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Message Boards Digest

April 13, 2021

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

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

Owner-only traditional DB Plan - Re-run valuation for less than 1,000 hours worked?

"We have a plan in which the only participant is the owner. The 1/1/20 BOY valuation was originally run assuming 1,000 hours (and therefore a benefit accrual) for the participant for 2020, which resulted in a TNC and a MRC > $0 (the plan has no shortfall). We now get to the end of the year, and due to a down-turn in business, the participant/owner ended up not working 1,000 hours. Would it be reasonable/allowable to re-run the 1/1/20 valuation showing no expected benefit accrual, which in-turn means no TNC and $0 MRC? If allowable, would that be considered a change in Actuarial Assumptions for the year as reported on Schedule SB? Thanks for any insight!"
2 replies   |    47 views   |    Add Reply
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katdmin created a topic in 403(b) Plans, Accounts or Annuities

Universal Availability Rule

"I have become the admin on a high school 403(b) plan and I don't work on that many 403(b)s. In conversations, they have indicated that they are letting people defer once they reach 1,000 hours. I explained the universal availability rule and so they put in the exclusion of Employees who normally work less than 20 hours a week. My thinking is they can't possibly have everyone fall under this exclusion. I thought they could exclude only if they expected them to work 20 hours a week or less. What if they know they are hired as full time, can they use this exclusion and then once they reach 1,000 hours, let them in. My company is so terrified to tell the client that they can't do something, so they try to come up with these clever ways to get around the rules. They have a discretionary match and I told them they can have the 1,000 hours requirement on that source but not the deferrals. Any input is greatly appreciated. Thanks!"
1 reply   |    39 views   |    Add Reply

shERPA created a topic in Retirement Plans in General

Social Security full retirement age mid-year

"An individual's DOB is 7/16/55, he turns age 66 this year. I think SS full retirement age for those born in 1955 is 66 and 2 months. So September 2021 would be full retirement age and assuming he wants to start his benefits at this time the first payment would be in October. Is this correct? How does this mid-year benefit start coordinate (or does it) with the earnings cap in this first year? This person earns about $6,750 per month, so as of Sept 1 earnings will be $54K YTD. He plans to continue working. I know after full retirement age there is no earnings cap but I don't know how they track/measure/compute this for a mid year benefit start. I've tried to figure this our reading info from SSA but nothing really seems to be on-point and it is confusing to say the least. It's hard to research (at least so far) because so much is written about the earnings cap and early benefit start. I'm not a SS expert at all. Thanks for any help."
2 replies   |    39 views   |    Add Reply

t.haley created a topic in Correction of Plan Defects

45-day notice requirement for safe harbor correction

"Employee made deferral election upon beginning employment in September 2020. Recently discovered that no deferrals were made from September through December, 2020. When new plan year began and employee completed annual enrollment forms, proper deferrals began January 2021. Since we just discovered the missed deferrals, we cannot meet the 45-day notice requirement under the safe harbor correction method. Should we go ahead and make the 25% QNEC plus earnings and give the employee notice and move on or must we correct under the regular method for missed deferrals? Thoughts?"
0 replies   |    18 views   |    Add Reply

GGreen23 created a topic in Health Plans (Including ACA, COBRA, HIPAA)

COVID Surcharge

"A carrier in NJ is putting a “Covid Surcharge” on medical premiums since the February plan month. Its no secret that carriers have lost significant revenue due to lower utilization (members not getting elective services) during the sheltering in place period of the Pandemic. Does anyone have a good explanation / rationalization for the surcharge? Was there any recent regulation that I may have missed that addresses this? Is this solely a New Jersey thing? Any help or guidance on this would be appreciated. Thanks!"
0 replies   |    24 views   |    Add Reply

Zoey created a topic in 401(k) Plans

RMD taken, but not reported

"I received a call from a financial advisor who has a solo-k client. The client has taken his RMD's faithfully for 10 years. The TPA who had the plan was told that the financial institution calculates the RMD and distributes it automatically. They were also told that the financial institution would prepare the 1099-R each year. Fast forward to 10 years later. The plan terminates and the client rolls his assets to an IRA (with the same financial advisor and same financial institution). When the TPA inquired as to the amount of the rollover and confirmation again, that the financial institution would be preparing the 1099-R, they informed them that they found out that there was never a 1099-R issued by the financial institution...ever. I asked if the financial institution withheld federal withholding, and if so, the IRS should have caught it (as they would have received 945 withholding and have nothing to tie it to), but that hopefully it's not as big of an issue as it could be then. They stated that they confirmed that the financial institution never withheld federal withholding. YIKES! So I asked if the client reported the income on his taxes. They stated that they don't believe he did. DOUBLE YIKES! So they asked what would be involved in correcting this. However, the owner is now incapacitated and his son has power of attorney. To be honest, I have no idea how to fix this and how far back we have to go. I have never had this issue. Has anyone had this problem or know what needs to be done, or can direct me to a cite. Thank you so much."
6 replies   |    53 views   |    Add Reply

TS0258 created a topic in Retirement Plans in General

Correction Procees - Loan in Excess of $50,000 Limit

"Within one of our defined contribution plans, a loan request was mistakenly processed from the wrong participant’s account. The participant who requested the loan had a HOLB of approximately $45,000 and should have only qualified for a second loan of $5,000. The loan was mistakenly processed from a participant with the same name for the maximum he had available - $40,000. We are aware that the participant who did not request the loan will need to be made whole, but we are unsure how to correct for the participant who actually received the funds. If we move the $40,000 loan to his account, he is of course exceeding the limit. Participant has refused to return the overage he received. Can the amount in excess of the limit be considered a deemed distribution? Any expert guidance is greatly appreciated!"
5 replies   |    45 views   |    Add Reply

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

401a4 testing - accrued-to-date - combo plan

"Hi A bit confusing myself with a scenario I have not seen before. Defined benefit and profit sharing combo. DB started 2015(HCE only) and PS started 2019. One non-HCE was already in the DB plan for 2018 - year of participation. Another non-HCE is only in the PS plan i.e. excluded for DB categorically. All 3 are participants in the PS plan effective 1/1/2019. DB was amended for HCE only during 2020 using A+B method (A x% of average comp for YOS starting 1/1/2020) and B is AB as of 12/31/2019 without wearaway - standard design. I usually use annual method but for 2020 wanted to look into accrued-to-date method. Assume all data is correct for all past years i.e. I have the correct salary history and the PS plan assets are all correct. Are there issues I need to watch out for the 401a4 testing? Thanks"
0 replies   |    20 views   |    Add Reply

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