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Message Boards Digest

September 9, 2021

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

JG-12 created a topic in 401(k) Plans

Common Control and Tax-Exempt Entities

"26 CFR ยง 1.414(c)-5 provides: "common control exists between an exempt organization and another organization if at least 80 percent of the directors or trustees of one organization are either representatives of, or directly or indirectly controlled by, the other organization." I'm trying to determine if a not-for-profit corporation and a LLC are in a common control group. Obviously a LLC does not have directors in the conventional sense, but what if it has a board of managers that are the functional equivalent to a board of directors? Does anyone think that the managers should be considered directors in this situation? The tax-exempt corp does have complete control over who the managers are. Should also point out the LLC is treated as a partnership for tax purposes. Thanks!"
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HCbs created a topic in 401(k) Plans

Reimbursement of Fund Fees ...

"I've looked a a variety of loosely related threads but none get to the heart of my question so I'll ask it here. I have a plan sponsor that would like to pick up ALL fees for plan participants, including fund fees. The plan uses a combination of pooled funds (CITs & MFs). Shy of converting everything to SMAs or having the fund companies develop an entirely new class of funds that are stripped of all fees (both unlikely for different reasons), this seems like it would involve some form of sponsor reimbursement to the Plan. Key concerns identified so far that I'm looking for insights on:
  • Is there a viable path to get these fees reimbursed by the sponsor to get to the intended result without running afoul of various rules pertaining to employer contributions?
  • Is there a viable path to get these fees reimbursed by the fund company that doesn't involve the employer making a reimbursement and thus avoiding the challenges of them being considered an employer contribution?
  • Related to this 2nd approach, it seems that the the Revenue Sharing rebate analogy may be useful (the practice or recapturing and rebating 12b1's, SubTA, etc. without them being considered an employer contribution). Could that analogy be extended so that the entire Expense Ratio is rebated in the way revenue sharing is?
This is one of those topics where I fear that the employer has a reasonable & positive motivation but the legal and operational hurdles might be difficult or impossible to overcome."
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JQZ2028 created a topic in 401(k) Plans

SH excess contribution financial statements question

"Hi all! first time posting here. I have a 401k plan where in 2019 plan year a excess SH contribution was identified, the auditors made us move the excess match to "Excess contribution payable" as a liability and reduce the SH contribution line on the financial statements. Nothing was done to schedule H. The excess SH from 2019 was put into the employer's forfeiture account. How do I fix the reconciling payable in the 2020 plan year financial statements? Should that SH excess been a payable at all if the amount was going to go into forfeiture and not paid out by the plan? Any insight is appreciated."
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Jakyasar created a topic in Retirement Plans in General

Am I a key employee?

"Hi Plan is calendar 2020. 5%+ owner terminates in April 2020 and sells his ownership to the other shareholder. Under HCE, because he was an HCE on 1/1/2020, he is HCE for 2020. How key employee rules, are the same here i.e. he is a key for 2020 because he was on 1/1/2020? Thank you"
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HCE created a topic in 409A Issues

Can I change payment timing under a "Short-Term Deferral" plan to a different date (where the payment remains a "Short-Term Deferral"?

"We have a Plan that provides benefits vest on 1/1/2022 (if the participant is employed) and are paid within 30 days thereafter (so, within the short-term deferral period). Clearly, the Plan doesn't provide for nonqualified deferred compensation, and 409A doesn't apply. We want to amend the Plan to provide those same benefits vest on 1/1/2023 (if the participant is employed) and are paid within 30 days thereafter (so, still within the short-term deferral period). Can we do this? It seems that we are just switching from one 409A-exempt arrangement to another, so I can see the argument this doesn't ever implicate 409A. But I also see the opportunity for abuse here, and I believe I've seen commentary on this before (I just can't find it now). Bonus Question: Would it be any different if we were accelerating the vesting/payment rather than deferring it further (but still keeping it within the short-term deferral window)?"
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HCE created a topic in Nonqualified Deferred Compensation

Can I change payment timing under a "Short-Term Deferral" plan to a different date (where the payment remains a "Short-Term Deferral"?

