Message Boards Digest

May 4, 2021

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

mariemonroe created a topic in Nonqualified Deferred Compensation

Is There a Reliable 409A Document for Sale?

"Many years ago (2007) I purchased a 409A Basic Plan Document and Adoption Agreement from SunGard. Does anyone know whether there are any other reliable vendors out there for these documents?"

2 replies   |    31 views   |    Add Reply

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Mr Bagwell created a topic in 401(k) Plans

Safe Harbor 3% Nonelective to NHCE Only; Mid-Year Change Desired

"Plan is designed as safe harbor 3% non-elective to NHCEs only. Appears that employer would like to add the HCEs now with a mid-year change. I'm pretty confident this is doable. But, because of the timing of the change, I think this requires a 4% safe harbor non-elective to both the NHCE and HCE? Am I correct?"

4 replies   |    39 views   |    Add Reply

Kissland created a topic in 401(k) Plans

After-Tax Amounts Not Credited by My Employer

"My employer began offering after tax elections in January of this year. Starting with my paycheck dated January 22, I made large after-tax contributions on every paycheck. None of these amounts have been credited in my 401k account (although they were deducted from my pay). Currently they total over $13k. In addition I was terminated from my job on Friday. What penalties would my employer be subject to? Also would the unpaid amounts count as unpaid wages?"

3 replies   |    45 views   |    Add Reply

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

Using Passive Investment Income as Basis for Determining Deduction Limit

"Client is a sole prop filing a K-1 as a 100% partner. (Had a partner through 2019, that guy's gone/paid etc.) Sponsors CB and 401k. K-1 shows about $74,000. Cash balance credit is a flat $150,000, but he's done enough cushioning in prior years that his MRC is only around $46,000. Max is hundreds of thousands higher, and he's not near his 415 limit (this is first year I've seen in five where he's been below 401(a)(17) in Earned Income). Sponsor says he'd like to deduct $100,000. Obviously that exceeds his Earned Income so I'd think this is a nondeductible contribution. But he could make a 4972(c)(7) election to not owe any sort of excise tax.

I guess the thing I need clarification on is, what stops him from looking at his overall income for the year (taxable investments, perhaps) and use that as something to deduct the remaining $26k of the $100k against? I suppose it might have to do with the fact that the other income is passive and therefore any claim for a deduction against THAT income isn't an ordinary 162 expense of the business. Am I close, crazy, or somewhere in between?"

1 reply   |    36 views   |    Add Reply

ldr created a topic in 401(k) Plans

Excess Deferrals in a Tribal Non-ERISA 401(k) Plan

"A plan (drawn up by a local ERISA attorney) is a tribal non-ERISA 401(k) plan. One of the participants routinely exceeds the 402(g) limit by about $1,300 each year. We bring it to the attention of the plan administrator and ask them politely to please monitor this carefully and stop doing it, but we're ignored. If this was a regular corporate 401(k) plan of any of our other clients covered by ERISA, we would get in touch immediately upon the discovery of the error and let them know that the excess plus earnings has to be removed. We haven't done that so far with this client because they are a tribal entity, the plan isn't covered by ERISA, and we don't know to what extent they have to follow the rules. Does anyone else have any experience with this or insight as to how to handle it?"

1 reply   |    26 views   |    Add Reply

Catch22PGM created a topic in Defined Benefit Plans, Including Cash Balance

Handling an Overfunded Solo-DB Plan

"Client (husband and wife) has a solo-DB that's overfunded by about $500k. They contributed the maximum deductible amount against recommendations. Investments were aggressive (again, against advice) and returned about 15% a year. They also have a solo-401(k) plan, which I administer. Both are in their mid-40's, so nowhere near retirement, but they're at a point where they finally understand that they can no longer make contributions to the DB. Can they roll over their DB benefits to their 401(k) and transfer the excess in the DB plan to an escrow account in the 401(k) (without excise tax) to fund employer contributions until they are exhausted, and then, in a couple of years, start up a new DB plan?"

4 replies   |    48 views   |    Add Reply

cheersmate created a topic in 401(k) Plans

Applying the CARES Act -- Participant Loan in Default, or Not?

"Is the following described loan in default, or is it still within a correction period? Participant took a loan in 4th quarter 2020. Repayments were to commence via payroll withholding, with 1st payment due in December 2020, with a 5-year repayment period. Assuming this participant is a Qualified Individual under CARES, loan repayments could be delayed until January 2021, at which point the loan balance plus interest could be re-amortized for a new 5 years. To date, the participant has not made any loan repayments. Under this scenario, is the cure period June 30, 2021, at least for missed loan payments during January 2021 through March 31, 2021?"

3 replies   |    27 views   |    Add Reply

BG5150 created a topic in Distributions and Loans, Other than QDROs

Participant Never Cashed Check and Now Is Missing

"Participant requested a distribution from a terminated plan. She actually came in and picked up the check. Withholding was properly taken and submitted. Her check was never cashed. And she cannot be located. The Trustee took it upon herself to stop payment on the check. What to do now? Can they open up an IRA with after-tax basis with these funds?"

0 replies   |    16 views   |    Add Reply

BG5150 created a topic in Distributions and Loans, Other than QDROs

Missing Participant -- Where to Send the Form 1099-R?

"When someone is missing at the time of a plan termination and the money is auto-rolled to an IRA, where should the plan send the Form 1099-R?"

0 replies   |    18 views   |    Add Reply

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

RMD Applies to an In-Service Distribution?

"Participant (non-owner) over RMD age, on workers comp so not formally terminated, and requests eligible in-service distribution. With no distributable event, would part of this distribution be treated as an RMD at time of distribution? If not and, say, the participant formally terminates later in the year but there is no more account balance, would we send a letter and issue Form 1099-R for the RMD amount?"

1 reply   |    38 views   |    Add Reply

Pink cupcake created a topic in 401(k) Plans

Help with Creating an Excel Formula to Show Safe Harbor Match

"I need to audit our safe harbor match and need assistance with creating an Excel formula. Our match is 100% match on first 3% of deferred salary; then 50% match on next 2% of deferred salary. I currently have this formula


but it does not factor in if an EE defers 5% or more.

100% X 3% = 3%
50% X 2% = 1%
Total Match = 4% of employees deferring 5% or more.

If employees are deferring 4%, the match would be:

100% X 3% = 3%
50% X 1% = 0.50%
Total Match = 3.50%

If the employees deferral is 3% or less, the employer match would be the same percent as the employee deferral, since it is matched at 100% up to 3%. For example, ee match = 1%, ER Match = 1%."

5 replies   |    53 views   |    Add Reply

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