Message Boards Digest

November 17, 2021

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

BG5150 created a topic in Retirement Plans in General

Is IRS Website Wrong in Explanation of Top Heavy Minimum Contribution Requirement?

"Or, at least I think the site is wrong in this case.

On the page 'Is my 401(k) Plan Top-Heavy?' (, under the section titled 'Making Minimum Contributions...' it says: 'If the average contribution for all key employees is less than 3%, non-key employees also receive that lower percentage instead of 3%.'

I don't believe it's the average contribution for all key employees -- instead, it's the the highest Key Employee's contribution that counts.

If I have one Key Employee with a contribution of 2.5% and another with 1.5%, the TH minimum would be 2.5%, not 2%. Agree?

So who do I contact at the IRS to ask about it? (Or am I really wrong? I consulted Treas. Reg. sec. 1.414-1, M-7, and the ERISA Outline Book, Chapter 3B, Sec. IV, Part A.2. Both of those seem to agree with my position."

7 replies so far   |    Click Here to Add a Reply

Peter Gulia created a topic in Plan Document Amendments

Do Your Clients' Plans Require a Minimum Distribution After Age 70-1/2 (Not 72)?

"Do your clients' plans still require a minimum distribution after age 70½ (not 72)?

In BenefitsLink discussions, many commenters observe that a plan administrator must obey the plan's governing documents, even if a document's provision is more restrictive than what's needed for the plan to tax-qualify.

Imagine this not-so-hypothetical. A section 401(a) plan's sponsor completed its Cycle 3 restatement, using its TPA'ss current IRS-preapproved documents. Those documents state the plan's minimum distribution provisions, with no update for the SECURE Act. And instead of specifying the required beginning date by reference to Internal Revenue Code Section 401(a)(9)(C), the basic plan document's definitions section states: 'Required Beginning Date means April 1 of the calendar year following the later of the calendar year in which the Participant attains age 70-1/2 or the calendar year in which the Participant retires[.]' Although the adoption agreement allows a user some choices about the required beginning date, all those choices refer to age 70-1/2. Nothing in the documents package suggests one must or may read 70-1/2 as 72. Assume the plan's sponsor has made no governing document beyond using the IRS-preapproved documents package.

Imagine a severed-from-employment participant had her 70th birthday on June 1, 2021. Must the plan's administrator begin her distribution by April 1, 2022? Or may the administrator interpret the plan not to compel a distribution until April 1, 2024?

Would you (or could you) interpret the plan's governing documents so the required beginning date is no sooner than as needed to meet section 401(a)(9)(C), and so turning on age 72?

If you might, what is your reasoning about why that's a reasonable interpretation of the plan's governing documents?"

1 reply so far   |    Click Here to Add a Reply

Biz Develop Consultant BJF created a topic in 401(k) Plans

Controlled Group Wants Two Plans -- OK to Use Different Safe Harbor Designs?

"We have a prospective client that is a controlled group and wants to set up separate plans. They were hoping to avoid a Safe Harbor option on Plan 2, which we advised is not permissible. So I was thinking SH match (100% on 4%) for Plan 1 and for Plan 2 a QACA match. This provides SH benefits for both employers but a vesting schedule can be applied to Plan 2. Am I missing something?"

1 reply so far   |    Click Here to Add a Reply

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

RMD for 9/30 Fiscal Year Plan -- Must Use 12/31 Account Balance?

"For a September 30 FYE plan, when calculating the RMD can/do you use the 9/30 balance, or do you need to determine the 12/31 balance and calculate the distribution based on that calendar year end balance?"

5 replies so far   |    Click Here to Add a Reply

BG5150 created a topic in Form 5500

OK to Use Form 5500-EZ for Sole Proprietor Whose Plan Still Has Account of Former Partner?

"Company formerly had two partners. One left in 2015, so now it's just a sole proprietorship. The former partner continues to have an account balance, however. Can the company file a Form 5500-EZ?"

No replies yet   |    Click Here to Add a Reply

BG5150 created a topic in Correction of Plan Defects

Late Deposits -- Start the Interest Calculations on Which Day?

"What date do you use as the start to determine how late the deposit was? The payroll date, or the end of the 7-day safe harbor? For example:

Pay date: Jan. 4, 2021

Seven day safe harbor: January 13, 2021

Deposit date: January 15, 2021

Do you use Jan. 4 as the starting date for interest calculations (9 days late) or January 13 (2 days late)?"

5 replies so far   |    Click Here to Add a Reply

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