Message Boards Digest

January 13, 2022

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

M Norton created a topic in Distributions and Loans, Other than QDROs

How to Fix Missed Loan Payments When No Paychecks to the Participant-Owner of S Corp Sponsor?

"S-Corp sponsors a SH 401(k) plan which allows for deferrals, SH match and discretionary PS contributions, and plan loans. 100% shareholder in S-Corp took out a $50,000 plan loan in late 2019, with payments from bi-weekly payroll beginning January 2020. All loan payments were deducted from shareholder's pay in 2020.

In 2021, due to cash flow problems, shareholder did not receive several paychecks. He missed paychecks for 10 of 26 pay periods in the year. For the pay periods in which the shareholder did not get paid, no loan payments were withheld for those pay periods. (There was at least one loan payment withheld from his pay in each calendar quarter.) In addition, due to cash flow problems, the S-Corp did not remit any withheld loan payments to the retirement plan after January 2021. (All 14 loan payments withheld in 2020 but not previously remitted were remitted to the plan in January 2022.)

In March, 2021, the shareholder sent a personal check for $20,000 payment on the loan. The plan is on document and allows for such additional payments although it does not allow for refinancing. What are the options to fix this situation? Can the $20,000 be used to satisfy the loan payments that were missed because no paycheck was issued? Is it possible to avoid a deemed distribution? What are other issues that need to be addressed (other than educating the shareholder about missing loan payments)?"

4 replies so far   |    Click Here to Add a Reply

VeryOldMan created a topic in 401(k) Plans

Cycle 3 IDP Plan Restatement Issues with Corbel/FIS Plan Documents for 401(k) Plans

"Our firm has been using Corbel docs for years. FIS took over a few years ago. In doing the amendment process from PPA plan documents to Cycle 3 plan amendments, FIS has a cool way of converting the checklists so you can quickly restate plans for cycle 3 without having to go back and enter each checklist question. We use the IDP form of plan document, so we're going from a IDP PPA plan doc to the IDP Cycle 3 amendment. After running several plans through the process, we found numerous syntax errors in their cycle 3 document. I discussed this with FIS back in November but they have yet to correct the problem. Is anyone else using FIS documents for the IDP format ( one single plan document) and are you having a similar problem? If so I would like to know your experience with FIS and what I can do to resolve this. I suppose I could switch to a non-IDP document format but that would not be our first choice."

No replies yet   |    Click Here to Add a Reply

ACK created a topic in 401(k) Plans

Missed the Date for Enrollment in 401(k) Deferrals

"If a plan has semi-annual entry dates, January 1 and July 1, and a participant does not enroll on January 1, can they still sign up for the plan later in January because the plan allows contribution changes at any time? The reasoning would be that the individual is changing from 0% to 5% (or whatever), which is allowed any time. Or would 'contribution changes' refer to something other than changing from 0% deferrals?"

2 replies so far   |    Click Here to Add a Reply

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

Terminating a PBGC-Covered Cash Balance Plan: A Few Participants Are Missing

"We're in the process of distributing benefits from a small Cash Balance Plan that is covered by the PBGC. Two participants who have lump sum benefits less than $5,000 cannot be located. The plan allows for automatic rollover of small benefits. Can we roll over the lump sum to an IRA for the two participants that cannot be located or do we have to go through the missing participant program with the PBGC?"

4 replies so far   |    Click Here to Add a Reply

Belgarath created a topic in Correction of Plan Defects

Oops, In-Service Withdrawal Was Not Authorized in the Plan Document

"So, the 100% owner, who is over age 65 (NRA), takes a distribution from the plan. Problem is that the plan does NOT permit in-service distributions, even at NRA.

I THINK this overpayment can be corrected under SCP with a retroactive amendment to conform plan terms to the operation of the plan. I haven't delved deeply into Rev. Proc. 2021-30 yet -- just going from memory. But I wonder if anyone has dealt with this recently and has an opinion?

P.S. It appears that it would otherwise be allowable under 6.06(4)(a), which refers you to 4.05. Under 4.05(2)(a)(i) and (ii) -- it appears it satisfies '(i).' My only 'squeamish' issue is whether it satisfies (ii) because it's due to the impermissible distribution to a HCE. It would be available to NHCE's as well, but the only current correction would be for a HCE."

6 replies so far   |    Click Here to Add a Reply

Peter Gulia created a topic in Plan Document Amendments

Any Plan Document Vendor Selling a Puerto Rico Hacienda-Preapproved Retirement Plan?

"Does any vendor of IRS-preapproved plan documents offer a version that is similarly Hacienda-preapproved to meet Puerto Rico’s tax-qualification conditions? If any, is it available with IRC § 401(a)? with IRC § 403(b)? If not available as a dual-qualified document, does any vendor offer a document on which Hacienda issued a preapproval letter so a user may rely without submitting its own application?"

No replies yet   |    Click Here to Add a Reply

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