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Message Boards Digest

October 28, 2021

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

Santo Gold created a topic in Retirement Plans in General

OK to Bring In Physician's Spouse as an Employee?

"A new solo medical practice established this year. A 401k plan was created this year as well. The doctor has no employees at this time. The doctor's spouse is working during this initial year to help establish the practice.

The doctor would like to pay the spouse for services and the spouse would then like to deposit a portion of that compensation into the plan. With no other employees, the doctor does not currently have a payroll service and would like to not have to use one until employees are hired, likely next year.

Without using a payroll service, is there a way for the doctor to pay her spouse for (legit) services to the new practice so that he can be considered an employee? If he is paid as a 1099 employee, can a plan document be written to include him as an eligible employee for the 401k plan, which would allow him to contribute 401k/Roth/after-tax?"

17 replies so far   |    Click Here to Add a Reply
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Santo Gold created a topic in Correction of Plan Defects

Plan Document Incorrectly Drafted to Have Auto Enrollment

"A plan sponsor started a new 401k plan in 2020 and gave instructions to the payroll company that a 1 year/1000 hours eligibility requirement to enter the plan was desired. No auto-enroll.

Someone at the payroll company dropped the ball and did a 3 month elapsed time eligibility condition and included auto-enroll with it. The payroll company has kind of fessed up to it being their mistake.

We now have several participants with employee and employer dollars in the plan due to the early eligibility and auto-enroll who were never intended to be in the plan. Is this something that can be fixed via an IRS correction program?

The employer would like to treat these individuals as ineligible and refund their 401k amounts if possible all due to mistake of fact. Other options would included amending the plan to do away with auto-enroll and the 3 month eligibility, but that would help for new employees and would not fix the existing employee problem. He could also bite the bullet and keep everyone in the plan, but terminate the plan and pay them out. But that would mean he could not start up a new plan until at least 2023 and he would like to have a plan in place without disruption."

6 replies so far   |    Click Here to Add a Reply

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