Message Boards Digest

January 21, 2022

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

M Norton created a topic in 401(k) Plans

Change in a Complex Controlled Group -- Effect on One Company's 401(k)

"4 companies (S-corps) are part of a controlled group and sponsor/participate in a safe harbor 401(k) PSP with 1 year eligibility and monthly entry dates. Effective January 1, 2021, one of the companies changed ownership and is no longer part of that controlled group of companies. Their employees that were participants as of 1/1/2021 are still participating in the plan. They actively deferred in 2021 and have received a match. The plan's profit sharing allocation has not yet been deposited. The company that changed ownership, Company A (S-corp), identifies with business code 484120 (general freight trucking long distance). There are 5 owners -- 3 of which own 26% each and the other 2 each own 11%. This same 5 owners also have identical ownership in another company (a partnership), Company B, that identifies with the same business code. Company B has a SIMPLE Plan effective July 1, 2020 with full eligibility and the 3% match election.

[1] Does the existing 401(k) plan need an amendment to add Company A as an unrelated participating employer effective 1/1/2021, effectively making it a MEP? [2] Do Company A and Company B form a new control group? If yes, then how do they sort out the 401(k) plan that Company A currently has and the SIMPLE plan Company B currently has for both 2021 and now 2022?"

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metsfan026 created a topic in 401(k) Plans

Exclusions from Compensation in Plan Document

"Generally when we put in exclusions from compensation in the document we state specific items to be excluded. I have a client that basically wants the document to state that compensation excludes 'All Non-Base Compensation.' Would this type of generalized exclusion be acceptable to the IRS? The software would support it, under the 'Other' exclusion option."

8 replies so far   |    Click Here to Add a Reply

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

Treatment of Unvested in Multiemployer Plan Withdrawal

"A client has chosen to withdraw from a union MEP and wonders how other employers in this situation have addressed the loss of potential future benefit to unvested participants. Has anybody had this experience / negotiated with a union to address some recompense?"
2 replies so far   |    Click Here to Add a Reply

Pammie57 created a topic in 401(k) Plans

Nonprofit Employer Trying to Choose New Plan: 401(k) vs. 403(b)

"We have a client that is a non-profit organization with a 401(k) plan. I know they could have either type of plan: 403b or 401k.They want a nutshell reason why a 401k is better than a 403b or/an explanation of the primary differences in the two. Does anybody have a concise answer or opinion on this. They don't have many participants yet."

4 replies so far   |    Click Here to Add a Reply

Basically created a topic in Form 5500

Can Use Form 5500-EZ If Non-Owner Employees Never Eligible (Fewer than 1,000 Hours)?

"For a business to be eligible to file a Form 5500-EZ, can the business have employees when none of them is eligible due to the eligibility requirement? Case in point, summer camp where counselors all work less than 1,000 hours. Only the owners (husband and wife) work 1,000+ so only husband and wife are participants."

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PS created a topic in Plan Terminations

New 401(k) Plan Is a Successor Plan Even If Different EIN Used?

"Looking for guidance on a successor plan. I understand that, if a 401k plan is set up/exists from another plan's termination date until the date that is 12 months after distribution of all assets, the new plan can be considered a successor plan. But what if a new EIN is used? Can an employer set up another 401k plan during that time period that has a different EIN, and thereby avoid the successor plan rule?"

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B21 created a topic in 401(k) Plans

In-Plan Roth Transfers

"I have a client who received an in-plan Roth transfer election form from a participant on 12/27/21. The request was submitted to Nationwide the custodian on the same day. All participant contribution sources are record-kept in the Nationwide account. No transfer of funds from outside of Nationwide. Nationwide shifted the funds from pretax source to roth on 1/3/22. Is there any guidance available that would allow the conversion to be taxed in 2021 as requested by the participant even though Nationwide will be issuing a Form 1099R for 2022? I reviewed notices 2013-74 & 2010-84 which say taxed in year of receipt or year of conversion. Can one argue that the conversion occurred at the time of the election?"

1 reply so far   |    Click Here to Add a Reply

thepensionmaven created a topic in Retirement Plans in General

Vesting from Effective Date of the Plan

"I'm setting up a DB and 401(k) for a prospect. All employed on the effective date enter the plan on the effective date. Anyone hired after, they enter after 12 months of service. Vesting service will start to be counted from the effective date of the plan. DB vesting schedule will be 3 year/100%, but the PS will use 2/20. I recall a thread that said this isn't allowed. What do you think?"

1 reply so far   |    Click Here to Add a Reply

Santo Gold created a topic in Retirement Plans in General

Compensation Definition in 401(k) Plan: Moving from W-2 to 'Guaranteed Payments'

"We have a pretty straightforward small 401k plan (about 6 participants) that uses W-2 wages for plan compensation. The owner wants to transition from W-2 wages to providing 'guaranteed payments' to all employees. I am not certain I completely understand what this involves but he says they can withhold 401k contributions before making the guaranteed payments. But do guaranteed payments also have federal/state/local taxes withheld before being paid? If not, can these wages still be used for 401k plan purposes? Any advice on what questions we should be asking would be greatly appreciated."

1 reply so far   |    Click Here to Add a Reply

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