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October 4, 2021

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

austin3515 created a topic in 401(k) Plans

Retro Amendment to Increase Safe Harbor Match

"Plan had basic safe harbor match in 2020 but payroll company calculated as 100% on 4%. EPCRS says I can amend retroactively to increase a benefit but 2016-16 says I can only increase safe harbor match by 10/1. Correct? Which one wins?"

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Jakyasar created a topic in 401(k) Plans

How to Test Controlled Group with 2 Different Plans?

"I was just asked to do a 2020 run for controlled group situation - employers, 2 plans (because the payroll company will not do it - shall not be named) as a favor. Must do it prior to 10/15. No good deed goes unpunished i.e. I just checked all the provisions and unpleasantly surprised. If any of the gurus have some suggestions on testing for top heavy and also coverage, would appreciate it.

Plan B is not top heavy but not sure about plan A yet as I am waiting for assets. I also do not know if combined plans will be top heavy - to be determined.

Provisions of each plan are as follow:

Plan A (Company A's plan) has 3% non-elective safe harbor, 401k deferral and profit sharing (1000 hours and must be employed at EOY). No compensation exclusions. For all provisions, entry date is the month following age 21/1 year service.

Plan B (Company B's plan) has enhanced match (100% of elective not in excess of 6% of compensation, 401k deferral and profit sharing (must be employed at EOY - no hour requirement). Only for match, compensation is from date of entry (No way for me get this unless payroll company will provide it). For all provisions, date of entry is the next payroll period (Plan is run by a payroll company so they can do this, I guess) upon satisfaction of age 18/1 year of service.

They want to have PS allocation in Plan A and none in Plan B. PS allocation for Plan A is group based i.e. needs to be tested.

I need to combine both for top heavy even if each plan passes 410b and 401a4 on its own (they do).

Since each plan has different safe harbor assumptions, separately top heavy for each plan is not an issue, one is 3% non-elective and the other one is enhanced match.

Do I need to test them all together for coverage and non-discrimination? What would the answer be if

  • If Plan A is top heavy, Plan B is not and combined not top heavy
  • Neither plan is top heavy and combined not top heavy
  • If Plan A is top heavy, Plan B is not and combined they are top heavy

What am I not asking properly? I never had to test two DC plans like this."

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

My Pension Amount After NRA; Are They Stealing My Pension?

"Worked 14 years 1997-2010, took lump sum from defined pension. Returned to hospital in 2016 at age 62 with intent to work until age 70. Was told I would need to work 5 years to be vested. In 2021 hospital was bought out and pension was frozen, employees were gifted an additional 4-7 years of vesting deep on age and wages. Moneys were give to an actuary and all employees are now being offered a window to receive a lump sum. I don't want a lump sum. I had returned to work specifically to earn an annuity and expected that if I were offered an annuity of $1000 at ERA after 14 years at half the wages that I would now at double the wages and 8 years vested look forward to at least half of that. In addition my lump sum in 2010 was over $100,000. So I would expect a lump sum of at least half of that after 8 years vested at double wages. I was offered a tiny annuity and small lump sum. When I question it to the actuary handing the funds, this is the reply I got…. Can anyone here help me understand this? I feel discriminated against because I am over 65. and disappointed because I thought I could keep working and earn another pension to help me when I planned to fully retire at 71.

Hello, This email is in reference to your recent question regarding your XXX Pension Benefit. The current benefit amount that would commence on 11/01/2021 is $14,589.23 as a lump sum and $127.86 as a life annuity. This benefit is less than your previous lump sum benefit in 2010 because of how the plan calculates benefits after a benefit has already been received. The plan states that if a participant is rehired after receiving a lump sum payment, and earns additional benefit service, their benefit is calculated as if no payment was made. The amount of the lump sum previously paid is increased with interest at 8% per year. Therefore, because of this high 8% interest rate being added to your previous lump sum during the calculation, your benefit is less than before. If you chose to wait until you reached age 70 your benefit would decrease to $0.00. This is again due to the high interest rate being added to your previous lump sum benefit during the calculation. If you have any other questions, please let us know. Thank you ...

