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Message Boards Digest

June 7, 2021

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

BTG created a topic in Form 5500

'Unfiling' a Final Form 5500?

"A retirement plan sponsor accidentally filed a final 5500 (showing no assets), under the mistaken belief that all assets had been distributed. In reality there were (and are) some assets in the plan. This is all very recent, so they are still within the acceptable window following plan termination to distribute the assets, but I'm not sure what to do about the incorrect filing. Is there some way to retract or unfile a final 5500? They could presumably file an amended final return, but not until all of the assets are actually distributed. (As some may have guessed, the remaining assets are nontraditional assets that may take some time to dispose of.) Has anyone else seen this situation?"

5 replies so far   |    Click Here to Add a Reply

Christine Roberts created a topic in 401(k) Plans

Coronavirus-Related Distribution Requested Dec. 26 But Not Paid Until Jan. 4

"Participant submitted the paperwork for a Coronavirus Related Distribution on December 24, 2020. The assets were transferred out of the participant account and plan trust account on December 26. They were transferred to a paying agent. The paying agent didn't send the distribution until January 4, 2021. The paying agent is refusing to treat this as a coronavirus related distribution because the check wasn't sent until January 4, 2021 (past the 12/31 CRD deadline). They will be issuing a 2021 1099 distribution for the full $100,000. Thus the participant will have to incur immediate tax consequences and penalty for taking this money out. Has anyone else had any issues like this? We're trying to build a case that because the money left the participant account and the plan's trust account on December 26 that this should be credited as a 2020 Coronavirus Related Distribution and the paying agent should treat it as such."

4 replies so far   |    Click Here to Add a Reply

HarleyBabe created a topic in 403(b) Plans, Accounts or Annuities

Adding an Employer Sponsored Roth IRA to a 403(b) Plan

"Had a client approach me about adding a Roth IRA as a plan option so they can offer more to long-term employees. They have Roth in their B plan. It's not a Safe Harbor B plan. I know everything I can do with the B plan but I suspect they don't want everyone to benefit. It's also an ERISA B plan. Apparently they can put together an employer-sponsored Roth IRA and just contribute for who they choose, of course the contribution they make is taxable to the participant. But how does this coordinate with the ERISA B plan? Are there combined testing requirements since both would be employer-sponsored? Can they do this free and clear? I've never in 30 years had a client do something like this so any insight on the whys and such or other options, pros and cons of this, would be great."

5 replies so far   |    Click Here to Add a Reply

Carol V. Calhoun created a topic in Defined Benefit Plans, Including Cash Balance

Opportunity for Unreduced 'Early' Retirement Benefit Means Actuarial Increase at Normal Retirement?

"Plan provides that normal retirement age is 65. However, early retirees and vested terminated participants can elect to receive unreduced benefits as early as age 60. Is there any requirement that benefits be actuarially increased if a terminated vested participant does not apply for benefits until, for example, age 65?

The only authority I can find on this is Code section 411(b)(1)(G) and Treas. Reg. section 1.411(b)-1(d)(3), which say that an accrued benefit cannot be decreased on account of increasing age or service. From an intuitive standpoint, it would seem obvious that if you can get a particular monthly benefit at age 60, providing only that same monthly benefit at age 65 constitutes a reduction in the benefit (because the same amount will be received for fewer years). However, Code section 411(a)(7) defines the accrued benefit as 'in the case of a defined benefit plan, the employee's accrued benefit determined under the plan and, except as provided in subsection (c)(3), expressed in the form of an annual benefit commencing at normal retirement age.' (Subsection (c)(3) deals with the portion of the accrued benefit attributable to employee contributions, and is not relevant here.) So since the plan is not decreasing the amount payable at normal retirement age (age 65), is it free simply to tell the participant who applies late, 'Sorry, we know you could have started receiving full benefits at age 60 if you had applied on time, but because you didn't, you won't receive either a make-up for the missed payments or an actuarial increase'?"

4 replies so far   |    Click Here to Add a Reply

Belgarath created a topic in Retirement Plans in General

Distribution Made from Corporate Account Rather Than Trust's Account

"Plan trustee liquidates funds to pay a terminated participant. Doesn't open a trust checking account -- deposits the funds to corporate account, and on the SAME day sends check to participant, or directly to the participant. Would this invalidate a rollover because it technically didn't come from a 'trust' account?"

3 replies so far   |    Click Here to Add a Reply

Trisports created a topic in Form 5500

Plan's Year-End Is Last Friday of Each December

"The plan document provides that the plan year end is the last Friday of each December. The 2019 plan year ran from 12/28/2019 through 12/24/2020, so Forms 5500 and 8955 were filed on the 2019 forms. For 12/25/2020 through 12/31/2021, the Forms 5500 and 8955 will be filed on the 2020 forms. My biggest concern is that 2021 Forms 5500 and 8955 would then be skipped because there is no plan year that starts in 2021. The next plan year is 1/1/2022 through 12/30/2022. Because the plan year starts in 2022, the Forms 5500 and 8955 should be filed on the 2022 forms, not the 2021 year, it seems to me. Another issue is that the year after also would be reported on the 2022 Forms 5500 and 8955 because the plan year is from 12/31/2022 through 12/29/2023. Any suggestions on how to handle this situation?"

1 reply so far   |    Click Here to Add a Reply

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