is permitted to designate a distribution described in the preceding paragraph as a coronavirus-related distribution').

Reviewing the foregoing, I am inclined to conclude that the requirement of consistency referenced in the second paragraph applies solely to determination of whether all coronavirus-related distributions (as designated by the individual) are taxed ratably over 3-years or taxed in full in the year of distribution. Therefore, A would be permitted to designate only the portion of the 401(k) account that would have been taxable but was not rolled over as well as the taxable IRA distributions as coronavirus-related distributions and not the periodic payments A was receiving from the defined benefit plan.

Does anyone have a contrary position on this?"

1 reply   |    43 views   |    Add Reply

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

Relative Value Disclosure Required for Less-than-$5,000 Lump Sum?

"Is the relative value disclosure required for a lump sum under $5k (over $1k). If yes, do I need to show the monthly benefit equivalences?"

2 replies   |    47 views   |    Add Reply

Carl S. created a topic in Communication and Disclosure to Participants

How Does Alternate Payee Get Information About Amount of Accrued Benefit?

"My ex-wife and I have mostly identical QDRO documents for each of our pensions. How can I go about finding out the expected value once I start receiving payments from her pension, and also how do I find out if a lump sum distribution option is available? Will her plan administrator supply that information to me?"

3 replies   |    40 views   |    Add Reply

Pammie57 created a topic in 401(k) Plans

Safe Harbor Match Miscalculated by Payroll Provider

"A company started a safe harbor 401k for 2020. They and their payroll provider misunderstood how the safe harbor match worked.... They over-matched a participant who only deferred 1% because they gave him 4%, so his match was way more than his deferrals. Should this be moved to the forfeiture account since it wasn't supposed to ever be given to this participant, or can it be returned to the employer? I have looked at their adoption agreement and don't really see a clear answer."

1 reply   |    33 views   |    Add Reply

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