Message Boards Digest

August 20, 2021

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

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

Distribution Reporting with Invalid SSN

"I'm curious how others are handling 1099-R reporting where you know you have an invalid SSN. Assume the participant has unequivocally confirmed they have been using both a name and SSN that was not properly assigned to them. They have a vested balance in the plan and are now requesting a distribution. The participant is still in the U.S. Assume the plan administrator cannot ascertain the participant's country of origin or legal citizenship. No question that payment is due under the terms of the plan, etc. I would assume most would not continue using an SSN on a 1099-R they know to be invalid as to the participant. It seems the participant could apply for a taxpayer ID using a Form W-7. I'm not familiar with the process, but I assume the plan administrator could not force the participant to do so. Is there another mechanism to report while somehow flagging that the SSN is invalid? Is there an argument to be made that a distribution cannot be processed until the participant has provided accurate information allowing the plan administrator to report the distribution? If not, how would you report?"

12 replies so far   |    Click Here to Add a Reply

CharlesS created a topic in 401(k) Plans

Transfer of In-Plan Annuity to an IRA

"Can a participant in a 401(k) transfer their in-plan annuity to an IRA? I have a client plan in which a participant 20+ years ago was convinced to purchase an immediate annuity as investment option. The Plan was listed as the owner of the annuity and all subsequent annuity payments have been deposited into the participant's 401(k) account. Fast forward to today and the plan administrator is tired of administering this one unique asset in the plan for 'who knows how many more' years and wants it removed. The participant tried to transfer it into an IRA by having it re-titled, but the insurance company has come back (after the participant completed all the paperwork) stating that the IRS does not allow plan changes on annuitized contracts. I do not work with annuities, so I have asked the insurance company for the specific citation. But from a purely taxation standpoint, I don't see why such a transfer would be prohibited as it puts the participant in the exact same position they are in today. Confirmation of or guidance with respect to the insurance company's position from those of you that deal with annuities regularly would be greatly appreciated."

3 replies so far   |    Click Here to Add a Reply

metsfan026 created a topic in 401(k) Plans

Multiple Plan Entry Requirements

"I have a client that has a main entity, which owns various LLC. They want to setup a plan, but have different Plan entry requirements: Main Entity - Entry after 1 year of service (with a vesting schedule) Sunsidiary LLC - Entry after 2 years of service (knowing that anyone who qualifies would become immediately 100% vested) There are numerous subsidiary LLC, but most of the employees are temporary so they are looking to keep them out of the Plan legally. I believe setting it up with two different sets of entry requirements is alright, but I just wanted to confirm."

3 replies so far   |    Click Here to Add a Reply

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

Professional Corporation Reports 1099 (Independent Contractor) Income to Owner

"A doctor owns a Professional Corporation, with no other employees. He received a 1099 from the PC for many years. Can this 1099 income be used as compensation for his DB plan?"

4 replies so far   |    Click Here to Add a Reply

AJC created a topic in IRAs and Roth IRAs

Is Notice of Plan Termination Required for Mid-Year SIMPLE-IRA Termination Due to Operational Failure?

"SIMPLE-IRA plan was adopted by an employer that already had a 401(k) plan. Both plans operated side by side for a number of years. The employer has been notified of the operational failure and agrees to stop contributions to the SIMPLE-IRA plan immediately and terminate it. Is a termination notice required? If so, is the termination notice required in advance of stopping contributions or in advance of an official termination date?"

No replies yet   |    Click Here to Add a Reply

AlbanyConsultant created a topic in 403(b) Plans, Accounts or Annuities

Leased Employees Under 414(n) -- Service Doesn't Count for 403(b) Plan Purposes?

"414(n) gets into all the rules about leased employees, and the Code sections it applies to.... and doesn't mention 403(b).

So I'm wondering whether the time that an employee worked for a leasing agency would ever be considered for the plan sponsor's 403(b) plan because the leased employee rules wouldn't apply.

And this article from Plan Sponsor magazine seems to support that theory:

But then I happened to come across IRS Pub 7003 (revised June 2021). On page 2, it specifically says....

'Unless the plan provides that all leased employees within the meaning of section 414(n)(2) of the Code are treated as common law employees for all purposes under the plan, a determination letter issued with respect to the plan's qualification under section 401(a) or 403(a) of the Code will be a determination as to the effect of section 414(n) upon the plan's qualified status only if the application includes:

1) A description of the nature of the recipient organization;

2) A copy of the relevant leasing agreement;

3) A description of the function of all leased employees within the trade or business of the recipient organization (including data as to whether all leased employees are performing services on a substantially full-time basis) and whether services are performed under the primary direction or control of the recipient organization; and

4) If the recipient organization is relying on any qualified plan(s) maintained by the leasing organization for purposes of qualification of the recipient organization's plan, a description of such plan(s) (including a description of the contributions or benefits provided for all leased employees which are attributable to services performed for the recipient organization, plan eligibility, and vesting).'

Am I getting twisted up in the legalese, or is this being contradictory? It sounds like this is saying that the 403(b) plan has to comply with 414(n).... but 414(n) itself doesn't reference that 403(b) plans have to subject to it."

2 replies so far   |    Click Here to Add a Reply

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