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Message Boards Digest

June 29, 2021

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

Belgarath created a topic in Retirement Plans in General

Canadian Investments in Domestic 401(k) Plan

"A medical practice plan has apparently just hired a doctor who is a Canadian citizen. Everyone understands that, because the doctor's pay is U.S.-source income, the doctor is eligible for the 401k plan. Now, this plan allows each participant to have individual brokerage accounts. Doctor is from Canada, and his broker is in Canada. Is there any problem with a U.S. trust allowing him to invest in funds in Canada?

Further complication: Plan specifies each Doctor is Trustee for her/his account. So technically the doctor is a foreign trustee. Anyone run into this before?

FWIW, the trust is in fact organized in the United States, so even if this person invests in funds in Canada, it would appear that the trust itself is under the jurisdiction of U.S. courts, and therefore it's OK.

Is this 'settled' law or does this require an opinion from an ERISA attorney?"

3 replies so far   |    Click Here to Add a Reply
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t.haley created a topic in Correction of Plan Defects

The VCP Status Inquiry Line: Having Trouble Getting Callback from IRS

"I submitted a VCP last October and have left several messages on the status inquiry line over the last few months with no response/call-back from the IRS. Has anyone else had this issue? Just wondering what the average turn-around for VCPs is given COVID, etc."

2 replies so far   |    Click Here to Add a Reply

Tom created a topic in Cross-Tested Plans

Class-Allocated Profit Sharing with Last Day of Year Employment Condition

"A plan is class-allocated for 2020 and has allocation conditions (1000 hours and last day of the year employment) for profit sharing. That obviously means someone who did not meet the allocation conditions will not receive profit sharing contribution.

But is the reverse true? Does someone who did meet the allocation conditions have to receive a profit sharing contribution? Seems the employer could choose not to contribute to that 'class' (one employee in the class). In other words, the class allocation funding decision comes first. The plan is not top-heavy and includes a safe harbor match. The reason I am asking: the profit sharing decision is being made now for 2020 and several employees who met allocation conditions for PS for 2020 terminated employment in 2021.

(We are removing allocation conditions and pretty much making all plans class-allocated with Cycle 3.)"

1 reply so far   |    Click Here to Add a Reply

Chippy created a topic in 401(k) Plans

Determining Participant Count for Form 5500 Purposes in This Scenario

"Plan had 103 participants at 12/31/2019. Eligibility is 1 year of service, for deferrals enter on 1/1 or 7/1 following meeting eligibility requirements. Profit Sharing is one year and enter on 1/1 preceding meeting eligibility.

At 12/31/2019 there were 103 participants. As of 1/1/2020 there were 14 additional participants eligible for the deferral portion of the plan bringing the total to 117, still under 120 to require an audit... BUT there were 12 additional participants that became eligible for the profit sharing portion on 1/1/2020 as well but not eligible for the deferral part of the plan. (So hired 2nd half of 2019.)

So counting them the total at beginning of year is 129 and would require an audit for 2020. I'm fairly certain those employees all must be counted in the beginning-of-year count, but is there any way not to count them because at 1/1/2020 they were technically not eligible yet and didn't become eligible until they had their 12 months of service for eligibility? For example, if date of hire is 12/01/2019 and had 1 year 12/01/2020, date of participation for Profit Sharing is 1/1/2020."

2 replies so far   |    Click Here to Add a Reply

jane murray created a topic in Defined Benefit Plans, Including Cash Balance

New Defined Benefit Plan for 2020 But Goal Is to Minimize Required Funding for 2020

"The sole proprietor's 2020 personal tax returns are on extension. The sole proprietor will adopt a new defined benefit plan for 2020 effective 1/1/2020. The plan's benefit formula will be 10% of average monthly compensation x years of participation. The participant's accrued benefit as of December 31, 2020 is equal to $1,916.67 (or 1/10 of the 2020 IRS dollar limit).

Can the plan be designed with a $2,000 maximum monthly benefit and not run afoul of any IRS rules?

The objective is to limit the 2021 accruals such that the required minimum contribution for 2021 is $0 or a very small amount. A year of benefit accrual service is based on 1,000 hours of service. The sole proprietor has already worked 1,000 hours during 2021. Does limiting the 2021 benefit accrual through the use of a $2,000 maximum monthly benefit violate the anti-cutback accrual rules or anything else?"

2 replies so far   |    Click Here to Add a Reply

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

'Related Rollovers' from 403(b) Plan to a Replacement 401(k) Plan?

"I've got a not-for-profit organization that's is terminating a 403b plan and starting a 401k plan (for many reasons). Most of the active participants are expected to roll their 403b plan balances into the new 401k plan. Of course, we never had to worry about top heavy in the 403b plan, but what about the effect of these rollovers in the 401k plan? It's the same entity sponsoring the plan, so they seem to be 'related rollovers,' and they are participant-initiated. But because they're from a 403b plan, do they retain the characteristic of not being subject to top heavy (so therefore I can treat them as non-related rollovers for the purpose of testing)?"

No replies yet   |    Click Here to Add a Reply

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