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Message Boards Digest

October 12, 2021

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

Belgarath created a topic in Correction of Plan Defects

'Clawing Back' Erroneous Employer 403(b) Contributions

"I have just been presented with an ERISA 403(b) plan that has been operationally botched for an as yet untold number of years -- could be 4, could be 13. VCP all the way unless ERISA attorney advises them to ignore the problems and start clean next year. Very doubtful.

Among the MANY transgressions, people ineligible for employer nonelective contributions have received them, for as far back as this goes. Plan is 100% immediately vested.

Just wondered if anyone has ever SUCCESSFULLY negotiated with the IRS to have such contributions removed from their accounts and reallocated?"

3 replies so far   |    Click Here to Add a Reply
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bzorc created a topic in Distributions and Loans, Other than QDROs

1% Is Reasonable Rate of Interest?

"An auditor friend of mine is trying to wrap up a 12/31/20 plan audit before Friday. A plan dropped its interest rate down to 1% due to the pandemic. Not sure why they did this. I'm not sure that 1% is a 'reasonable rate of interest' per IRS standards. If it's not, then isn't there a risk that the 'loans' would be considered distributions?"

2 replies so far   |    Click Here to Add a Reply

Jakyasar created a topic in 401(k) Plans

Safe Harbor Contribution Deadline

"The following scenarios deal with a payroll company, and its plan.

Scenario 1: 3% non-elective safe harbor for 2020. They do not have the money to make it by Friday. They already missed the 9/15/2021 deduction deadline. I thought that they had until 12/31/2021 to finalize the 2020 SH. Am I wrong?

Assuming that it can be done by 12/31/2021 (after 10/15/2021), it will be deductible for 2021. However, it will not affect the 2021 415c limits, correct?

Scenario 2: Plan sponsor did not make any contribution for 2020 by 9/15/2021 corporate deadline. Plan has 3% non-elective safe harbor for 2020 plus they want to make profit sharing for 2020. For the profit sharing to be for 2020, they need to deposit by 10/15/2021, correct?

How about the safe harbor? Let's say similar approach as in scenario 1 -- can make it by 12/31/2021?

In both scenarios, they will have anough payroll in 2021 for the 2020 and 2021 contributions to be deductible. 415(c) issue is another story."

5 replies so far   |    Click Here to Add a Reply

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

20 Hour Exclusion Applied by 403(b) Plan But No Such Provision in Document

"403(b) plan with many operational violations. The plan does NOT provide for the 20 hour exclusion, but it's been operated as if it did. Now, because employees were incorrectly excluded form deferring, there will have to be make-up contributions, etc.

Under Treas. Reg. 1.403(b)-5(b)(4)(i), if any employee in the 'less than 20 hour' exclusion category is permitted to participate, then no one in that category may be excluded. So, in this case, because some of the 'under 20 hour' folks are going to need to participate because they weren't previously excluded, doesn't this preclude amending of the document for future years to institute this exclusion? Or have I got that wrong?"

1 reply so far   |    Click Here to Add a Reply

WCC created a topic in Form 5500

File 5500 Without Audit?

"The following sentence is above the signature line of the 5500:

Under penalties of perjury and other penalties set forth in the instructions, I declare that I have examined this return/report, including accompanying schedules, statements and attachments, as well as the electronic version of this return/report, and to the best of my knowledge and belief, it is true, correct, and complete. (Emphasis mine.)

I know the DOL has issued FAQ25 on EFAST2 Q&A -- https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/efast2-form-5500-processing.pdf

I understand there are extraordinary circumstances that cause the audit to be late. However, in my experience, 99% of the time audits are late due to procrastination.

Does the penalty of perjury sentence mean nothing to the DOL? Or does it apply to all the data besides the audit? Does the perjury sentence mean nothing to CPA's and those under Circular 230 who recommend filing without the audit? Filing without the audit seems to just be a way to buy another 45 days of 'extension' and the DOL seems to be okay with it."

No replies yet   |    Click Here to Add a Reply

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