Message Boards Digest

July 28, 2021

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

richyboycaldo created a topic in 401(k) Plans

Is It OK Not to Withhold Salary Deferrals When Paycheck Is Too Small?

"Employee received a small paycheck due to working less hours. The paycheck was for $700 (enough to cover premiums). $200 was taken out for medical insurance, then a $320 HSA deduction came out (meaning $180 was remaining), then a Dependent FSA deduction of $192 was due. Because there was only $180 remaining in the paycheck, the Dependent FSA deduction did not come out.

Plus, all further deductions were stopped, meaning that the employee's 5% 401(k) salary deferral election did not come come out.

Should we have taken the 5% salary deferrals out of the remaining $180 (ahead of the Dependent FSA)? Or, was it OK that we didn't take out the salary deferrals or the Dependent FSA and instead paid the employee the $180, which is what we did?"

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R.G. created a topic in Other Kinds of Welfare Benefit Plans

Final Form 5500 Filing Required Here?

"Employer sponsors a welfare benefit plan -- the 2018 Form 5500 was filed with code 4R. For 2019 the plan was under 100 participants and a Form 5500 was not filed. The participant count in 2020 was below 100 but the employer was purchased by another company during 2020. Do we need to file a final form 5500 for 2020?"

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OR-ERISA created a topic in 401(k) Plans

Prefunded NECs Allocated to HCE Who Terminated Mid-Year Were Withdrawn and Reallocated to Remaining Participants

"Employer prefunds non-elective contributions for all employees (HCEs and NHCEs) to an EExEE cross-tested plan. These prefunded contributions are allocated to the accounts of individual participants at the time of contribution, and the participants have investment control of the funds. The plan does not have a PYE employment requirement. Employer adopted a policy saying that allocations for HCEs that leave before year end are at the sole discretion of the employer. An HCE terminated mid-year. The HCE had received pre-funded allocations before termination. After year end, the employer exercised its discretion not to make any contributions to the terminated HCE, and withdrew those contributions from the HCEs account, allocating them to the accounts of other participants.

Can the employer do that? What does the plan document need to say to allow it, and what regulations apply?"

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PS created a topic in Plan Terminations

QPLO Scenarios

"Which of these scenarios would fall under a QPLO?

  1. Plan is terminated, participants are terminated on or after that plan termination date; loans are offset as part of plan action to close out the assets on the plan (within one year of participant's termination date). When the participant defaults on the loan after termination but less than one year from termination, is it a QPLO? Can defaulted loan be a QPLO? I though only active/current loan could be a QPLO.
  2. Plan is terminated but not frozen; participants are active and able to contribute and make payments on loan. If the participants are able to continue to make loan payments after the plan has terminated, a resulting default will not be a QPLO because the participant had the ability to make payments but did not. Correct?"
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401 Chaos created a topic in Correction of Plan Defects

Correction of SIMPLE After Crossing the 100-Employee Threshold

"Client started a SIMPLE 401(k) with less than 100 employees. They've grown over the years and have been over the 100-employee threshold for a few years (beyond the grace period).

I see the IRS permits 'correction' of this issue via EPCRS VCP -- -- by stopping all contributions to the SIMPLE and making the required VCP filing and sinning no more.

If we make this correction now per VCP, can the client start a new 401(k) plan, to permit contributions for the remainder of 2021?

There does not seem to be any discussion in the EPCRS corrections literature regarding possible establishment of new plan going forward. For a bit of a wrinkle on this, what if the company is being acquired and buyer sponsors an existing 401(k) Plan and demands the SIMPLE be terminated prior to closing? Could the seller's employees participate in the buyer's 401(k) post-closing in 2021?"

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WCC created a topic in 401(k) Plans

HCE Gets Refund Due to ADP Test Failure, Wants to Use It to Fix 402(g) Failure Also

"Company A sponsors a traditional calendar year 401k plan. Employee A contributes $19,500 during 2021 (not catch-up eligible) to said plan. Company A goes out of business and terminates the plan in May 2021. The plan fails the 2021 ADP test so Employee A receives a refund of $9,500. Employee A is hired by unrelated Company B. Employee A contributes $9,500 to Company B's 401k plan during 2021. Question: Can the $9,500 ADP test refund be considered a return of excess deferrals and therefore the 402g failure has been corrected?"

1 reply so far   |    Click Here to Add a Reply

LawyerGuy created a topic in 401(k) Plans

40 Former Employee-Participants Didn't Get a Blackout Notice

"We found out recently that when we changed plans we did not provide the blackout notice to non-employee participants (former employees). By the time we corrected the error the new plan was up and running. Do you have experience with this or could you recommend any steps to take? I've seen the $131/day penalty which gets a little pricey when there were about 40 people who didn't get the notice!"

1 reply so far   |    Click Here to Add a Reply

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