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Message Boards Digest

March 30, 2021

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

EPCRSGuru created a topic in Retirement Plans in General

Additional Compensation for Services in Year of Retirement, But Not Paid Until Late March

"We have two employees who retired in December 2020. Shortly before their retirement, their pay rate was adjusted retroactive to JUNE 2020 but the compensation is only being paid to them now, in late March/early April. This is after the 2-1/2 months referred to in the regs.

  • The payment is regular compensation for services performed during their normal working hours and in all respects meets the definition of compensation under our plan.
  • The payment would have been paid to the employees prior to their severance from employment if the employees had continued working, BUT
  • The payment is not being made by "the later of 2-1/2 months after severance from employment or the end of the limitation year that includes the date of severance from employment with the employer maintaining the plan." Our limitation year is the calendar year.

I believe this means that the employer cannot make corrective contributions to their accounts to reflect the retroactive pay change. For the sake of equity, we would probably make a compensatory payment outside the plan but I think the participants would prefer a contribution. Any thoughts, anyone?"

2 replies   |    28 views   |    Add Reply
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Michael Iglesias created a topic in Qualified Domestic Relations Orders (QDROs)

Entry of a QDRO After Death of the Participant

"My cousin was in the final stages of a divorce. There was an agreement about his NYCERS pension. Unfortunately he took his own life before it was finalized. He had retired and received his 1st check. In the event he didn't leave her as beneficiary and had elected maximum option as his temporary option, would NYCERS accept a QDRO after the participant has died?"

3 replies   |    49 views   |    Add Reply

kmhaab created a topic in 401(k) Plans

When Must a Changed Salary Deferral Election Go Into Effect?

"What is a 'reasonable period' of time for a plan sponsor to implement salary deferral election changes? Plan states that an election to modify a salary reduction agreement 'will take effect within a reasonable period following such election.' Typically, election changes would take effect on the next semi-monthly payroll date (i.e., 1-2 weeks). But due to an administrative error, election changes made earlier this year did not take effect for as many as 12 weeks (i.e., an election change made Jan. 1 to increase deferrals was implemented March 31). I'm analyzing whether the election changes were not implemented within a reasonable period, resulting in an Election Deferral Failure under IRS rules."

1 reply   |    27 views   |    Add Reply

WCC created a topic in 401(k) Plans

Plan Terminated Before Document Restated

"Company A and Company B both sponsor 401k plans. Company A purchases Company B in a stock acquisition. Prior to the acquisition, the attorneys drafted a board resolution establishing a termination date for Company B's plan. The plan termination date was the day before the closing of the purchase of Company B. The resolution was executed timely.

The TPA for Company B's plan is stating that since the plan was not restated for the tricycle amendment prior to the establishment of the termination date, they are now considered a non-amender and must file under VCP to bring the document current. They state that had they known about the acquisition ahead of time, they could have avoided VCP by restating the document before the termination date. Note: the purchase happened within the past two weeks. All assets are still in the trust.

I know the document needs to be updated, but I have never heard that it must be updated before the termination date is established. Is the TPA correct that Company B must file via VCP to restate the document as a non-amender?"

1 reply   |    39 views   |    Add Reply

Purplemandinga created a topic in Retirement Plans in General

Multiple Union CBA in One Plan?

"If one employer has employees that are subject to two different CBAs, and both CBAs provide for different benefit arrangements. Could one plan satisfy the two different CBAs? Could you disaggregate one CBA benefit from the other CBA benefit for testing purposes?"

0 replies   |    10 views   |    Add Reply

Purplemandinga created a topic in Retirement Plans in General

Can Management Company's Plan Cover Employees of the Managed Company?

"Is it possible for a management company that manages the operations of a hotel to  successfully argue that even though the employees of the managed hotel are paid from the managed entity, they are common law employees of the managing company? W-2s, wages and taxes are issued and paid from the company that is being managed.

I suppose the purpose of such an argument is to avoid IRC 414(m) management group rules so that the employees could participate in the managing company's retirement plan. Is this common or legit?"

2 replies   |    45 views   |    Add Reply

Catch22PGM created a topic in 401(k) Plans

Aggregating Nine Plans Into Three Groups

"I'm looking for a little confirmation on what I hope are easy questions -- with a lot of set-up.

A control group has 9 different 401(k) plans. A few of the plans fail the ratio% test so we're going to aggregate the plans into 3 separate groups:

Group 1: Plans 1, 2, 3, and 4 are not safe harbor and all have identical provisions.

Group 2: Plans 5, 6, and 7 are not safe harbor and all have identical provisions (but different match than group 1).

Group 3: Plans 8 and 9 are safe harbor match with identical provisions except Plan 9 also has a fixed 2% non-elective contribution.

Groups 1 and 2 each pass the ratio% test for 401(k), 401(m), and 401(a) as well as ADP and ACP so we are in the clear. Group 3 passes the ratio% test for 401(k) and 401(m), but not 401(a). The only option for Group 3 is the average benefits test and it passes --if our system is running it properly. While I know the basics, I don't have a ton of experience dealing with the ABT and I'm always leery of results that I can't double-check with confidence. I know I should trust the software, but I trust the opinions of many of those who reply to this message board a little more.

In the average benefits test the HCE and NHCE in Group 3 are having the EAR's calculated while all HCE and NHCE from Groups 1 and 2 are shown with a 0.00 EAR. The average EAR for all HCE is .72%. The average EAR for all NHCE is .65% so definitely more than 70% of the HCE EAR. Non-discriminatory classification seems fine -- excluded employees are only those employees from companies 1-7 and the ratio% test for 401(a) was 52%.

With this information does it sound like our system is running this properly and all three groups pass coverage -- or is this not enough information to hazard a guess?

I think we've aggregated the most-logical way possible but am I missing any potential problems with aggregating these 9 plans into 3 separate groups?

Each of these plans uses different recordkeepers, have different investment lineups, and very different fee structures. Is this a potential BRF problem?"

1 reply   |    23 views   |    Add Reply

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