Message Boards Digest

August 4, 2021

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

David Olive created a topic in Plan Document Amendments

Plan Amendment to Exclude HCEs After One HCE's Participation Has Begun?

"Plan A excludes a large class of employees who are required to be included in testing for minimum coverage. Coverage testing had never been an issue in the past due to there being no HCEs (non-profit entity, so no owners). Now there is a HCE under compensation rules, and we have a coverage test failure. Plan Sponsor of Plan A wishes to amend Plan A going forward so that HCEs are excluded from participating in order to pass minimum coverage under Treas. Reg. Section 1.410(b)-2(b)(6). Does this proposed amendment violate anti-cutback provisions? Any other concerns?"

8 replies so far   |    Click Here to Add a Reply

cathyw created a topic in Correction of Plan Defects

Missed Earnings for Late Deposits

"Absent a plan document provision requiring elective deferrals to be deposited within x days of the payroll date, the late deposit of deferrals is not an operational failure and therefore does not fall within the guidelines of EPCRS. The late deposit is a presumptive prohibited transaction (loan to the employer) and fiduciary breach. Corrective action requires payment of an excise tax of 15% of the 'amount involved' which is based on the value of the use of the funds or the disgorgement of profits.

Every auditor and tax preparer that I know has traditionally calculated the missed earnings and resulting excise tax using the DOL calculator, and prepared Form 5330 accordingly, regardless of the actual earnings of the participants' accounts. However, I am aware that others say you can't use the DOL calculator to determine missed earnings if you don't file an application under the DOL's VFCP.

What authority is there that the IRS method(s) of calculating missed earnings contained in EPCRS should apply to late deposits?"

7 replies so far   |    Click Here to Add a Reply

BG5150 created a topic in Retirement Plans in General

No Fail Safe Language But Too Late for 11(g) Amendment

"Plan fails coverage and does not have fail safe language. What happens if the coverage failure is not discovered until November the next year. It's now too late to do an 11(g) amendment. How does it get corrected?"

1 reply so far   |    Click Here to Add a Reply

Kiley created a topic in 401(k) Plans

Short Plan Year Partnership Compensation Pro Rata

"Initial plan year defined in document to be 3/1/20 to 12/31/20. Calendar plan year. Partner's earned income is determined to be $300,000. Is the pro-rata to be (which is correct?):

$300,000 * 10/12 = $250,000


$285,000 * 10/12 = $237,500"

1 reply so far   |    Click Here to Add a Reply

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