"We have a Plan that provides benefits vest on 1/1/2022 (if the participant is employed) and are paid within 30 days thereafter (so, within the short-term deferral period). Clearly, the Plan doesn't provide for nonqualified deferred compensation, and 409A doesn't apply. We want to amend the Plan to provide those same benefits vest on 1/1/2023 (if the participant is employed) and are paid within 30 days thereafter (so, still within the short-term deferral period). Can we do this? It seems that we are just switching from one 409A-exempt arrangement to another, so I can see the argument this doesn't ever implicate 409A. But I also see the opportunity for abuse here, and I believe I've seen commentary on this before (I just can't find it now). Bonus Question: Would it be any different if we were accelerating the vesting/payment rather than deferring it further (but still keeping it within the short-term deferral window)?"
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Jakyasar created a topic in Retirement Plans in General

IR-2021-179 Tax Relief for Ida victims

"Hi If anyone saw this, did you notice anything on pensions i.e. extension for 5500 and also 9/15 contribution dates? I browsed quickly. In the past they were specific (Sandy etc). IRS: Tax relief now available to Ida victims in New York and New Jersey; Oct. 15 deadline, other dates extended to Jan. 3 | Internal Revenue Service"
2 replies so far   |    Click Here to Add a Reply

Christopher Wilson created a topic in 401(k) Plans

EPCRS

"Hello everyone. Client wants to put in 100% of missed deferral instead of 25% under EPCRS. May a client do that or would the 75% be considered a non-elective contribution?"
1 reply so far   |    Click Here to Add a Reply

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

Excess Assets and Maximum Benefit

"Suppose a small non-covered DB plan terminates with excess assets. The plan document contains a maximum benefit of $3,500 payable at normal retirement age. No participant is close to their 415 limit. However, one participant has accrued a $3,500 benefit prior to the plan termination date. The plan has excess assets of $21k. Normally, we would simply allocate the excess to all participants (3 in this case) in a non-discriminatory manner. I would think (but am not sure) that the one participant at the $3,500 maximum could not be allocated any of the excess. Does anyone agree / disagree? Thanks."
1 reply so far   |    Click Here to Add a Reply

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

RMD Required for now less than 5% owner?

"Suppose you have a former 25% partner in a firm that has sponsored a 401(k) plan for many years. The partner has been winding down and will have less than a 5% capital and profits interest in the firm before his required beginning date in 2022. He eventually just plans on being an employee indefinitely with great work hour flexibility. Since his interest went below 5% in the year before the year he would normally begin taking RMDs (and will stay below 5%), I would think he would qualify for the RMD exception. Anyone agree or disagree?"
4 replies so far   |    Click Here to Add a Reply

BG5150 created a topic in Retirement Plans in General

Terminated plan, ER doesnt want to pay for 5500

"Who is responsible for filing the 5500--plan administrator or trustee? We have a client whose business closed. Unbeknownst to us, they terminated the plan and paid all the assets in 2021. Obviously, they have to file 2020 and 2021 5500s. Client says "who will know" if they don't file any more 5500s? I know that answer. Plus, he says, there's no more money to pay us for the 5500. But if they don't file, who does the IRS/DOL go after? The plan administrator or trustee? Can IRS/DOL go after his personal finances? I know for fiduciary breaches they can do that. Is filing the 5500 a fiduciary act? I want to impress upon him the gravity of the situation, but I want to properly put the fear of God in him."
3 replies so far   |    Click Here to Add a Reply

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

Uncompleted Rollover

"I'm sure most of us are familiar with Rev. Rul. 2019-19, which essentially says that an uncashed distribution check is still taxable and subject to reporting and withholding for the year of issuance. If the individual actually cashes the check in a later year, it is not subject to tax, reporting, or withholding in that later year. Has anyone seen guidance on how to handle reporting where the initial distribution was a direct rollover, but the participant never provided the check to the new institution? What if the participant requests a new rollover in a later year? Obviously, there are no tax or withholding implications of a direct rollover, but should another 1099-R be issued? I would think so..."
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