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Message Boards Digest

March 5, 2021

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

Belgarath created a topic in 401(k) Plans

Late Correction of ADP Failure: Big Plan, Small Amounts

"401(k) plan with several hundred participants had an ADP failure. Small failure -- between $1,000 and $1,500 had to be distributed to 1 HCE. This was done timely in March of 2020 BUT, 3 days after the deadline, the custodian reversed the distribution due to some BS paperwork question. They never notified anyone of this, and the distribution was never reprocessed.

Fast forward to now, when it was just discovered. Of course it can be corrected by a QNEC (prohibitively expensive) or the 'one to one' correction method. Problem with one-to-one is that the amounts are so small that it amounts to a QNEC of just a few cents for many eligible NHCE's. Anyone have brilliant creative thoughts?

VCP is prohibitively expensive, and any solution under SCP, while possible, carries no guarantees. Many fixes, while 'reasonable' by ordinary standards, might not stand up under audit. However, short of an 'approved' fix, then some risk must be assumed."

4 replies   |    43 views   |    Add Reply

Jakyasar created a topic in Plan Terminations

Excess Assets to Be Transferred to Qualified Replacement Plan -- Troublesome Items on PBGC 500

"I have not had an overfunded DB plan PBGC termination in many many years. The excess is to be reverted to the employer under the provisions plan document, always have been from adoption date which is 2007. There is also a resolution that the excess will be transferred to qualified replacement plan (QRP). 100% of the excess will be transferred to QRP and all participants in the DB plan are actively participating in the QRP. Excess is estimated at $300k. PBGC Form 500, line 16a to 17c is where I am having a bit brain freeze to complete. I would appreciate if someone with this experience can share their knowledge."

2 replies   |    31 views   |    Add Reply

glhotdog created a topic in 401(k) Plans

CARES Act Non-Cash Bonus Is Included for Total Comp and Testing Purposes?

"Should a CARES Act non-cash bonus be included for Total Comp and Testing purpose? Or excluded?"

1 reply   |    38 views   |    Add Reply

PS created a topic in 401(k) Plans

Rolling Over a Participant Loan Into an IRA

"A participant with an outstanding loan can roll over the loan into an IRA, correct? Can anyone provide more details?"

4 replies   |    53 views   |    Add Reply

SSRRS created a topic in 401(k) Plans

No, But Thanks: Permanent Opt-Out Available to Certain Participants in Money Purchase Plan

"A DC (Money Purchase) Plan (volume submitter) has a provision in the compensation definition section (shown below) that allows the owners to sign a form that states that their compensation for the year of the effective date of the plan and all future years is $0. Their contribution based on this is $0, and only the employees receive an annual contribution. Are there any issues with this?

Compensation Limitation Election Available to Certain Participants. Except for determining Top Heavy allocation requirements under Section 3.5 or Code §415 limitations of Article 6, any participant who is a Key Employee, an Owner-Employee, a Self-Employed Individual, or a Highly Compensated Employee may elect for any Plan Year, on a form prescribed by the Administrator to limit Compensation for all purposes under this Plan."

6 replies   |    51 views   |    Add Reply

Dobber created a topic in 401(k) Plans

Can Minor Children Huddle Up Under Dad's Solo 401(k) Tent?

"Small business owner (no employees) would like to set up a Solo K plan but he wants to add his child (a minor) to the payroll and have the child participate in the plan. I've read that, in order to qualify as a Solo K ('Owner-Only') an employer must have no full-time employees other than themselves, a business partner and a spouse. What about children? Would the plan continue to qualify as a Solo K if the child is eligible to participate?"

2 replies   |    26 views   |    Add Reply

Vlad401k created a topic in 401(k) Plans

Participant with $0 Comp: What Effect on ADP/ACP Test and Form 5500 Participant Count?

"A company has a plan that runs from 1/1 to 12/31. It pays employees once a month on the first of the month. An employee is hired in December of 2020 (enters the plan right away because there is no eligibility condition) and has no pay through the end of year (he receives his first paycheck on 1/1/2021). So the employee cannot possibly defer/receive a match for 2020. Should this participant be included in the ADP/ACP test for 2020? Should the participant be included in the active participant count for the Form 5500 purposes for 2020?

2 replies   |    34 views   |    Add Reply
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