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Message Boards Digest

June 15, 2021

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

Christine Zinter created a topic in VEBAs

Retiree HRA VEBA -- Post-Tax Dollars and Purely Voluntary Employee Contributions

"I'm fairly new to the world of VEBAs, but my understanding has always been that in order to have an HRA, there can be no employee contributions. Because a VEBA is just the funding vehicle, how can an association have a post-retirement HRA that is funded by voluntary post-tax employee contributions with a small employer match? I have an IRS approval letter for the VEBA where the plan accurately described itself as voluntary post-tax with a death benefit, but I'm perplexed as to how/why the IRS granted approval to begin with. What am I missing?"

No replies yet   |    Click Here to Add a Reply
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Vlad401k created a topic in 401(k) Plans

SPD and Safe Harbor Notice to Employee Prior to Plan Adoption But Eligible Due to Retroactive Effective Date?

"A new plan is established effective 1/1/2021 (but adopted mid-year). One of the employees (who met the eligibility conditions) is terminated in the middle of 2021 (before the plan is adopted -- so the employee was not able to defer to the plan). The plan is Safe Harbor Non-Elective, so this employee will receive 3% Safe Harbor contribution for the year. Would an SPD and a Safe Harbor Notice be required for this employee?"

1 reply so far   |    Click Here to Add a Reply

austin3515 created a topic in 401(k) Plans

After-Tax Contributions / Reasonable Limits

"I have a participant in the plan for whom we added after-tax contributions. Not to worry, she is not an HCE. She is married to a guy who is an 'HCE' but he works for an unrelated company. She wants to contribute as much as possible. What sorts of limit are people imposing on these contributions in order to make sure we don't blow the 415 limit? Can it be a one-off limit decided at the beginning of the year? For example, I want the client to be able to add a goal to the payroll system. I think it just occured to me that the payroll system's 'goal' should be $58,000 minus $19,500 ASSUMING the Employer contributions will not exceed the Employer contributions (in my case they will not). Is that what people are doing? Other ideas?"

4 replies so far   |    Click Here to Add a Reply

Lou S. created a topic in Plan Terminations

Terminating Safe Harbor 401(k) Plan Mid-Year -- Spoils Safe Harbor Status?

"We have a client with SH 401(k) Plan selling his practice in an asset sale. He will terminate all employees effective with the sale. They will be hired by the acquiring company. His corporation will retain the plan. He wishes to terminate the plan and the corporation as a result of the asset sale. The corporation will only exist for wrapping up any accounts receivables, the 401(k) plan, and other administrative items. At this time he does not wish to make any additional employer contributions other than the required ones for deferral and SH match through date of sale.

Does this generally meet the exception to the 12 month rule where the plan can be less than 12 months as a result of the business transaction and retain its status as a SH 401(k) plan? Does the answer change if the termination is done before, concurrent with, or after the transaction? Assume it is done contingent on the sale going through if done before or concurrent with.

I know he can clearly retain SH status if the plan runs through 12/31 for a full 12 months but he would like the option to terminate sooner without ADP/ACP testing and this would seem to me at least to be on account of a business transaction."

1 reply so far   |    Click Here to Add a Reply

Belgarath created a topic in Retirement Plans in General

Employer Can Pay Annual Fee Imposed by Plan on Former Employees Who Still Participate?

"If the accounts of terminated participants are charged an annual fee ($50, $100, whatever) and this fee is paid to the employer, how is that not a prohibited transaction?"

8 replies so far   |    Click Here to Add a Reply

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