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Message Boards Digest

November 15, 2021

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

Basically Green created a topic in Plan Document Amendments

Confused About the Deadline for Cycle 3 Amendments

"In announcement 2020-07 there is this passage:

'Deadline for Employer Adoption of Pre-approved Defined Contribution Plans. The end of the third six-year remedial amendment cycle for pre-approved defined contribution plans is January 31, 2023. An adopting employer whose defined contribution plan is eligible for the six-year remedial amendment cycle and who adopts, by July 31, 2022, a newly approved plan, will be considered to have adopted the plan within the third six-year remedial amendment cycle.'

So.... January 31, 2023 or July 31, 2022? I don't get the need for 2 separate dates.

If I have an existing plan and we need to restate the document to comply with Cycle 3 it says above 'The end of the third six-year remedial amendment cycle for pre-approved defined contribution plans is January 31, 2023' which I am taking to say you need to restate by 1/31/23. Or do I need to have them restated by July 31, 2022? What's the IRS is trying to convey? What am I missing?"

2 replies so far   |    Click Here to Add a Reply

TPApril created a topic in Form 5500

Reporting Covered H&W Plan Participants Who Are Furloughed at Year-End

"Curious how others are reporting covered participants at the end of the year who are furloughed (receiving benefits as per ARPA). Active or terminated?"

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DABU created a topic in 401(k) Plans

ESOP Keeps Selling Some of My Stock to Pay Administrative Fees

"My wife works for a company that's publicly traded on NADAQ, and has an ESOP option in her 401(k). Company's stock in ESOP is 100% vested. The plan administrator sells a small quantity of vested stock every quarter to pay towards the administrative fee. She called the plan administrator and the administrator indicated that the expenses cannot be taken out of a stable value/money market fund. So, the administrator must sell the stock. Is this a common practice? We don't want to sell the vested company stock to pay for paying administrative expenses. Any comments/suggestions will be appreciated.

She also has mutual funds and expenses have been taken out from the corresponding investments. We don't have any issue with mutual fund expenses."

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katdmin created a topic in Retirement Plans in General

Earned Income of a Non-U.S. Citizen

"A profit sharing plan has two partners paid via K-1s. They're both Canadian citizens. Their CPA says they aren't subject to self-employment income tax. Normally I would take line 14a and do all the required calculations/deductions, but if they aren't subject to taxation then do I simply use line 14a for my calcs and testing?"

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TPApril created a topic in Plan Terminations

Plan Terminated in 2018; Still Has Assets. Is Restatement Needed?

"Plan terminated in 2018. Owner still has assets and continues to file Form 5500, including life insurance. The plan still needs to be restated, correct?"

2 replies so far   |    Click Here to Add a Reply

MetsFan86 created a topic in 403(b) Plans, Accounts or Annuities

Multiple Plan Scenario: Parent Has 403(b) While Subsidiary Has 401(k)

"A 501(c)(3) organization (Org A) that sponsors a 403(b) plan with a non-elective deferral is taking control of the board of another 501(c)(3) organization (Org B) that sponsors a 401(k), also with a non-elective deferral. The preferred outcome would be to continue to maintain the plans separately because the organizations will continue to exist and operate separately.

For 401(k) testing of elective deferrals, I see 26 C.F.R. Section 1.410(b)-7(f) disregards 403(b)s for testing. Furthermore, 26 CFR Section 1.410(b)-6(g)(3) allows 403(b) plans of a 501(c)(3) organization to be excluded for 410(b) purposes. However, one of the conditions is that 'No employee of an organization described in section 403(b)(1)(A)(i) is eligible to participate in such section 401(k) plan or section 401(m) plan.'

I also found this IRS language: 

https://benefitslink.com/src/taxregs/E6-11545.html

which would seem to suggest the intent was to allow one to keep these plans separate.

As for 403(b) testing, it seems optional whether to include the 401(k) employees.

[1] Because Org B is also a 501(c)(3), would it not meet the requirement under 26 CFR Section 1.410(b)-6(g)(3)? I'm concerned that Org B's employees are eligible to participate in a 401(k), or would they be treated as separate?

[2] How does 26 C.F.R. Section 1.410(b)-7 relate to 1.410(b)-6(g)(3)?

[3] Is it correct that for the testing of Org A's 403(b) Org B's employees could be excluded? Is there more guidance on this?

[4] Because both plans include non-elective deferrals and it seems that the 403(b) employees cannot be excluded from testing for the non-elective deferral of the 401(k), is there any sense in even trying to exclude employees and avoid testing a controlled group?"

No replies yet   |    Click Here to Add a Reply

Pammie57 created a topic in Plan Terminations

Partial Plan Termination Means Full Vesting for Two Participants Who Quit?

"Client has a profit sharing plan (non-401k). He lets about 15 people go, which results in over 20% of the participants being terminated. Then two more quit within two weeks of the others being let go. The question is about the two who voluntarily quit. Are they also 100% vested or not? I have no idea if they were encouraged to quit or not."

2 replies so far   |    Click Here to Add a Reply

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