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Message Boards Digest

March 3, 2021

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

Jakyasar created a topic in Retirement Plans in General

Fidelity Bond Required in This Scenario?

"The following DC plan needs a fidelity bond: owner (100%), spouse and 2 adult children are participants. Correct?"

3 replies   |    48 views   |    Add Reply

TPAnnie created a topic in Correction of Plan Defects

Compensation Not Capped; Match Calc'd on Excess Comp

"We're doing testing on a takeover plan and found an issue -- comp is not being capped for match. So, for their match formula of 50% of 6% deferrals, someone deferring $26k with $500k comp got a match of $15k rather than $8,550. (Correct? That the comp must be limited, regardless of whether they're matching per payroll or annually?)

The correction is to forfeit the excess match, correct? Is there an actual term used for this excess match? Which amount goes into the ACP test -- $15k or $8,550?

Now, to further complicate the situation, this has been going on since 2015. (FWIW, the higher figures' testing has always passed all testing -- other than whatever test would have caught the problem.) This is such a large payroll, it would cost way too much to retro-amend the doc for a larger match.

What would be the appropriate correction path to follow here?"

2 replies   |    44 views   |    Add Reply

WCC created a topic in 401(k) Plans

2021 Distribution Requested in 2020 But Mishandled -- Can Be CRD?

"A participant submitted a CARES distribution request in November 2020. The request was valid and in good order, but the recordkeeper did not process it. The recordkeeper is a large national bundled provider. The plan sponsor was upset and has been in an argument with the recordkeeper because it wasn't processed timely. The solution from the recordkeeper is to process the CRD today and issue a 2020 1099-R and call it a CRD. The recordkeeper will file a VCP submission asking the IRS to approve a 2021 distribution due to a procedural error because the paperwork was received in good order and the recordkeeper failed to process it. Apparently, this happened with multiple plan sponsors, because the recordkeeper is filing a VCP submission of behalf of multiple plan sponsors. (Note -- the participant does not qualify for any other type of in-service distribution.)

Does the IRS have authority to approve a VCP submission to treat a 2021 distribution as a CRD due to the recordkeeper's error?"

2 replies   |    47 views   |    Add Reply

katdmin created a topic in Retirement Plans in General

Earnings and Losses on Pooled Investments Were Not Allocated to Terminated Participants

"I recently took over the admin of a pooled profit sharing-only plan. And as it seems with every plan I start to work on, there's an issue. When a participant terminates employment, they stop sharing in gains (or losses). For example, there's a terminated participant whose balance hasn't changed since the 6/30/2014 plan year end. I looked through the document (it's the lovely Datair IDP) and I can't find any language confirming whether that's right or wrong. Assuming the plan is administered consistently, is it OK to NOT allocate earnings to terminated participants who still have balances?"

6 replies   |    51 views   |    Add Reply

shERPA created a topic in Retirement Plans in General

What's the Date of Hire for the Partners in This New Partnership?

"Three partners get together and form a business. They start meeting and discussing the business in April 2020. They start working on organizing the business, writing a business plan, researching customers and suppliers, etc. in June 2020. In September 2020 they engage an attorney to create an operating agreement and form an LLC, which is registered with the state in November 2020. In November and December 2020 they interview and hire employees to start working in January. They 'officially' begin operations in January 2021. For purposes of plan eligibility, what is the partners' date of hire?

Under DOL regs it typically is the date an employee first performs an hour of service for the employer for which the employee is entitled to payment. The partners clearly started working on this in April of 2020. They clearly expect to earn a profit. But they didn't have a formal employer entity until November.

A. April 2020

B. June 2020

C. November 2020

D. January 2021

E. Other__________."

2 replies   |    34 views   |    Add Reply

401 Chaos created a topic in Health Plans (Including ACA, COBRA, HIPAA)

COBRA, Bankruptcy, and a PEO . . . . Oh My

"So, small client has benefits through a large, national PEO. Things are not going well for the company and it is facing bankruptcy. Unclear at present if that will be a Chapter 7 or Chapter 11 and whether some employees will remain on staff to wind things down for a short period, etc. but likely to involve terminating most employees in a few days. Client asked PEO about COBRA in the event of bankruptcy and was told that "PEO is willing to offer COBRA for a company in bankruptcy if the fees are all paid upfront. Fees would be $500 per employee as a set up fee (presumably for all current employees whether or not they elect COBRA) and then $75 per month per employee. All amounts to be paid up front with any unused amounts returned if someone doesn't sign up for COBRA (or takes less than 18 months). Again, all of this appears to be by way of COBRA / administration fees just to get to point of employee being able to pay regular COBRA premiums. Does this make sense. I suppose at one level it might be generous if we assume some complete liquidation and this envisions allowing employees to participate in the PEO's multiple employer plan even though client no longer exists and no longer participates in the group health plan. On the other hand, it seems strange to me for the PEO to be saying it is "willing" to permit COBRA coverage and then to assess some employer administration fees to make that happen. What if they are trying to reorganize and a handful of employees stay on to help and the company continues the group health plan participation but just for those few employees. Wouldn't the terminated employees have a legal right to participate in COBRA?"
1 reply   |    34 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

'Signature' Feature in Adobe and Other PDF Software

"I'm just discovering the 'signature' feature in my PDF software (I use Kofax f/k/a Nuance). I am curious to know if we can tell clients it's OK to sign plan documents using this feature. From my brief readings what I am finding is that it is actually much more secure than a regular ink signature because the signature itself is able to tied back directly to the signers own credentials (some crazy encryption-like key). I'm curious to know if anyone has ever researched this or has found an article about its use in legal documents, whether the IRS will accept it, etc."

8 replies   |    56 views   |    Add Reply

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