Message Boards Digest

October 22, 2021

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

BenefitsBum created a topic in 401(k) Plans

Having Trouble with Form 5310 Submissions Through

"Has anyone experienced problems with responses being changed in Form 5310 being filled out through I'm using Chrome. On multiple times, I've had the numbers in line 16a(3) change on me after I've logged back into the form. I'm having similar issues with additional items being checked off in line item 3f and line item 20. How does one submit the completed procedural checklist for the Form 5310 on Does it appear after the signature page is completed?"

3 replies so far   |    Click Here to Add a Reply

bzorc created a topic in 401(k) Plans

New Plan -- Application of Less-Than-7-Month 5500 Audit Exemption

"Company started a new plan, with a 1/1/2019 effective date. 2019 Form 5500 was filed, with a beginning of the year participant count of 188, making plan subject to audit. However, on Schedule H, Part III, the Form 5500 prepared and filed on EFAST checked box 3d2 - the audit will be attached to the next Form 5500 pursuant to 29 CFR 2520.104-50 (less than 7 month exception). Our reasoning for the exemption is that, for plan eligibility purposes, the plan Adoption Agreement indicates that anyone employed on July 1, 2019 was eligible. According to the plan sponsor, deferrals began in August 2020. The 2020 Form 5500 has not been filed, as the TPA will not file the return without a 2019/2020 audit. We have been brought in to perhaps prepare the 2019 and 2020 audits.

Question: Can the plan claim the exemption for a year less than 7 months, utilizing the eligibility feature noted? Or should we, if engaged, recommend an amended 2019 filing with a 2019 audit, once it's complete, attached to the amended return?"

6 replies so far   |    Click Here to Add a Reply

Luke Bailey created a topic in Defined Benefit Plans, Including Cash Balance

PBGC Interpretation of 'Greater Than 20% Active Participant Reduction' Reportable Event Rule; Voluntary Late Reporting Policy

"Plan sponsor has frozen DB plan that is well funded in economic sense, but does not satisfy the 'well-funded plan safe harbor' of PBGC reg. sec. 4043.10, because pays variable rate premium. May or may not satisfy the 'low-default risk' safe harbor. Have not determined that yet.

Pursuant to SECURE Act, sponsor amends pan to permit in-service lump sums at age 59-1/2. Enough active employees cash out so that at some point during 2020 the number of active participants in plan drops from 55 to 30, so more than a 20% reduction. Plan has several hundred terminated vesteds and retirees, and paid flat-rate premium for more than 100 participants for 2019, so does not satisfy the requirement for small plan waiver.

It does not seem clear to me under reg. sec. 4043.23 whether a greater than 20% active participant reduction reportable event occurred. The plan's amendment could be viewed as a 'single cause' under 4043.23(a)(1)(ii), sort of like an early retirement incentive program, except that the participants didn't retire, they just cashed out their benefit, but 4043.23(a)(1)(i) defining a 'single cause' greater than 20% active participant reduction refers only to a greater than 20% reduction in the number of 'active participants,' without saying whether this is referring to a reduction in the number of 'active participants' employed by the plan sponsor or covered by the plan, and the definition of 'active participant' in 4043.23(b)(2) says it's someone working for, or on leave, etc., from the sponsor, again without referring to plan coverage. Thus, since all or most of the folks who took the in-service distribution are still working for the company, there was not, strictly speaking, a 20% reduction in the number of 'active participants' as so defined. It's harder (maybe impossible) to wriggle out of the greater than 20% active participant reduction due to an 'attrition event' [oxymoron?] definition in 4043.23(a)(2), because that definition does refer to the number of 'active participants' covered by the plan at the end of the plan year as compared with at the beginning, but at least if I have an attrition event, the requirement for the reportable event notice is delayed.

Follow-on question: Assuming plan sponsor did, at least arguably, have a reportable event, does anyone have experience with reporting late to PBGC, voluntarily, with a 'good cause' explanation? It does not appear that the PBGC has any guidance for obtaining a penalty waiver, but it seems likely that in a case such as the one described above they would likely waive or apply only a small penalty if the sponsor made a voluntary delinquent filing."

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Dougsbpc created a topic in Cross-Tested Plans

Testing 2 Plans with Different Year-Ends

"Suppose you have two related companies where a controlled group exists. Each of the companies sponsors a profit sharing plan that provides a uniform contribution which is the same for each plan. No testing issues.

Now they want both plans to be cross-tested. Since they have a controlled group, both companies will need to be tested as one. It actually looks like the plans will pass the general test.

One problem. One company and plan have a 12/31 year end and the other company and plan have a 10/31 year end. How is the cross-testing done with two plans that have different year ends?

Have never run into this issue in all these years."

2 replies so far   |    Click Here to Add a Reply

Robin Wilson created a topic in 401(k) Plans

'Open' Multiple Employer Plan -- 5500 Scenarios When Reporting the Plan Number

"When filing the form 5500, what should the IRS plan number be listed as for the PE? What if the PE had a prior plan that merged into the MEP-- what should the IRS Plan number be then? What happens when the PE decides to start their own 'stand alone plan'-- what should the IRS plan number be listed as then? What happens if the PE decides to start their own 'stand alone' plan and previously sponsored a 'stand alone' plan that merged into the MEP that the PE adopted?"

1 reply so far   |    Click Here to Add a Reply

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