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Message Boards Digest

July 26, 2021

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

PS created a topic in Plan Terminations

Plan Sponsor Using 3(16) Services During a Plan Termination Due to Bankruptcy

"A plan is terminating due to bankruptcy. The company is in the process of implementing the 3(16) services. How does that change the plan termination process? Will the record keeper company need to do things that normally are done by the plan sponsor? We only prepare the NDT and 5500. Will this need to be filed by us in case the 3(16) service is implemented?"

3 replies so far   |    Click Here to Add a Reply

Pammie57 created a topic in 401(k) Plans

401(k) Plan Began and Ended During Same Year

"A 401k was effective as July 1, 2020. It had only two participants (non-spouses). They put deferrals into the plan for a couple of months but then terminated the plan a of September 15, 2020. They took distributions before year-end (12/31). Do we need to file a 5500-SF? If so, do we file it as the first and final all on the same form?"

1 reply so far   |    Click Here to Add a Reply

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

Offset Formula in Pension Plan; Treatment at Divorce

"The husband is a participant in a plan that will reduce his pension annuity benefits when he begins to draw Social Security benefits, that is, it is an 'integrated' [sic] plan. The parties have agreed that the wife will receive 50% of the marital portion of his retirement benefits (and are agreeable to either a shared interest allocation or a separate interest allocation). Is it possible to somehow freeze the wife's share of the husband's pension annuity so that her share will not be reduced when the Social Security causes the reduction in the husband's pension benefits?

As you may know, Social Security benefits are not considered to be 'marital property', so if I cannot fix the problem her share of his benefits will decrease, and his benefits will increase, by an amount of his Social Security benefits not paid to his wife.

It's too late to consider workarounds such as paying alimony equal to the wife's net loss. I've prepared QDROs for 33 years and never seen this addressed in any QDRO packages prepared by any plan administrator, or any any of the QDRO treatises I have on my desk. Thanks for your thoughts!"

No replies yet   |    Click Here to Add a Reply

Catch22PGM created a topic in 401(k) Plans

1% Interest Rate on Loans to Owner-Participants

"Husband/wife solo-401(k) plan. They were not using a TPA, have self-directed brokerage accounts, and used a loan recordkeeping system to take out 4 loans back in 2019 -- 2 for each of them. As a TPA I have never dealt with this loan recordkeeping system so I don't know the whole story, but it allowed 2 of the loans to be taken with a 1% interest rate. Not prime + 1% -- just a flat 1%. The other two loans had prime + 1% applied.

Their financial advisors wised up and brought them to your friendly local TPA. There are numerous other issues with these loans that we will help them fix through re-amortizing and consolidating.

My questions for the BenefitsLink community: [1] Is there any possible way that a 1% interest rate would be a 'reasonable interest rate' for a solo-401(k) loan in the eyes of the IRS? [2] Does anyone know how to shut down these loan recordkeeping systems when their services are no longer needed? They send monthly 'invoices' for the repayments (which have been wrong -- long story) and they charge a monthly fee that we need to end. I don't want to mention a name because I think they have botched these loans, but again, I don't know both sides of the story."

1 reply so far   |    Click Here to Add a Reply

AmyETPA created a topic in Plan Terminations

OK for Safe Harbor Plan to Have Short Plan Year Due to Mid-Year Termination?

"Business will be terminating this year because the owner is retiring. They want to terminate the safe harbor 401k effective 9/30/21 in order to get everyone paid out by year-end. Not sure of actual termination date of business but intent is to get everything wrapped up by year-end. Would this qualify as a reason that a plan could maintain safe harbor status for a short plan year?"

No replies yet   |    Click Here to Add a Reply

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