Message Boards Digest

October 27, 2021

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

ESI2015 created a topic in 401(k) Plans

Trust Accounting for Brokerage Accounts

"Have any fellow TPA firms found software that will scan brokerage statements for certain items such as contributions, withdrawals, dividends, etc. and convert into an Excel file for ease of starting the trust accounting process?

We've recently found a significant number of clients who are moving back to individual brokerage accounts, making the trust accounting much more labor intensive and with room for data entry errors."

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Robin Wilson created a topic in 401(k) Plans

Safe Harbor Plans -- Prohibition on Mid-Year Addition of Matching Contributions

"Section B.III.D.4 (prohibited mid-year changes) of Notice 2016-16, states the following:

A mid-year change (i) to modify (or add) a formula used to determine matching contributions (or the definition of compensation used to determine matching contributions) if the change increases the amount of matching contributions, or (ii) to permit discretionary matching contributions. However, this prohibition does not apply if, at least 3 months prior to the end of the plan year, the change is adopted and the updated safe harbor notice and election opportunity are provided, and if the change is made retroactively effective for the entire plan year (which may require a plan that provides for periodic matching contributions as described in §§ 1.401(k)-3(c)(4) and (5)(ii) and/or 1.401(m)-3(d)(4) to be amended to provide for matching contributions based on the entire plan year).

It appears that you may add SH match mid year per the exception. What is does not say is if the plan had to have already had Safe Harbor match during that same year and then had it removed. My take on this is that that plan did not have to have already had Safe Harbor Match. Please advise of your opinion."

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Ananda created a topic in IRAs and Roth IRAs

Rollover of a Life Insurance Death Benefit into a Roth IRA

"If a 401(k) plan owns a term life insurance on the life of a participant, and the participant dies, the death benefit goes to his children as beneficiaries. The children are requesting that the death benefit, which is income tax-free, be directly rolled over into a Roth IRA. I see no problem with this, but their accountant is saying that an income tax free death benefit can't be rolled over to a Roth IRA. Am I right?"

2 replies so far   |    Click Here to Add a Reply

Belgarath created a topic in Correction of Plan Defects

DOL Wants VFC Used Due to Form 5500 Showing a Late Deposit of Deferrals

"We've just had a 403(b) client receive a letter from the DOL, inviting them to use the VFC program. First one we've seen. This was generated from the 2019 Form 5500, which showed a late deposit of deferrals.

Total interest correction was something like $30. It was corrected promptly, and excise tax was paid. The DOL calculator was used to determine the lost interest, but VFC program was NOT utilized.

I know that the Philadelphia region was saying that the DOL could consider it not "fully corrected" if the DOL calculator was used, but no VFC filing was done. This letter was out of the Boston region, not Philadelphia.

So, first, is everyone getting these letters, and in other regions? Or maybe this was just random.

Second, has anyone yet contacted the DOL person listed on the letter in such a situation with extremely minor amounts involved, and if so, with what result?

Third, has anyone heard of/experienced an audit that was initiated because, after receiving this letter, they did not utilize the VFC program? It just goes against the grain to have to do a whole VFC filing on some of these plans where the lost interest is $1.18. But, if an audit is triggered absent a VFC filing..."

9 replies so far   |    Click Here to Add a Reply

Basically Green created a topic in 401(k) Plans

Using Owner's Pension Plan Assets to Jointly Buy an Apartment Complex

"Client wants to purchase an apartment building. He informs me that he is in escrow to purchase, that he intends to get a loan, AND that wants to use some of his pension plan's money in order to complete the deal.

Is it a prohibited transaction because he will benefit personally? Without the plan's investment, he wouldn't be able to purchase the apartment building.

Should I steer him towards an ERISA attorney and let him/her educate him on the legalities of this type of investment?"

4 replies so far   |    Click Here to Add a Reply

RestAssured created a topic in Form 5500

TPA Missed Filing of 2019 Form 5500

"I'm a TPA. I did not file a client's 5500 that was due Jan. 15, 2021 for the 2019 plan year. (The deadline was extended because of Hurricane Sally, therefore it was due on January 15, 2021.) I'm willing to pay the $750 DFVC fee myself, but I'm coming here in hopes that someone knows of a way I can plead my case.

The client has NOT received notification from IRS or DOL. I discovered my error when I was filing his 2020 5500. I don't know why I didn't file his 2019, although it looks like I began the process. Any ideas?"

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