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Message Boards Digest

June 28, 2021

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

Megandps created a topic in 401(k) Plans

What's the Plan Entry Date When Immediate But Requires 12 Months and 500 Hours?

"Our client is wanting to change their eligibility requirements to Age 21, 12 months of service and 500 hours, with plan entry being immediate. Basically if the employee is at least 21 and has completed 500 hours within their first year of employment, they would enter the plan as of their 1 year anniversary date. Where we'e getting stuck: what if the employee does NOT meet the 500 hours within the anniversary year? We would be switching to evaulating the 12 month period then on a plan year basis. If the employee then completed 500 hours between the plan year of 1/1 and 12/31, does the entry date become 12/31 of the plan year the 500 hours was completed, or is it 1/1 of the following plan year?"

3 replies so far   |    Click Here to Add a Reply

austin3515 created a topic in 401(k) Plans

Deducting Contributions for Both 2020 and 2021 for 2021 Tax Year?

"Plan A wants to contribute $50,000 for the 2020 year but needs more deductions in 2021. Can they deduct the 2020 contributions (which are deposited in 2021) on the 2021 tax return (i.e., you can always deduct on the cash basis) and then use the special 404a6 timing rule to deduct 2021's contributions (which are funded in 2022) on the 2021 tax return as well? The combined deduction is less than 25% of 2021's comp (it's a virtual certainty so that is not a concern).

My position has always been "of course because both deductions are perfectly legal, so why in the world 2 completely allowable deductions be disallowed?" There is simply no rule on the books that says you cant take them both.

Now someone did mention that maybe there is some tax law that says you have to have consistency in approaches, and to that I can't speak. Anyone have some first hand knowledge on that?"

3 replies so far   |    Click Here to Add a Reply

Barry Levy created a topic in 401(k) Plans

HCE Carve Outs For Safe Harbor 401(k) Plan

"Safe K plans can contain provisions where HCEs are not allocated a Safe Harbor match. Are one or both of the following design allowed? [1] HCE Safe Harbor match is limited to $3,000 ($3,000 is an example); [2] Non-Shareholder HCEs' match is limited to $3,000."

3 replies so far   |    Click Here to Add a Reply

Jakyasar created a topic in Retirement Plans in General

Combo Plans -- Running into Some Gateway Issues

"Looking at a combo plans (DC+CB). Plans are top heavy and top heavy benefits are provided in the DC plan only. Not my typical way of designing. CB has 1000+ hour requirement for pay credit. DC has 401k + 3% non-elective safe harbor + profit sharing. Profit sharing portion has no hour requirement but has last day rule. Gateway is 7.5% (i.e., 3% safe harbor + 4.5% profit sharing).

Have a participant (in both plans) terminated during the plan year with more than 1,000 hours of service, but not employed at end of year. The participant gets CB pay credit -- the minimum to satisfy 401(a)(26). The participant gets 3% mandatory safe harbor.

What else does he get? Additional 2% profit sharing for top-heavy (it's 5%) or full 4.5% profit sharing for gateway?

Whichever he gets, I think I need 11-g, correct?"

1 reply so far   |    Click Here to Add a Reply

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

How Do I Coordinate the 415 Limitation When Computing the Lump Sum Payout for Employee in 2 Pension Plans? (Total Accrued Benefits Are Less Than 415 Limit)

"Employee is covered in a frozen pension plan and another pension plan of the same employer. The sum of the monthly accrued benefits in both plans does not exceed 415 benefit limits. The lump sum is the greater of benefit based on plan rates ( '94gar 5%) or 417(e) rates but not to exceed applicable 415 limits. In this case 417(e) applies and the question is how to compute the 415 maximum lump sum.

The plan doc in plan A and plan B states only that if the sum of the accrued benefits from all plans exceed the applicable 415 limit, the limitation is first applied to plan A. It doesn't cover this situation because the aggregate limit is not exceeded. John has a monthly accrued benefit of $10,000 in plan A (frozen plan) and $1,350 in plan B. The applicable 415 limit is $14,166 per month at age 65. Not clear on how to compute the 415 lump sum for each benefit."

No replies yet   |    Click Here to Add a Reply

Purplemandinga created a topic in IRAs and Roth IRAs

Identifying Self-Directed IRA for Rollovers to 401(k)

"Starting up a new 401(k). Owner wants to roll money in from a Self-Directed IRA. He sent me a copy of a checking account balance at some bank that, according to the owner, contained the money of several employees. Is there any substantiation I can request to make sure this mystery money is legit?"

2 replies so far   |    Click Here to Add a Reply

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