Message Boards Digest

June 18, 2021

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

gregburst created a topic in 401(k) Plans

Excess Deferrals Refunded, But Check's Still Uncashed

"A participant in a 401k plan deferred more than the 402g limit in 2020. An appropriate refund check was issued timely. But the participant never cashed the check. Now it's past the deadline. If he cashes the check now, is everything ok? If the check goes stale dated and a new one has to be re-issued, can it be done under the original check date? If not, I assume the funds just have to stay in the plan, leading to double taxation on the excess."

1 reply so far   |    Click Here to Add a Reply

PS created a topic in Plan Terminations

RMD Not Needed at Plan Termination When Participant Becomes Employed by Acquiring Company?

"A plan is terminating due to acquisition of the plan sponsor. Some of the participants are 72 and are eligible for an RMD. The advisor states that, because the participants are not being terminated from their employment (they are becoming employed by the acquiring company), these participants will not be subject to the RMD requirements because they aren't terminated employees. Agree?"

2 replies so far   |    Click Here to Add a Reply

ratherbereading created a topic in 401(k) Plans

New Hardship Rules -- No Need to Ask for Proof of Eligibility?

"With all the new hardship distribution rules, is anyone still advising the Plan Administrator to get proof of hardship, in case of a future plan audit?

Participant wants to take 100% of his funds ($360,000+). He provided the wording below from the IRS to show he did not have to submit proof. Also, he claims the IRS told him via phone call he did not have to submit proof.

[3] How does a participant show that he or she is experiencing a hardship? Generally, if a 401(k) plan provides for hardship distributions, the plan will specify what information must be provided to the employer to demonstrate a hardship. Most 401(k) plans use the 'deemed necessary" rules described in Q&A-2 above, so that inquiry into the employee's financial status is not required. In other cases, an employer may generally rely on the employee's representation that he or she is experiencing an immediate and heavy financial need that cannot be relieved from other resources. However, an employer cannot rely on an employee's representation if the employer has actual knowledge that the employee's need can be relieved: [1] through reimbursement or compensation by insurance; [2] by liquidation of the employee's assets; [3] by stopping elective contributions or employee contributions under the plan; [4] by other currently available distributions (such as plan loans) under plans maintained by the employer or by any other employer; or [5] by borrowing from commercial sources.

[Treas. Reg. section 1.401(k)-1(d)(3)(iv)(C)]'

4 replies so far   |    Click Here to Add a Reply

DJL created a topic in 457 Plans

Basic Question About Deferrals Under a Non-Governmental 457(b) Plan

"Our TPA firm has just been engaged by our first client that makes employer contributions to their non-governmental Section 457(b) plan. (We have 5 other clients with non-governmental Section 457(b) plans, but none have employer contributions.) The plan also permits the participants to make deferrals from their salaries. I have a very basic question for which I have not been able to find the answer -- does the participant in this 457(b) plan need to make a deferral election with respect to the employer contribution? If so, must the election be made the month before that employer contribution is made to the Section 457(b) plan, just like deferrals from their paychecks?

The deferral form that this new client has been using does not seem to address a deferral election for the employer contribution because it requires the participant to elect either a dollar amount or a percentage of his/her compensation for each payroll period."

5 replies so far   |    Click Here to Add a Reply

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