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Message Boards Digest

March 8, 2021

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

Snapper created a topic in Governmental Plans

Ignore IRC Section 401(a)(17) Cap for Purposes of Employer Pick-Up Contributions?

"Plan document says 'Solely for purposes of determining the amount of an employee's Pick-Up Contribution, Earnings shall be determined without regard to the limit on Earnings imposed by Code Section 401(a)(17).' Is that acceptable?"

2 replies   |    47 views   |    Add Reply
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nan created a topic in Form 5500

Single Owner/Employee DB Plan and Solo 401(k) -- Needs Services of a TPA?

"I am getting old fast and new to DB plans as I've been looking to find good TPA for solo401K and defined benefit plan for single owner/employee.

I have been working for just over 30 yrs and finally decided to set up a CB plan and solo 401K, already established in Dec. All of my accounting etc. is straightforward with no complicated matters and it's just myself in my owner-only small business (LLC.).

Does anyone know if I really need a TPA to do anything for the solo 401K I set up (for administration), or can I use the general plan/adoption agreement template that the large brokerage house already has?

Any recommendations on TPA for the CB plan? It seems hundreds of TPAs are selling services with large fees and mostly geared towards larger businesses. I know DB plans are complex and although mine is straightforward, so I'd like to find someone/group that could help me."

3 replies   |    45 views   |    Add Reply

D.J. Simonetti created a topic in 401(k) Plans

ERISA 3(38) -- Issues with Service Agreement

"Client with about 50 employees in its 401(k) plan wants to change TPAs. The new TPA (major insurance company) has suggested a third party ERISA 3(38) investment manager (major investment firm) to select and monitor investment options to be made available to participants. Big emphasis on how 3(38) allows fiduciaries to avoid or minimize their fiduciary liability.

Seems like a good idea until I read the service agreement with the 3(38) investment manager ('IM') which states that:

[1] Employer is responsible for determining that the investment lineup chosen by the IM is 'appropriate for the plan'. Wait, isn't that the IM's job?

[2] IM will indemnify the plan (but not the fiduciaries) against losses arising from its breach of fiduciary duty, willful misconduct or breach of the agreement (but not from its negligence). First, you can't sue the plan for a fiduciary's breach of his fiduciary duty. Second, the whole point of 3(38) is to protect the plan fiduciaries, not the plan. Third, the IM should indemnify if the loss is attributable to its negligence.

[3] The Employer and the plan indemnify the IM for any losses arising in connection with the services provided by the IM unless attributable its breach of fiduciary duty, willful misconduct or breach of the agreement. So, the Employer and the plan have to indemnify the IM for it losses even if those losses are due to the IM's negligence.

Bottom line is that the Employer is not receiving the protection from statutory fiduciary liability that the marketing materials promised and, in fact, is assuming contractual liability to the very party that is supposed to assume that fiduciary liability. Am I missing something?"

2 replies   |    49 views   |    Add Reply

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

TPAs Using Public Records to Confirm Participants' Married Status?

"Do plan administrators search public records for marriage and divorce certificates? A situation might be the filling out of a pension application to start drawing a single life pension without the participant's checking of the 'unmarried/divorced' box."

9 replies   |    103 views   |    Add Reply

nan created a topic in Form 5500

Two Plans, One Owner, So Two 5500-EZs?

"Is an individual required to complete and file 2 separate 5500-EZs -- one for a solo401K plan and one for a DB plan -- because assets exceed $250k between the combination of the plans?"

2 replies   |    28 views   |    Add Reply

Dougsbpc created a topic in Correction of Plan Defects

Deferrals Made by Ineligible Employee -- Now Eligible for Share of Employer Contribution?

"A 401(k) plan mistakenly allowed one of their ineligible employees to enter the plan and fund salary deferrals. We know the correction for this under SCP is a retroactive amendment allowing just that NHCE to be eligible to make salary deferrals when they did, just for that year.

If this is done, does it automatically then make this otherwise ineligible employee entitled to employer contributions or safe harbor contributions? It would seem that the intent of a corrective amendment is to only correct the plan with respect to what was violated."

1 reply   |    26 views   |    Add Reply

austin3515 created a topic in 401(k) Plans

What to Do with ADP/ACP Refunds: Personal Finance Aspects

"Has anyone ever seen a document for people getting ADP/ACP refunds that addresses the following critical point: what one does with the refunds will dictate the ultimate impact.

So others can probably write more eloquently (and with more expertise) than me on:

-Availability of deductible pre-tax IRA's

-Availability of current year 401k contributions for you or your spouse to offset

-Availability of Roth IRA contrbiutions (if not over limits)

-Availability of back door Roth IRA contributions

-Simply investing in an after-tax account (capital gains, municipal bonds,etc).

It seems to me that if there were such a document it would go a very very long way.... I could probably write such a thing with all appropriate disclaimers. I could even do a bit of a choose your own adventure (whats your AGI? Are you married? etc)."

2 replies   |    43 views   |    Add Reply

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