Message Boards Digest

November 2, 2021

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

Luke Bailey created a topic in 401(k) Plans

401(k) for Cannabis Businesses; Impact of Impact of IRC 4972 10% Excise Tax on Nondeductible Contributions

"Several articles have been published to the effect that Cannabis businesses can sponsor 401(k) and other qualified retirement plans. The basic theme of these articles seems to be that IRC §280E would only restrict the employer's deduction for contributions to the plan, possibly affecting only a portion of the contributions, and that the §280E does not jeopardize the employees' tax treatment or the trust's tax exemption. Those points seem generally sound to me, but what about the 10% excise tax on nondeductible contributions under IRC §4972?"

2 replies so far   |    Click Here to Add a Reply

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

Plan Made Loan to Owner, But No Loan Provision in Document

"Have a one person DB plan with no loan provision in the plan document. Apparently the owner/sole participant took money out of the plan because his CPA said he could do that and that he had 5 years to pay it back. What's the proper way to correct the problem?"

1 reply so far   |    Click Here to Add a Reply

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

First Year -- Missed Funding Deadline

"I have almost no experience with missed funding deadlines. Dealt with them twice in my lifetime but both deposited prior to December 31 of the same year, following 9/15 deadline.

A brand new cash balance/401k-PS plan combo for 2020. Was told that 401k deferrals and safe harbor match was contributed timely. The issues are the CB deposit and PS deposit.

  • Because the plan sponsor is totally broke, they cannot make the $200k CB deposit (assume it's the minimum required -- I do not have the report to check), whatever the PS amount due (must make it to pass combo plan testing) or the 10% penalty on missed contributions. It's unlikely they can come up with the monies by 12/31/2021 and possibly never, because business went south suddenly.
  • Possibly covered by PBGC. Not even sure if PBGC was alerted about missing contributions -- I believe Form 10?
  • All participants were provided statements of benefits for both CB and PS for 2020.

They want to send the IRS a Form 5330 with a letter explaining their situation and ask for any kind of relief. Based on my understanding, they may be late for filing a Form 5330 unless they filed Form 5558 for a possible 6-month extension. Definitely late for 10% excise tax, correct?

From what I read, IRS may impose additional late interest charges. Not even sure if AFTAP was done and/or 101j notice was provided by 10/31/2021. My first thought was to freeze the plan ASAP but apparently they were told by the actuary, not doable. What???

Given that they may never be able to make any of the contributions, what can they do? What a mess."

1 reply so far   |    Click Here to Add a Reply

Bb248 created a topic in Defined Benefit Plans, Including Cash Balance

Termination of Cash Balance Plan -- Unhappy About Allocation of the Excess Assets

"My company froze and canceled our CB plan. The payments are being distributed shortly. We were given a page to sign so we knew how much money each participant is getting. (It was the same amount for each person, 7 employees in addition to the the owner.) But then we were told there are 'excess' funds and that, before distribution, these excess funds need to be figured out. What I don't understand is how this excess, which came out to $100,000, is being split between us employees. I am 27 and I am getting $300 of this $100,000. Someone who is 68 is getting $20,000. Someone who is 85 is getting $3,000. Does that make sense?? Could I suggest they do an even split among all of us employees? $300 seems ridiculous and age discriminatory. All I know is that my boss put in $1,000 each year for EVERYONE, with a 5% interest credit. I don't see why the excess would be so randomly distributed."

1 reply so far   |    Click Here to Add a Reply

Madison71 created a topic in Distributions and Loans, Other than QDROs

Refinancing of Participant Loan

"A participant took out a loan from his 401(k) plan on January 1, 2018 with repayments over a 5 year period ending on December 31, 2022. Participant was a qualified individual under the CARES Act and requested a suspension of the loan back in June 2020. The loan was reamortized in January 2021 which extended the original repayment end date out one year to December 31, 2023. Participant is wanting to take out another loan, but the plan only allows one outstanding loan at a time. However, the plan does permit loan refinancing and the participant is now requesting to refinance the loan. The participant is looking to take out an additional amount and refinance to December 31, 2023. Is there an issue since the replacement loan is technically more than 5 years from the existing loan's origination date of January 1, 2018?"

No replies yet   |    Click Here to Add a Reply

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