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Message Boards Digest

September 24, 2021

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

Gilmore created a topic in 401(k) Plans

Merging Safe Harbor Plans

"Company A purchases Company B in stock sale. The transaction occurs in 2021. Company A sponsors a calendar year end safe harbor 401(k). The safe harbor is an enhanced, 100% of the first 4% match. The plan requires age 21 and One Year of service for eligibility. Company B sponsors a calendar year end safe harbor that also uses an enhanced 100% of the first 4% match. Company B's plan requires age 21 and 3 months of service. At some point Company B's plan will be merged into Company A's plan. I understand that it would be best to merge the plans at the start of a new plan year. It is not possible at this point to merge for 1/1/2022. If Company A does not want to wait until 1/1/2023 to merge the plans and they do so mid 2022, what pitfalls need to be overcome? Company A has been considering making their eligibility requirements more liberal anyway, so moving to a 3 month wait would not be an issue. And both plans use the same match formula. If Company A amends eligibility to 3 months effective 1/1/2022, that effectively ends the coverage transition for 2022, correct? But if the intention is to merge the plans in 2022 the coverage transition would end in 2022 anyway. That being said, would it be better to wait until the plans merge in 2022 for Company A to amend eligibility, or would amending at the start of 1/1/2022 be the preferred way to go? Are there any "mid-year" amendment concerns since we are talking about safe harbor plans? I've already advised the client that any decisions should be reviewed by their legal advisors, especially any decision that might affect the length of the coverage transition period, so this is more for my own education. Thanks very much."
No replies yet   |    Click Here to Add a Reply

joel created a topic in IRAs and Roth IRAs

Five year period

"I am 62 and retired. I have a Roth 401(k) which has satisfied the five year period for taking tax-free earnings. I plan to roll this Roth 401(k) account into a Roth IRA. Does the five year period start anew?"
2 replies so far   |    Click Here to Add a Reply

kmhaab created a topic in 401(k) Plans

Deceased Participant - No Beneficiary, No Estate and Plan is Terminating?

"I've seen variations of this question on here, but nothing exactly on point. What does a plan do with the benefit of a deceased former participant when there is no beneficiary, no estate, and the plan is terminating? 401(k) Plan participant died in 2013 and plan was notified in in 2015. There was no beneficiary on file. According to the plan document, if there is no designated beneficiary, the beneficiary shall be the surviving spouse and if there is no spouse the beneficiary shall be the executor or administrator of the participant's estate. It appears there was no estate established and employer cannot find any heirs. The plan will soon be terminating due to a merger. What should be done with this participant's benefit?"
1 reply so far   |    Click Here to Add a Reply

TPApril created a topic in Form 5500

fidelity bond & new plans

"I'm curious when most new (small) plans tend to acquire their first fidelity bond and how that affects reporting on Form 5500-SF. New plan didn't manage to purchase their bond during first year plan in effect (2020), and only purchased upon review in early 2021. My approach is to report no fidelity bond on 5500-SF but just wondering if it's legitimate to report the bond since it's in effect at time of filing 5500-SF, even though not in effect during that plan year."
3 replies so far   |    Click Here to Add a Reply

TPApril created a topic in 401(k) Plans

401(k) Plan is irreparable

"401(k) Plan is in awful shape, so owner, whose business is in just as bad shape, has asked to terminate it. As far as I can tell he is simply not going to resolve everything and just wants to give the participants whatever balance they can. He also has no intent of paying fees related to VCP and VFCP corrections. So I've basically been asked for help so that participants can get balances paid out. I know the typical response is run, run for your life but I've never believed that is truly a solution, nor does that benefit the non-owner participants. Apparently, he has not paid at least 2 years worth of safe harbor contributions. This is a pooled account and the owner has proposed the following: He has no intent of making those safe harbor contributions, but he would be willing to give equivalent balances (contributions + lost earnings) out of his account balance to help make those participants 'whole'. I"m just curious of any thoughts about this."
8 replies so far   |    Click Here to Add a Reply

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