Message Boards Digest

August 13, 2021

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

TMcfall created a topic in 401(k) Plans

Missed Deferral Opportunity

"A client recently acquired a number of employees but never gave the employees the opportunity to enroll and begin deferrals. The client is looking for a solution to remedy this with the employees as well as keeping the plan compliant. I know that a QNEC is owed for the missed opportunity and the employer is responsible for 25% of employee deferrals and 100% of the Safe Harbor Match. My question is since the employees were never notified or given the opportunity to elect a deferral percentage. What would you take 25% of?"
3 replies so far   |    Click Here to Add a Reply

Joe L created a topic in Defined Benefit Plans, Including Cash Balance

Solo DB Plan Has Missing Valuations, No Sched SB

"A prospect has had a Solo DB for three years. She had a falling out with the actuary and he will not provide copies of the actuarial valuation or Sched SB for the past two years. I have put her in touch with an ERISA attorney, but they were not able to help. Should she terminate the plan and hope for the best? File a correction with the IRS?"

4 replies so far   |    Click Here to Add a Reply

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

Can Spin-Off Termination Include Active Participants Whose Benefit Accruals Have Been Frozen?

"DB plan was closed to new entrants and partially frozen several years ago. Employees meeting service requirements continued to accrue benefits and accruals were frozen for all other employees. Plan sponsor wants to pay out benefits to vested termed participants and active frozen participants. Can they do a spin off termination and include active employees with frozen benefits in the spun off terminating plan? I can't find anything either way."

No replies yet   |    Click Here to Add a Reply

Gruegen created a topic in Correction of Plan Defects

Failure to Implement Elective Deferral -- Impact of Compensation Limit

"An employee made a 5% deferral rate election effective January 1, 2020; however, due to a mistake in plan operation, this 5% deferral rate was never implemented. This would likely be classified as the 'failure to implement an employee's election' for an entire plan year as described in Appendix A.05(5)(a) of Revenue Procedure 2021-30. The Rev. Proc. states that:

'...the Plan Sponsor must make a QNEC to the plan on behalf of the employee to replace the "missed deferral opportunity." The missed deferral opportunity is equal to 50 percent of the employee's "missed deferral." The missed deferral is determined by multiplying the employee's elected deferral percentage by the employee's compensation.'

The plan sponsor normally allows employees to make 401(k) contributions on compensation in excess of the 401(a)(17) compensation limit of $285,000 for the 2020 year (as permitted by IRS Employee Plan News Issue 2012-1). The employee's compensation for the 2020 plan year was $340,000.

Is the 'compensation' used in calculating the missed deferral $285,000 or $340,000? As best as I can tell, the Rev. Proc. does not say that compensation under the corrections in Appendix A or B must limited to the 401(a)(17) limit, and quite frankly, if the plan had been operated correctly, the participant would have had the 5% deferral rate applied to the full $340,000 of compensation. Thoughts?"

1 reply so far   |    Click Here to Add a Reply

Carrie created a topic in Retirement Plans in General

Understanding Affiliated Service Groups

"Still new to ASGs and want to make sure I fully understand the rule. Consider this example from an IRS publication on controlled and affiliated service groups:

'Allen Averett, a doctor, is incorporated as Allen Averett, P.C. and this professional corporation is a partner in the Butler Surgical Group. Allen Averett and Allen Averett, P.C. are regularly associated with the Butler Surgical Group in performing services for third parties. The Butler Surgical Group is an FSO. Allen Averett, P.C. is an A-Org because it is a partner in the medical group and is regularly associated with the Butler Surgical Group to perform services for third parties. Accordingly, Allen Averett, P.C. and the Butler Surgical Group would constitute an affiliated service group.'

My scenario: Individual owns 25% of medical practice (S Corp). In 2019, the individual created a SMLLC which provides similar services to a hospital. The initial contract was with the medical practice for the individual's services and the income was paid to the medical practice. As the medical practice was essentially just a flow through, the contract was renewed with the SMLLC. This would not be an affiliated service group because the SMLLC is not the shareholder in the medical practice and the individual is providing services as an employee. Any guidance would be much appreciated."

2 replies so far   |    Click Here to Add a Reply

Jakyasar created a topic in Form 5500

Is Insurance Cash Value to Be Reported on the 5500 as a Plan Asset?

"DB plan with life insurance that has cash value and 5500-EZ filing. Looking at instructions for 2020 5500-EZ/SF. The wording on the instructions is 'an insurance company qualified to do business under the laws of a state, e.g., investment contracts with insurance companies.' Also from 29 CFR 2520.103-1(c)(2)(ii)(C): 'investment and annuity contracts issued by any insurance company.' I remember when the instructions were specific about inclusion of insurance cash value on the 5500 forms. Do I need to include the cash value?"

6 replies so far   |    Click Here to Add a Reply

TPApril created a topic in 401(k) Plans

Payroll Department's 'Compensation' Didn't Line Up with Plan Document's Definition

"Plan set up beginning of last year with a certain definition of compensation. On payroll, a different definition of compensation was used. To what extent can plan be amended retroactively to match what has been done in practice (i.e., a self-correction)?"

4 replies so far   |    Click Here to Add a Reply

mattmc82 created a topic in 401(k) Plans

Adding Participating Employer via 11(g) ?

"So a small employer (1 HCE and 4 HCEs) has a SHM plan. We take over TPA work and discover they are a controlled group with another entity with no plan (1 HCE and 2 NHCEs). The HCE is the same person in both scenarios. So now their nice and simple safe harbor plan fails coverage. We can pass coverage using ABT with some QNECs (this option is reserved to be used whenever needed). But the fail-safe in the document is to add excluded otherwise eligible employees until it passes. Cannot find anything definitive as to whether it's permissible to add a participating employer in this scenario. The QNEC to pass ABT is the cheaper option but it's still good to know what the Friday morning experts of BenefitsLink think!"

No replies yet   |    Click Here to Add a Reply

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

Contributions Withdrawn After Being Deposited?

"Brand new CB plan. $50k was deposited in March 2021. Prepared all certifications accordingly (not filed the 5500 yet). I just got a follow-up statement showing a withdrawal of $30k in April 2021. Was never discussed with me, and not disclosed. Does not affect the MRC so it's good on that end. Does not affect 404(o) so no issue with deductibility.

Anyone had experience like this? What is the correct course of action here? I want to make sure that I go on record with them about the penalties, if any. I also want to let them know, very sternly, that this is not a bank account -- once in, stays in. (Already starting on wrong foot, time to fire the client? Already becoming a liability.)"

2 replies so far   |    Click Here to Add a Reply

Here are the most recently posted jobs on, a service of BenefitsLink:

View job as Employee Benefits Investigator

Employee Benefits Investigator  View details

Employee Benefits Security Administration [EBSA]
Remote / Chicago IL

►View More Jobs

►Post a Job

►Get Instant Job Alerts, Inc.
56 Creeksong Road
Whittier NC 28789
(407) 644-4146

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

Copyright 2021, Inc. All materials contained in this mailing are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of, Inc., or in the case of third party materials, the owner of those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

Links to web sites other than and are offered as a service to our readers; we were not involved in their production and are not responsible for their content.

Unsubscribe | Privacy Policy