Message Boards Digest

August 17, 2021

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

BG5150 created a topic in Distributions and Loans, Other than QDROs

Force-out of "lost partiicpants" in ongoing plan

"Plan has the standard force-out of terminated participants option: under $1,000 cashout, and under $5,000 roll to an IRA. Plan is ongoing, not terminating. If the plan administrator cannot locate someone with less than $1,000 can they roll the money to an IRA and let the new custodian work it out? This is assuming the PA has satisfied her due diligence by sending mail to last known address and subsequently sent mail to a more recent address obtained via commercial means. All attempts resulted in returned mail. What happens is the mail is not returned, but the PA has reason to believe the participant is not at any of the addresses available through commercial investigation? I guess the people living there now are just throwing away any correspondence to the participant at that address."
2 replies so far   |    Click Here to Add a Reply
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PS created a topic in Plan Terminations

Forfeiture account

"Hi, One of the 401k plans that is terminating, the plan sponsor has a huge balance in the forfeiture account. The plan document does not states if the balance in the forfeiture can be re-allocated to the eligible participants. I believe they can have the funds re-allocated however will this require a plan amendment since the plan document does not states anything about this. I thought IRS permits re-allocation for terminating plans isn't? Thanks"
11 replies so far   |    Click Here to Add a Reply

John314 created a topic in Defined Benefit Plans, Including Cash Balance

ARP Relief, Quarterly Requirements and revoking elections

"Here are the details: Calendar year plan. 2019 MRC before ARP Relief = $1,000,000 $200,000 quarterly contribution requirement satisfied by credit balance election on 4/15/2019. Remaining contributions satisfied timely with cash, but after 4/15/2019. ARP shortfall relief is elected for 2019 plan year reducing MRC to $500,000. New quarterly contribution = $112,500. The sponsor wants to revoke the original election to apply credit balance per guidance on ARP relief. Since all contributions for 2019 are after the first quarterly deadline, would revoking the prior election result in a later quarterly as of 4/15/2019 in the amount of $112,500? I didn't see any relief in Rev Notice 2021-48 but this seems like a ridiculous result - which might actually make it perfectly in line with everything else related to credit balance."
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Pathfinder created a topic in Retirement Plans in General

Full Vesting Upon Attainment of Normal Retirement Age; Occurs as Long as Employed by a Member of the Controlled Group in Which the Endorsing Entity Occurs; the Member of the Controlled Group Lacking an Endorsement of the Plan Lacks Effect on the Situation

"To present a hypothetical situation, Myra R----- works at Entity W and enters retirement plan 3. She later transitions to work at Entity T, an entity within the controlled group in which Entity W occurs. Entity T has not endorsed plan 3; she attains normal retirement age while at Entity T. To prevent ambiguity, Myra R----- transitioned from Entity W prior to having attained unequivocal vesting, though with a sufficient balance to thwart ยง 401(a)(31)(B) distributions. Must she receive full vesting while employed at Entity T?"
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Craig Garner created a topic in 401(k) Plans

Safe harbor, Top Heavy, multiple plans and a Union

"I am trying to determine Top Heavy (TH) obligations in a safe harbor (SH) plan for an employer who has multiple plans. The employer (ER) has both union employees and non-union employees. The ER contributes to 2 union plans (DC & DB) under a collective bargaining agreement. The ER also sponsors a "frozen" ESOP plan in which both union and non-union employees are eligible. And, the ER has a safe harbor 401k, using a SH match formula, for non-union employees. Historically, only non-union employees have been Key employees. Last year was the first year in which a union employee personally owned enough company stock (outside of the ESOP) and earned enough salary to be a Key employee. Based on my understanding of the TH regs, an ER must aggregate all plans in which there is a Key employee. And, based on my understanding, this would include multiemployer, collectively bargained plans that include a Key employee. To confuse matters a little, the regs (1.416-1, T-3) seem to indicate that all of the plans must be aggregated to determine TH status, BUT the TH rules do not apply to union employees if benefits are subject to collective bargaining. So, I'm assuming that even if the plans are TH, I do not need to provide TH minimum benefits to any union employees, only non-union employees. Since the ESOP is frozen, and all of my non-union employees are in the SH plan, I am focused on TH obligations, if any, in the SH plan. Here's my first problem, the union plans do not have any sub-accounting. The account balances/accrued benefits for union employees include amounts earned/accrued with OTHER employers. Logically, it seems wrong to use this data, as it could skew the TH results in one direction or another. The Internal Revenue Manual says an employer can use a simplified method to compute TH ratios (overestimate Key, underestimate non-key). Let's say we do this, resulting in the plans being TH (on purpose!). QUESTION: If the plans are TH, and I do not need to provide TH benefits to union employees, and my non-union employees are participating in a SH match plan, do I have any obligation to provide additional TH benefits to non-union employees who don't get any SH match??? The ER is not making any additional contributions to the SH plan other than SH match. But the ER is making additional contributions to other plans, namely the 2 union plans: union plans that are part of the required TH aggregation group, but benefit employees who are not required to get TH benefits. For the ultimate conservative approach, could I suggest the SH plan switch to a 3% NEC? Or suggest that they simply provide all non-union EE's with a minimum 3% benefit each year? I'm just not sure how I could ever prove that these plans, in aggregate, are TH or not TH. I'm wondering if the best approach is to simply assume the plans ARE TH. Any thoughts you have would be appreciated. Thank you."
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