I asked for clarification, and got this:

We apologize for the confusion. Let us try to explain the offset better so it may make more sense.If a Participant is rehired after receiving a lump sum payment (which fits your scenario as you took a large lump sum in 2010), and earns additional benefit service, their benefit is calculated as if no payment was made. The resulting lump sum value, at the new payment date, is reduced by the amount of the lump sum previously paid increased with interest at 8% per year. The final present value is then converted to an annuity. In your case what is happening is, since the plan froze and no benefits are being earned, the offset is growing faster and will eventually wear away any additional benefits. Since you were over 65 at 2/1/2021 you should have received a separate packet prior to the lump sum offering that back dates your lump sum amount to the first eligible payment date. That is the date that your lump sum will be greatest since the offset will continue to wear away your benefit. If you need that reprinted please let us know.

I have not received a reprinted backdated offering even thought I asked. Nor can I get them to give me a copy of the pension plan with the rules they are stating. One customer service person told me it was federal law being followed. I am real savvy with my nursing skills but I am lost with this stuff. I really feel like they are stealing my pension."

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HCE created a topic in Nonqualified Deferred Compensation

Bonuses Outside Controlled Group

"We have a company (Company A) which only exists to hold units in Company B. However, Company A only owns 60% of Company B, so I don't think they qualify as being in the same controlled group. Company A would like to award bonuses to Company B employees that pay out upon a Company B change in control if the employee is still employed at Company B at the time. I don't see any reason why this can't be done, but what are the tax implications here? Would Company A issue 1099s? Can the Company A take any sort of deduction for the payments, even though they are not being made to a Company A employee (or an employee to Company A's controlled group)?"

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TLM created a topic in VEBAs

Convert Grantor Trust to VEBA?

"Client currently has a grantor trust and wants to convert it to a VEBA. Is there any IRS guidance or practical considerations on converting an existing grantor trust to a VEBA? Is conversion of the existing trust even possible or should a health plan deplete the existing grantor trust and then transition to the new VEBA? Or should the existing trust document just be amended to comply with the VEBA requirements on a go-forward basis?"

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BK created a topic in Qualified Domestic Relations Orders (QDROs)

Can QDRO Be Amended After Divorce Has Been Finalized?

"My husband and his ex divorced in 2010. At that time, his ex was awarded the following:

- their house (just purchased the year prior for $430,000)

- their travel trailer

- a used vehicle

- 1/2 of his 401k and 1/2 of his PERS retirement accounts (1/2 of the total amount for the time they were married which equates to a large sum).

My husband was awarded the following:

- he had to sell the house to her for $1.00 (which she paid off in 2013 w/ her new husbands money)

- he had to sell the travel trailer to her for $1.00

- he kept their boat that he had to sell (worth under $15,000)

- a used vehicle

My husband did not have an attorney, she did, paid for by her then boyfriend, now husband. My husband, had he been allowed to keep all of his PERS retirement or most of it, could be retired at this point. When they got divorced, she quit working and hasn't had a full time or even part time job since. My question is this: Can his QDRO be amended, now several years after the divorce has been finalized, to be more fair and equitable? Not only did she get everything listed above, we also found out after having a retirement plan review w/ the administrator, that in the QDRO, her attorney got the court to approve she will be the "spouse" listed when he retires for the 50% joint spousal designation for when he passes away. This designation also means he cannot list myself, his wife, as his 50% joint when he retires.

I have my own retirement so while the latter is rather upsetting, I know at least I will have my own retirement to help take care of us when I can retire. However, my husband, quite literally, got screwed. I just want for him to be able to retire. He's worked very hard to reach this point and there should be no reason why he cannot. If anyone has any knowledge of an amendment being done for this reason, I am grateful for any advice you can give."

2 replies so far   |    Click Here to Add a Reply

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