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Message Boards Digest

July 30, 2021

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

Fortunate Freddy created a topic in 401(k) Plans

No S-8 Needed If 401(k) Sponsor Decides to Use Company Stock to Make Matching Contributions?

"A public company client is thinking of adding employer stock to its plan. It would match in employer stock. The employer stock received would be sold and invested according to the employee's wishes unless the participant affirmatively elected to keep the stock. No participant could elect to purchase any employer stock with their own funds. In these circumstances, there would not be an investment decision on the part of the participant (even the election to get stock or cash). So, no S-8 would be required, but the participants and the plan would hold 'restricted securities' that must be sold in accordance with Rule 144 or some other exemption. Anyone hear of a company actually do this? If so, how do they handle resales of the unregistered shares?"

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

DB Plan Distribution to a Restricted HCE -- Need a Insurer to Sell Us a Bond

"One of the 25 highest paid restricted HCE in a DB plan wants payment of his benefits as a lump sum. He does not want to deposit funds into an escrow. Can anybody recommend an insurer that would sell a bond to cover his restricted benefit? Greatly appreciated."

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401 Chaos created a topic in SEP, SARSEP and SIMPLE Plans

Ineligible Employer Became Ineligible for SIMPLE But Corrects It; Can It Start a New Plan Mid-Year?

"I posted this originally in the plan corrections message board but have not received any response there so thought I might post it here as well. I have a client who started a SIMPLE with less than 100 employees. They have grown over the years and have exceeded the 100-employee threshold for a few years (beyond grace period). I see the IRS permits 'correction' of this ineligible employer issue via EPCRS VCP -- https://www.irs.gov/retirement-plans/simple-ira-plan-fix-it-guide-you-have-more-than-100-employees-who-earned-5000-or-more-in-compensation-for-the-prior-year by stopping all contributions to the SIMPLE and making the required VCP filing and sinning no more.

Question: 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. I'm concerned because of the general prohibition on making contributions under a SIMPLE for a calendar year if it maintains a qualified plan during the same year. 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. Can seller's employees participate in buyer's 401(k) post-closing in 2021? Maybe special transition rules would permit this even if the seller couldn't start their own new 401(k) in the same year?"

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