Message Boards Digest

October 25, 2021

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

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

Reducing Future Accruals Under a DB Plan

"A DB plan had a benefit formula of 6% per year of participation for the first year of the plan. Now for the second year (takeover for second year) we want to use 3% for each year of participation (of course with 204(h) notice). However, we want the accrual for this second year to be 3% of comp for this year of participation, without reducing the current accrual due to the benefits earned for the first year. Meaning the total benefit at the end of the second year will be the 6% of comp accrual for the first year plus the 3% of comp accrual for the second year.

Based on this, would the following be an appropriate language for the plan document as the plan benefit formula? 'For 12/31/2021 year 6% of average comp, and for 12/31/2022 and future years, 3% of average compensation, WITHOUT WEARAWAY.'"

3 replies so far   |    Click Here to Add a Reply

401kCotttage created a topic in 401(k) Plans

401(k) Control Group and New Acquisitions Participation in 401(k) Plan with Match

"I work for company A that has acquired several businesses through stock purchase, in different states, same business type, and will continue to acquire more over the next few years. Each acquisition is maintaining their own EIN.

We own 80% to 100% of each acquisition and we consider them part of our controlled group which allows them to participate in our health and welfare plans. I have been asked for financial reasons to create multiple options for benefit offerings that may have differences in PTO days, 401k, health plans and other items for each acquisitions employees. None of the acquisitions has less than 60 employees. Example:

Plan 1 would have full health plan offering, 22 PTO Days, SH 401K w% Match

Plan 2 would offer full health plan offering, 19 PTO days, 401K no match

Plan 3 would offer HMO health plan options only, 18 PTO Days, 401k no match.

My dilemma is around the 401k options. Company A (The acquirer) has a single employer SH 401K plan. Because we consider these acquisitions a part of our control group I do not believe we can shift our SH 401k plan to a multiple employer plan because we are related businesses.

Company A has a safe harbor plan with employer match and company A does not want to offer 401k employer match in all regions for financial reasons and because the acquisitions either have no 401k and if they do have a 401k they do not match.

If you have suggestions for how I might design 401k options to fit this scenario I would be grateful for the ideas."

No replies yet   |    Click Here to Add a Reply

BG5150 created a topic in Retirement Plans in General

Widowed Spouse Wants Participant's Death Benefit to Go Directly to Children

"Husband and wife own a company with a retirement plan. Neither named an alternate beneficiary. Wife dies. Husband does not want to be the beneficiary. He wants the benefit to go straight to the children. Is there any way to do this?"

12 replies so far   |    Click Here to Add a Reply

alexa created a topic in Cafeteria Plans

Offering FSAs to Ex-Pat Employees

"We have a handful of ex-pats (US citizens working abroad). We  offer an international plan for medical, dental and vision benefits. At open enrollment for U.S., we offer them the option of healthcare and dependent care accounts along with voluntary life and voluntary LTD. We recently implemented other voluntary benefits (pet, legal, ID theft & auto/home), but our carriers indicated a covered employee's residence must be U.S.-based -- so we have not offered voluntary benefits to the ex-pats. Anything to look out for in offering the FSA accounts?"

1 reply so far   |    Click Here to Add a Reply

Ron Torgesen created a topic in IRAs and Roth IRAs

Inheriting Two IRA Accounts from the Same Spouse

"This is an estate planning question. I am well past the age of 59.5 while my wife is well under. So, I am trying to develop an optimal strategy for her in case I die before she reaches 59.5. I have an IRA and a Roth IRA; she has just a Roth.

My idea is that I should very soon divide my IRA into two IRA accounts at the same brokerage house. Then when she inherits, she can take my Roth as her own, one IRA as her own, and one IRA as a beneficiary. She will be able to take distributions from the beneficiary IRA account without penalty, because the taxation rules that applied to me will continue to apply to that account. The downside is that she will have to drain that account within ten years. The assets in the IRA she inherits as owner will not be available to her without penalty until she reaches 59.5, but she would not have to drain the account within any time period. If she needs more income than the Inherited IRA provides, she can withdraw from her Roth which now holds the combined assets from both our Roth accounts without tax and without penalty. Once I have divided my IRA into two IRA accounts we would shift assets between them annually to try to assure that the IRA that will become her Inherited IRA has enough assets in it.

Would this work?"

1 reply so far   |    Click Here to Add a Reply

BG5150 created a topic in Retirement Plans in General

Apply a Vesting Schedule to Top Heavy Minimum Contribution While Providing Full Vesting for Profit Sharing Contributions (If Any)?

"401(k) plan requires 2 years of service to be eligible for the profit sharing component. Therefore 100% vesting required. If the employer does not want to make a profit sharing contribution, but a top heavy miminum contribution is required, can the top heavy minimum contribution be on a vesting schedule?"

5 replies so far   |    Click Here to Add a Reply

BG5150 created a topic in Retirement Plans in General

404(c) Protection for Plan That Provides Brokerage Accounts Only?

"Can participant accounts be protected under 404(c) where (i) the only investment vehicle is brokerage accounts, and (ii) the trustees offer no suggested funds to satisfy the requirement of diverse asset classes available?"

3 replies so far   |    Click Here to Add a Reply

metsfan026 created a topic in 401(k) Plans

Outstanding Loan Balance Included in RMD Calculation?

"General question regarding RMD. If a participant has an outstanding loan, is the outstanding balance of the loan included in the 12/31 balance for the calculation? In other words: (Investments + Outstanding Loans) / RMD Factor"

3 replies so far   |    Click Here to Add a Reply

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

QPLOs as an Eligible Rollover Distribution: What to Disclose?

"The Direct Rollover option is not mandated for QPLO distributions. The QPLO amount, however, is still an eligible rollover distribution. What must the disclosure statement contain?"

1 reply so far   |    Click Here to Add a Reply

Ananda created a topic in 401(k) Plans

Top Heavy Minimum Contributions Required for Employees Who Refuse to Participate?

"A 401(k) plan has been deemed Top Heavy and will begin making minimum contributions to non-key employees who are plan participants. However, there is a group of employees who are eligible to participate in the plan, but absolutely refused to do so because the funds offered by the plan invested in companies that have poor records regarding the environment. If a non-key employee is eligible to participate in the plan but absolutely refuses to do so, should they be receiving minimum contributions or can the plan sponsor argue that only employees that enrolled in the plan should receive minimum contributions.

Treas. Reg. section 1.416-1, Q&A M-10, states that non-key employees that are 'participants' in a top heavy plan must receive minimum contributions and ERISA 3(7) defines 'eligible employees' as participants. However, Q&A M-12 refers to 'employees covered under the plan' as receiving minimum contributions and I could argue that these non-key employees are not 'covered' under the plan. Any thoughts?"

5 replies so far   |    Click Here to Add a Reply

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