Message Boards Digest

July 15, 2021

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

AlbanyConsultant created a topic in 401(k) Plans

Timely Deposit of Deferrals to 'Plan Holding Account', But Not to Participant Accounts

"In this plan where all the assets are in self-directed brokerage accounts, the deferrals are sent in one check to the financial advisor, who deposits them to a holding account titled in the name of the plan. A breakdown is sent with the check, and once the check clears (I assume that has to happen first?), the money is moved from the holding account to the participant accounts.

The checks often arrive in approximately five business days... so we're already getting close the the safe harbor timing. While this may be outdated these days, we might be able to make the argument that this mailing time and waiting for the funds to clear and then +1 day for the split is 'reasonable' for this set up. Mmmmmaybe. But what about the times where there is a delay at the financial institution? The money has been segregated from the employer and is deposited to the plan -- check. So it's not really late to the plan. Where's the exposure that it didn't get to the participant's account timely... because I assume there has to be some, right? This happened a couple of times last year, so I want to warn them about this, and being able to hang my hat on something would be nice, but all I'm finding is "must be deposited to the plan", which it was.

I know, get them to a product platform. Maybe one day. LOL."

7 replies so far   |    Click Here to Add a Reply

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

Order for Hardship Withdrawals from Combination of Non-Qualified Roth and Pre-Tax Money

"Is there a rule regarding the distribution order, based on fund type, for hardship withdrawals?

In the case of hardship, the plan allows for distribution of all employer contributions plus earnings, as well as pre-tax and Roth employee deferral contributions (no earnings). So, if a member has a combination of employer contributions and pre-tax and (non-qualified) Roth deferral contributions, is the plan required to distribute the available fund types pro-rata, or can the Member choose from which contribution type(s) he/she wants distributed?"

No replies yet   |    Click Here to Add a Reply

justatester created a topic in 401(k) Plans

Mega Roth IRA Conversion When ADP/ACP Test Is Failed

"We have a client that is inquiring about the Mega Roth IRA conversions. I have a pretty basic understanding, but have a few plan-specific questions.

The plan has 1 HCE and the maximum pretax/Roth contribution he could make is 4.5% due to relative low NHCE average. On the match/after-tax side, he would be limited to 1.96% (plan uses prior year testing). If he maxes out his Roth contributions of $26,000 (Roth deferrals plus catchup) and then puts in an additional $21,000 in after-tax (plus $11,000 in match) to reach the 415 limit and then fails the (ADP/ACP) test, how does that impact the conversion?

Participant is savvy enough (which the plan we are talking about is very likely) and takes a distribution of full Roth and after-tax money via rollover to an IRA account. How is the ADP/ACP test then corrected? Is the money associated with the ADP/ACP correction not available for rollover? If not, is the 1099 need to be 'updated'? Or is there no impact on the rollover since it's all after-tax money?"

5 replies so far   |    Click Here to Add a Reply

waid10 created a topic in Correction of Plan Defects

Earnings Adjustment -- Actual vs. DOL Calculator

"We mistakenly distributed a lot of 401k plan account balances to participants when there wasn't a distributable event. Our correction plan is to seek return of the distributed amounts, and then use the DOL calculator to adjust for earnings.

We have been informed that 1 participant took their mistaken 401k distribution and rolled it into our 403b plan. The 403b plan has the exact same fund lineup, and the participant selected the same age-appropriate target fund where she had had her 401k balance.

Our intention had been to use the DOL calculator for all affected participants as it will be impossible to learn of the actual earnings for all impacted (they all did various things with their improper 401k distribution).

Can we use actual earnings for the 1 participant described and the DOL calculator for the rest? Or do we need to use the DOL calculator for everyone so that we treat them the same? For the 1 participant described, if we forfeit her actual earnings in the 403b plan, the DOL calculator will result in less earnings applied to the principal when it is returned to the 401k plan."

2 replies so far   |    Click Here to Add a Reply

David Olive created a topic in Cafeteria Plans

Nondiscrimination Rules Apply to Health Benefits Through Cafeteria Plan for Certain Retirees?

"Employer wants to encourage longevity, is looking at offering benefits to certain retired employees that meet certain requirements.

Example: A Cafeteria Plan is amended to allow only active group health insurance plan participants who are at least 60 years of age but younger than 65 (i.e. Medicare eligibility) AND have a minimum of 10 years of GSB service to participate in the Plan after retirement.

Would that be allowed? I'm looking at 1.125-7(b)(2), which requires any 'employee' (and I believe, would also include former employees) with 3 years of employment to participate in the Plan. Can any further service requirements for former employees be added?"

No replies yet   |    Click Here to Add a Reply

BG5150 created a topic in Correction of Plan Defects

Can Forfeitures Be Used for QNECs to Fund Correction of Late Deferrals?

"Can a plan's forfeiture account be used to fund QNECs due from late deposit of deferrals and the attendant earnings?"

5 replies so far   |    Click Here to Add a Reply

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