Message Boards Digest

May 10, 2021

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

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

COBRA for Former Employee

"Health plans and COBRA are not my area of experience. A question has arisen from my employer regarding COBRA continuation of health plan coverage. It seems a basic question, but I have not found any discussion on this point. Say an employee voluntarily terminated his employment in January 21, 2021. He was covered by our health plan at that time, and his coverage ended that day. Under the current rules, he has until the earlier of [1] one year from January 21, 2021, or [2] 60 days after the announced end of the COVID-19 emergency to elect to continue health coverage under our plan. If he does not obtain health coverage during the ensuing months, we understand that he remains eligible to elect COBRA under our plan until that deadline. What if he is covered by a health plan with his new employer and then he terminates that employment before the deadline to elect COBRA coverage under our plan -- could he elect COBRA under our plan rather than the new employer's plan? Or, does the intervening coverage under another plan mean that he can no longer elect COBRA coverage under our plan?"

1 reply   |    31 views   |    Add Reply

SSRRS created a topic in 401(k) Plans

New York Requires Employers to Offer a Retirement Plan?

"A client recieved a letter that New York requires all employers with five employees to offer a retirement plan. Is this true? It appears from research that this program is voluntary in NY."

9 replies   |    87 views   |    Add Reply

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

Is This a Qualified Plan Loan Offset (QPLO)?

"Participant in her 40's terminated in 2017 with an outstanding loan in an ongoing 401(k) pPlan. She continued to make loan payments and was current with repayments when she elected to receive a distribution from the plan in the form of rollover to her traditional IRA in October 2020. The total amount of her distribution, i.e., her total account balance, was offset by the outstanding loan balance, and the remaining amount was rolled over to her IRA.

Two 2020 Forms 1099-R were issued in January 2021. The rolled over amount was reported on one 1099-R with $0 taxable in Box 2 and distribution code G in Box 7. The other 1099-R reported the loan offset amount as taxable in Box 2 and used distribution code 1L in Box 7.

The participant is now asking for the plan sponsor to issue a corrected 1099-R for the loan offset using distribution code 1M to indicate that the offset was a Qualified Plan Loan Offset (QPLO). She wants to avoid the early distribution penalty on her tax return. No withholding was deposited for either the loan offset amount or the rollover amount.

Side note: the 401(k) plan did not allow for Coronavirus Related Distributions (CRD) or Coronavirus Related Loans (CRL) in 2020.

I read up on QPLO requirements, but have not seen an example similar to this situation. Yes, the participant was current with the terms of the loan, but the offset occurred well after 12 months from her severance from employment date. Did this loan offset qualify to be a QPLO and reported using the 1M distribution code?"

3 replies   |    43 views   |    Add Reply

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

Can a Legally Separated Spouse Be Denied Healthcare Coverage?

"I can't say I know what it means to be 'legally separated' as opposed to simply separated or divorced, but can medical benefits be denied to a legally separated spouse?"

2 replies   |    37 views   |    Add Reply

boomo99 created a topic in Defined Benefit Plans, Including Cash Balance

Worked in New Hampshire for 26 Years, Live in Kansas Now

"I have about a $250,000 lump sum option I can take from the job I had in NH which has no state tax. If I take that lump sum while living in Kansas, will Kansas take state tax, even though I never worked in this state? Or is it time for me to move to another tax free state?"

2 replies   |    43 views   |    Add Reply

B21 created a topic in Correction of Plan Defects

SCP -- Operational Failure on Bonuses for 401(k) Deferral

"I have a client that sponsors a 401(k) plan & has been allowing employees the option to have 401(k) deferral elections applied to their bonuses. The plan document states 'Bonuses are subject to the same deferral election as regular wages.' Can this failure be self-corrected under Rev. Proc. 2019-19 by adopting a retroactive amendment to allow special elections for bonuses? Would this amendment be considered an increase in a benefit, right or feature?"

2 replies   |    24 views   |    Add Reply

thepensionmaven created a topic in Form 5500

No Date Needed on Form 5558?

"We know that no signature required on Form 5558, but we have always dated the form. I seem to remember the form has to be dated, but my software vendor says no. Curious, I've got about 75 calendar year extensions, I'm doing currently, and if they don't need to be dated, great."

1 reply   |    16 views   |    Add Reply

John Bliss created a topic in Defined Benefit Plans, Including Cash Balance

Effect of S-Corp Loss on Contributions to My Defined Benefit Plan

"I have an LLC with an S-election, which has been nominally profitable for over a dozen years. The S-Corp just has myself and my wife as the shareholder-officers. We have a DB plan coupled with a 401k plan. We draw a reasonable salary from the S-Corp, and the S-Corp contributes to the DB plan as well as some 401k profit sharing.

In 2020, at around tax return filing time for tax year 2019 (July 2020), the funds in S-Corp were running low due to loss of business, so I made a personal loan to the S-corp to cover the DB plan contributions along with 401k plan deferrals and 401k profit sharing contributions. Let's say this amount was about $100K. Also note that for tax year 2019, the S-corp had a small profit. Due to continued loss of business in 2020, the S-corp for tax year 2020 had an even bigger loss, but in calendar year 2021, business is looking up a bit and there's some cash in the bank by May 2021.

[1] Even though the S-Corp has a loss in tax year 2020, but because there is money in the bank earned in 2021, can the S-corp still contribute to DB plan and/or 401k Profit sharing, even though this will increase the S-Corp's loss? Note that even without the DB plan and profit sharing contributions, the S-Corp had a sizeable loss in 2020.

[2] Because of the $100k loan I had made earlier in 2020 to the S-Corp, I think that may have increased my 'basis' in the S-corp? If so, can the S-corp's loss of tax year 2020 flow to my personal tax return for 2020, and could I deduct this loss against my personal income (from a second W-2 job that I had to start in 2020 due to poor business) because I have 'basis' in the S-Corp?"

1 reply   |    42 views   |    Add Reply

Donna W created a topic in 401(k) Plans

Employer Promised 401(k) to Prospective Employee But 401(k) is MIA

"Is a company in breach of contract if they specifically state that the employee is entitled to a 401k but never provides even after being asked repeatedly when the eligibility period has already passed?"

2 replies   |    47 views   |    Add Reply

austin3515 created a topic in Operating a TPA or Consulting Firm

Moving to the Cloud

"Has anyone moved their desktops out to a cloud-based environment, and if so with who? We just started talking to 'Infinitely Virtual' which seems like an interesting approach. Unlike Azure, where we have to hire an IT firm to build the whole thing out, this platform seems like it's ready made with all the bells and whistles. I know there are other firms out there like them, and curious to know what others have used."

0 replies   |    19 views   |    Add Reply

Pam S. created a topic in Retirement Plans in General

Vesting Computation Period Change

"My firm is taking over a calendar year Profit Sharing Plan where the current document indicates that the vesting computation period is Hours of Service (1000) commencing on the date the employee is hired and each anniversary thereof. We are checking with the client and prior TPA to confirm that is how the vesting has actually been calculated for the participants, but are considering recommending changing the computation period to coincide with the plan year, rather than the employee's employment year. If this change is made July 1, how does that affect the current participants? Will we need to treat it similar to a short period of time and determine hours in 2021 based on their employment anniversary as well as based on the calendar year 2021 and possibly credit them with 2 years of vesting service? Are there other pitfalls to consider with such a change?"

0 replies   |    9 views   |    Add Reply

Here are the most recently posted jobs on, a service of BenefitsLink:

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Defined Benefit Pension Consultant  View details

The Ryding Company
Telecommute / Westlake Village CA

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Whitney Pension Associates, Inc.
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