Message Boards Digest

November 22, 2021

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

Plum created a topic in 457 Plans

Death Benefits in 457(b) Top Hat Plan

"Participant started installment payments in a 457(b) top hat plan (tax exempt employer), and then the participant died. The beneficiary is asking about options. Does the beneficiary need to continue the installments (assuming they meet RMD rules)? Or can they choose to take a lump sum distribution?

My concern is the language in Treas Reg 1.457-7(c)(2)(iv) since payments under the ppt's election started. Thanks!

(iv) Election as to method of payment. An eligible plan of a tax-exempt entity may provide that an election as to the method of payment under the plan may be made at any time prior to the time the amounts are distributed in accordance with the participant or beneficiary's initial or additional election to defer commencement of distributions under paragraph (c)(2)(ii) or (iii) of this section. Where no method of payment is elected, the entire amount deferred will be includible in the gross income of the participant or beneficiary when the amounts first become made available in accordance with a participant's initial or additional elections to defer under paragraphs (c)(2)(ii) and (iii) of this section, unless the eligible plan provides for a default method of payment (in which case amounts are considered made available and taxable when paid under the terms of the default payment schedule). A method of payment means a distribution or a series of periodic distributions commencing on a date determined in accordance with paragraph (c)(2)(ii) or (iii) of this section."

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DDB BN created a topic in 401(k) Plans

Questions About Using a Qualified Replacement Plan to Soak Up Excess Assets in Terminating DB Plan

"DB plan terminated and excess assets will be transferred to the 401k PS Plan (QRP).

[1] Must the excess assets be allocated in the QRP based on 1/7th of the excess each year, or can the allocation be an amount based on desired allocation by Plan Sponsor even if less in each year?

[2] Can the allocation be based on new comp 401(a)(4) method with the owners at 415 max and the employees at minimum to pass testing? Or must employees receive allocation at 415 max as well?

[3] If there are excess assets at the end of the 7th year, must all participants receive an allocation up to 415 limit before refund of remaining excess at 20% excise tax? Continue to allocate until all excess funds depleted or QRP terminates? In 7th year, allocate based on new comp max for owners / min for others and refund remaining excess?

[4] Can excess assets in the QRP be used to pay plan expenses?"

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BG5150 created a topic in Correction of Plan Defects

Missed Deferrals Due to Failure to Implement an Employee's Election; What About Matching Contributions?

"Company missed a deferral opportunity for one employee. Failure to implement an employee election. Correction is 50% QNEC. I get that.

But to make up the match, it's:

'(c) Missed opportunity affecting matching contributions. In the event of failure...if the employee would have been entitled to an additional matching contribution had either the missed deferral or after-tax employee contribution been made, then the Plan Sponsor must make a corrective employer nonelective contribution for the matching contribution on behalf of the affected employee, or a corrective QNEC in the case of a August 2, 2021 230 Bulletin No. 2021-31 safe harbor plan under § 401(k)(12).'

What does 'nonelective contribution for the matching contribution' mean? Is it a convoluted way of saying it has to just be a match? If not, what kind of nonelective contribution?

This is NOT a safe harbor plan, so it won't be a QNEC."

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Scott A. Davis created a topic in Communication and Disclosure to Participants

Broker Compensation Disclosure - Covered Plans? Voluntary Critcal Illness, Vol. Cancer, Vol. Hospital Indemnity

"NAHU and others have stated ERISA Sectioin 733 (a) defines group health plan to include Dental and Vision for disclosure purposes. Is anyone aware if the volunatary group products CI, Cancer, and HI in the title are also included in the defined covered plans? Not purely list billed Individual CI, Cancer, HI plans. So far no one has been able to answer this, but each covers medical care and are sold to Groups via payroll pre-tax reduction under Section 125 Plan, so they are included in ERISA Plan Documents. Thanks in advance"
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jmartinrps created a topic in 401(k) Plans

Patriot Act Requires Custodians to Collect SSNs of All Plan Trustees?

"Have a 401k PSP where the doctors have investments in different brokerage firms (Schwab, Fidelity, etc.). This plan recently voted to update their trustee listing to incorporate all 12 current owners. An advisor for another doctor at the company advised the plan sponsor that all 12 trustees must report their SSNs and DOBs to Fidelity (the custodian of that particular doctor's assets) due to the Patriot Act. I tried researching the Patriot Act and did not have any luck. Is the advisor correct?"

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GettinTheShaft created a topic in Qualified Domestic Relations Orders (QDROs)

QDRO to 'Attach' Disability Pension for Spousal Support, Not as Community Property

"I was granted disability retirement in 2000 by Marin County, California. Then married in 2008. And divorced in 2019. The court ordered spousal support be attached by QDRO, which I opposed and basically had no choice and they pushed it through. The order was never signed by me, went to administrative person, and they approved it without a dollar amount or percentage to be paid or the number of payments or time period to which the order applies which are required.

The ERISA specifically spells that out. Did the plan administrator unlawfully qualify this DRO? If so what can I do?

They never even sent a joinder in person to my court appearance. Just submitted a letter at the last hour on the last day. I feel like the plan administrator dropped the ball on this and qualified a DRO that did not meet the requirements set forth by ERISA. This has basically made me homeless and is pretty disgusting."

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Santo Gold created a topic in Distributions and Loans, Other than QDROs

Is an RMD Required in This Scenario?

"A >5% business owner, still working, turned 70-1/2 in 2019 and took an RMD in 2019. He did not take an RMD due to the waiver in 2020. In early 2020 he sold all of his ownership shares but continues to work. For RMD purposes, is he still considered a key employee who would need to take an RMD in 2021? Would the RMD requirement for him change in any future years if he continues to work?"

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metsfan026 created a topic in 401(k) Plans

Auto-IRA Mandate in New York State as Applied to Employers with Newly Adopted Plans

"Is anyone familiar with the auto-IRA mandate recently signed for New York? I know it says that if you're already providing a retirement plan then you're exempt from the mandate. But if an employer were to install a plan today, would it be exempt from the mandate?"

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

Reamortization of a COVID Loan -- Does 5 Become 6?

"Maybe I'm losing my marbles, but wouldn't the outstanding balance of a loan as of the date the participant stopped payments be reamortized with an additional one year? So a 5 year would now be a 6 year loan? That's what the recordkeeper for a plan is telling the client."

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