Message Boards Digest

September 3, 2021

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

cjdwyer1 created a topic in Distributions and Loans, Other than QDROs

Coronavirus-Related Distribution Amendment Not Adopted But Several CRDs Actually Paid

"I have a plan that did not want to allow CRDs. A few were paid by the recordkeeper. I assume that the recordkeeper contacted Plan Sponsors to tell them the "default" was to allow unless they communicated that they did not want to offer. When they noticed that some were paid, they shut them off. The recordkeeper tried to recoup the money recently but the employees either didn't respond or have been terminated and had received a full distribution. How should they correct? I suggested having the Plan Sponsor adopt the CARES amendment but to only allow until they were shut off. Any other ideas? If they don't adopt the CARES Act CRD, then don't they have an operational error due to not following the plan document?"

8 replies so far   |    Click Here to Add a Reply

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

Expanded Availability of In-service Distributions?

"Regarding the requirements that elective deferrals and safe harbor contributions cannot be distributed to employed participants until they attain age 59.5 (assuming the doc permits such payouts), I was recently speaking with someone who mentioned that recent legislation (he said either the SECURE or CARES Act) now permits in-service distributions from all sources including deferrals and SH money. I normally defer to him since he's a TPA, but I haven't been able to locate anything in writing that backs up this change. Have the in-service rules changed in this respect?"

5 replies so far   |    Click Here to Add a Reply

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

Removal of DB Contribution After SB Filed for Terminated Plan

"DB Plan is terminated early in 2020 and the SB is filed along with the Form 5310 showing a contribution of $170,000 made in Jan. 2020. Approval letter received in June. The SB shows the $170,000 contribution. This is a sole proprietor employer and the actuarial report is not filed with the Form 5500. The plan is quite overfunded. It's intended that a QRP Plan be set up for the excess assets. But the client subsequently elects on his own to remove $170,000 from the plan. As the employer, he amends the business return and pays taxes on it. The question is, what to do with the 2020 SB, which is the last SB for the Plan? Option 1: do nothing. Option 2: amend the SB and file it with IRS agent who approved the DT? The MRC is zero in either case and the plan remains overfunded in either case. What would happen if the plan was audited?"

2 replies so far   |    Click Here to Add a Reply

Jakyasar created a topic in Retirement Plans in General

Amending Profit Sharing Plan Provisions After NHCE Participant Has Terminated

"Calendar plan for 2021. Only PS provisions. It is cross-tested with a DB plan. Top heavy provisions only provided by the PS plan. 2 rank & file employees terminated with 1000+ hours but plan has EOY requirement for allocation. Only one rank & file in the DB and already accrued the 2021 benefit. Sponsor will terminate the PS plan during 2021. However will continue working for the company. Sponsor wants to provide PS contributions in excess of gateway requirements (combo testing passes easily with minimum gateway). Cannot do that with an 11-g so need to remove last day requirement. I can do the amendment now retroactive to 1/1/2021, correct?"

No replies yet   |    Click Here to Add a Reply

Jakyasar created a topic in Retirement Plans in General

What's the Deduction Limit for 2021? What's the Testing Salary Here?

"DB/DC combo plans. DC is straight PS only, no other provisions. DB is covered by PBGC. 3 participants, owner/HCE, non-owner HCE and rank & file NHCE. Both the non-owner HCE and NHCE terminated on 6/30/2021 but worked over 1,000 hours. Assume each had final salary of $50k for 2021, i.e., the 2021 W-2's will show $50k for each. Sponsor wants to terminate the PS plan as of 9/30/2021. His salary as of 9/30/2021 will be $200k and as of 12/31/2021 will be $290k. He has always been at maximum limits for the past 3+ years. The DB plan will stay active for the time being -- no 401(a)(26) issues for 2021. They are asking me to finalize the PS contributions for 2021 now. I have thoughts on performing all on a very conservative level but want to check on the following. What salary do I use for the owner for deduction of PS portion and what salary do I use for testing?"

3 replies so far   |    Click Here to Add a Reply

PS created a topic in Plan Terminations

Rollover of After-Tax Voluntary Contributions -- Plan Is Terminating

"A terminating plan contains after-tax contributions. The accounts of all non-responsive participants are to be rolled over into IRAs. I believe the after-tax money will need to be put into a Roth IRA and the earnings into a traditional IRA. Correct?"

3 replies so far   |    Click Here to Add a Reply

ERISAQuestions1234 created a topic in 401(k) Plans

Back Pay Issue -- Participant Terminated in 2020 Before Meeting Last Day Requirement But Has Been Reinstated. How to Correct for Missed Deferrals?

"Participant P is fired sometime mid-year in 2020, does not meet last day requirement for profit sharing contribution. In 2021, participant is awarded (by a hearing officer for the company) back pay for lost wages and his/her termination is deemed a wrongful termination. Participant is reinstated as an employee and is a participant in the Plan once again. Is participant eligible for the 2020 profit sharing contribution he/she missed due to wrongful termination? Does the Plan Sponsor have a correction to make re the 2020 deferrals the participant should have been able to make with respect to the back pay?"

No replies yet   |    Click Here to Add a Reply

PensionPete created a topic in Other Kinds of Welfare Benefit Plans

Section 127 Plan Available to a Sole Proprietor?

"I don't dabble too often in the education assistance world. I'm not 100% clear as to whether a sole proprietor (no other employees) can sponsor his own Section 127 plan in order to take advantage of the recently modified rules on Section 127 plan and student loan repayments. Does the nondiscrimination rule effectively make this unavailable?"

No replies yet   |    Click Here to Add a Reply

thepensionmaven created a topic in Form 5500

IRS Notice 216F

"We file all our calendar year extension for 2020 in May, equesting extension to 10/15/21. More than one client recently faxed an IRS extension approval dated 8/30/21 aporoving the extension to 8/15/21, which assumes a PYE 5/31/20, which obviously is an incorrect extension for our plan. Since the IRS wait time averages 30-60 minutes, I faxed a letter to Ogden, attaching our extension to 10/15 as well as their incorrect extension to 8/16/21 and a note to please change their records. Anyone else run into this?"

No replies yet   |    Click Here to Add a Reply

metsfan026 created a topic in Retirement Plans in General

Does Plan Need Its Own TIN?

"I know for the EIN, generally we use the employer's number on the Form 5500. Is there a need to get each plan its own individual TIN, however? And if there are two plans (i.e., a 401(k) and a Cash Balance), would each plan need its own individual TIN? I believe they are looking for a TIN in order to open the pooled account for the Profit Sharing and Cash Balance Plans (not a 401(k))."

3 replies so far   |    Click Here to Add a Reply

ElaineW created a topic in 401(k) Plans

Rollovers Allowed to Come Into Plan Despite Plan Document Saying 'No'

"A 401k plan allowed for rollover contributions. It was amended and restated about 7 years ago. The permitted rollovers provision was switched to 'No', but every year since then there have been rollovers into the plan. Can a retroactive amendment be done for this, or does it need to go through VCP or self-correction?"

No replies yet   |    Click Here to Add a Reply, Inc.
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