Message Boards Digest

March 16, 2021

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

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

Coverage of Non-Employee Directors by Health Plan?

"Does covering non-employee directors under an employer-sponsored health plan make the plan a MEWA? Does it make a difference if the plan is fully insured or self-insured?"

1 reply   |    26 views   |    Add Reply

J295 created a topic in 401(k) Plans

Excess Deferral to Solo 401k Promptly Corrected. Tax Implications?

"I've read about this but seem to be having a brain freeze so seeking some help here. In March 2020 my wife made an employee deferral for the year 2019 (which is clearly permitted) in her solo 401k and miscalculated the allowed amount (which was my mistake), then, two weeks later, we discovered the error. We contacted Fidelity and had the excess ($3k) removed from the solo 401k in March 2020. We reported the correct deferral amount on the 2019 tax return by ignoring the excess. What are the tax consequences? Are we taxed on the $3k excess deferral just as if it was a withdrawal in 2020 from a retirement account (we are age 61) -- which seems odd, but perhaps it's the law We did get a 1099-R from Fidelity for the $3k stating the amount was taxable in box 2a and stating distribution code as 'E' in box 7 which is 'EPCRS Other'."

2 replies   |    46 views   |    Add Reply

H2202 created a topic in 401(k) Plans

Excess Employer Nonelective Contributions to My Solo 401k

"Due to unexpected W-2 income in 2020, I have excess employer non-elective contributions to my solo traditional 401k. I am a sole proprietor. Any advice on how to handle this situation with the IRS would be appreciated. I have not filed my 2020 taxes yet. (The amount of the 2020 401k excess employer non-elective contributions is $3,984.)"

4 replies   |    61 views   |    Add Reply

jmbaughm created a topic in 401(k) Plans

Not Sure My 401(k) Is Run Properly by My Employer

"I work a hotel job where I receive cash tips, which I self report electronically on my paycheck. My employer's 401k program contributions are pre-tax.

When I receive my paycheck the 401k deduction amount (20%) from my total gross earnings is not accurate and neither is the employer match. It appears I am being taxed on the full amount of my gross earnings and the 401k deduction amount is coming from what is left over after taxes, often several hundred dollars less than my calculations.

After contacting HR about this, they don't have any real answers for me, only that because my tips are cash there is nothing to actually deduct from the paycheck to contribute to the program. Only after reaching out to them on multiple occasions for an explanation, they have now started to send me e-mails post-pay period prompting me to write the hotel personal checks to cover the difference in the amount that was deducted and the amount that should have been deducted. This also does not account for the missing portion of the employer match.

Am I missing something? I believe that, because the 401k program is pre-tax, the deductions should be coming out of my gross earnings, regardless of whether the earnings are self-reported cash tips. It seems as though not only am I getting taxed higher on my full gross earnings, but I'm also losing out on money from the inaccurate employer match while also having to come out of pocket to catch up on the contribution amount.

Can someone please help me understand this, because my HR department has been so unhelpful?"

1 reply   |    27 views   |    Add Reply

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