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Message Boards Digest

March 17, 2021

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

BTG created a topic in Correction of Plan Defects

Plan Must Be Amended to Permit QNECs Just to Make a Corrective QNEC?

"I swear I've seen something from the IRS that states that a plan does not need to be amended to permit QNECs just to use the standard corrections for missed deferral situations that generally involve a corrective QNEC. In fact, I thought it was right in the EPCRS Rev. Proc. However, I can't seem to locate anything that confirms my recollection. Can anyone point me in the right direction (or, alternatively, discredit my memory)?"

0 replies   |    17 views   |    Add Reply
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M Norton created a topic in 401(k) Plans

Pooled 401(k) Plan -- How to Allocate Interest Payments on a Particular Participant's Loan?

"Last year we took over TPA work on a medical practice's SH 401(k) with all assets held in pooled Schwab account. Doctor took out plan loan at the end of 2019, and during 2020 made regular loan payments as deductions from his pay check. When allocating earnings for 2020, do you allocate the loan interest only to the doctor? Or is that interest combined with other plan earnings/losses and allocated across the board to all eligible participants the same as other plan investment income or losses?"

3 replies   |    34 views   |    Add Reply

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

Beneficiary of Term Certain Annuity Can Choose a Lump Sum Payment Instead?

"Sole proprietor (with employees in plan) elected at age 70.5 to take his RMD based on 100% J&S with 15-years-certain annuity. After a few year of taking his annual RMD, he passed away in 2018. Since then, his wife (the survivor) has been taking the RMD based on the annuity that her husband elected. Now she wants to take a Lump sum, and after taking the 2021 RMD, will transfer the lump sum to an IRA. Is a lump sum permissible, or must she continue to take the yearly annuity?"

1 reply   |    33 views   |    Add Reply

rocknrolls2 created a topic in Distributions and Loans, Other than QDROs

Recontribution of Coronavirus-Related Distribution; Interaction with Maximum IRA Contribution

"Participant X left his job at Company M during 2020. He received a distribution of his remaining 401(k) account balance of $6,000. If X claims the distribution as a Coronavirus-Related Distribution taxable over 3 consecutive years, $2,000 would be taxable during 2020. However, if X contributes $2,000 to an IRA, he has repaid the distribution, resulting in $0 tax for that year. Assuming that X is over 50 years old, how much can X contribute to a traditional IRA during 2020? $7,000, or $5,000 ($7,000 - $2,000 recontribution)?"

4 replies   |    26 views   |    Add Reply

Luke Bailey created a topic in 401(k) Plans

Role of TPA as Party to Trust Agreement

"My client is being asked by its TPA to enter into a new trust agreement with a directed institutional trustee (a trust company) that makes the TPA a party to the trust agreement. Under the proposed trust agreement the TPA, called the "Designated Representative," is responsible for ensuring the timelines and amount of contributions, and the TPA is given authority to authorize distributions and payments on its own, with the trustee being indemnified by the plan sponsor for any losses resulting from following the TPA's directions. These provisions are part of a new standard package designed by the TPA to simplify the plan sponsor's tasks with respect to the plan and lower costs, and it is being urged on all of this TPA's clients, as I understand it.

I am used to trust agreements that allow the trustee to rely on plan sponsor instructions it believes in good faith to be authentic, and to provisions in which the plan sponsor indemnifies the trustee for everything short of willful malfeasance or some other low standard. We push back on those with mixed success, depending on size of the client. But this is the first time I've seen a trust arrangement in which the TPA is a party to the trust and the plan sponsor delegates extensive authority to the TPA. I guess at a minimum this makes the TPA a fiduciary, which they usually don't want to be.

My question is, is this common and I have just not run across it before, or do others think it is unusual and perhaps not well thought out?"

2 replies   |    46 views   |    Add Reply

stephen20 created a topic in Plan Document Amendments

Dual Plan Provisions, Need Expert Advice

"While work a plan I have notice that Deferral & Match eligibility requirements are follows:

-21 Age, 1 Years of service & Semi Annual

whereas, PS eligibility requirement is immediate (no age or service required) as per plan document. Profit sharing eligibility is more generous compared to deferral requirements.

Usually, I've found relax eligibly for 401k Deferral contribution and little bit tough eligibility to get profit sharing contribution such as - 21 of Age+ 1 Years of service+ 1000 hours, sometimes last day and 1000 hours.

Above scenario is new to me and never dealt with before, I'm totally confused and It supposed to me discrimination not to give deferral opportunity but giving more earlier opportunity to get PS.

Is it allowable to give priority of getting profit sharing contribution rather delay/ hard rules for deferral contribution?

Please share your thoughts on this and provide related laws/regulations/reference (if any) to be sure about this dual eligibility. Thanks in advance."

1 reply   |    30 views   |    Add Reply

Scuba 401 created a topic in IRAs and Roth IRAs

Trust Named as Beneficiary of Participant's Retirement Account, f/b/o Named Individual's IRA

"Participant dies with a trust as beneficiary. The check is payable to Jack Smith as trustee of the John Doe Trust f/b/o Jane Doe IRA. Does the trustee take the check and deposit in the trust, or can an IRA be opened and that check be deposited directly?"

0 replies   |    17 views   |    Add Reply

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