Message Boards Digest

February 8, 2022

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

K-t-F created a topic in Distributions and Loans, Other than QDROs

RMDs from Retirement Plan Funded Entirely with Roth Money

"I have a single member plan which is funded solely by Roth money. His CPA told him he didn't need to take an RMD because it's Roth money. In the case of an IRA, an RMD is not required as long as the owner is alive, so that seems like good advice for his IRA accounts. But I've read that, when it comes to a qualified plan, it doesn't matter whether it's Roth money or pre-tax money -- in either case, an RMD must be taken from the plan. Correct?"

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famoosemutt created a topic in 401(k) Plans

Employer Concerned About Sudden Large Increase in Employee's 401(k) Deferral Rate

"My company's plan matches 100% of employee deferrals up to safe harbor match of 3%. An employee is accelerating his deferrals, which is raising a concern that the employee plans to jump ship soon. The deferrals probably are not sustainable (20% of salary!), so the employee's goal appears to be to max out the matching contribution. ADP contributes 3% of our match to the employee's 401k. Will we be required to true-up the employee's match if the employee quits in March/April/May and has already contributed the full 3%? For example, assume the employee makes $150k per year. We've contributed $1,100 by March based upon ADP's approach. Employee has contributed the full $4,500 by March. Do we need to true-up our contribution to match that of the employee even if the employee participates in the plan for about 25% of the year?"

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Benefits Vet created a topic in Cafeteria Plans

Medication Flavoring for Children -- FSA-Reimbursable?

"A TPA told an employer that charges for flavorings added to Rx medicines (usually for kids) are not reimbursable under an FSA. Has there been any IRS guidance on this issue?"

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Ahuntingus created a topic in 401(k) Plans

$1.68 in Lost Earnings

"A client missed a 401k deposit for 1/5/2021. The total missed deferrals was $330. The lost earnings amount was $11.14. The 15% penalty is $1.68. Does the IRS have a de minimus rule for self-corrections of amount such as this one, or must the client file Form 5330 and pay the $1.68 penalty?"

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Lou81 created a topic in 401(k) Plans

410(b) Testing for Plan Having Both Safe Harbor Match and a Discretionary Match

"I have a plan with safe harbor match and discretionary match. 1,000 hour and last day requirement on the discetionary match. When running the 410(b) test, software is testing both the SH match and the discretionary match contributions as one component. But because they're actually two different money types, don't they need to be tested separately?"

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MGOAdmin created a topic in Retirement Plans in General

Can Use Self-Employment Income Earned in the Cayman Islands as Basis for Retirement Plan?

"I have a client who is a U.S. citizen and lives in the U.S. He works in the Cayman Island a few weeks a year and picks up the income on his Schedule C of his 1040. Can this income be used towards a retirement contribution? I believe it is subject to self-employment taxes."

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EBECatty created a topic in 409A Issues

Does Amount Paid for Stock Option Count Towards Exercise of the Option for Purposes of 409A Exemption?

"Does anyone know whether the price an employee pays for the grant of an option can count toward the price of the exercise of the option for 409A-exemption purposes? In other words, say employer's stock is worth $10 per share on the date it grants an option to an employee. The employee pays $9 per share for the grant of the option itself, and the price of exercise is $1 per share. A few years later, employer stock is worth $20 per share. The employee pays $1 per share to exercise the option. Under the 409A definition of 'exercise price' it seems that only the $1 is considered ('...the consideration in cash or property that, pursuant to the terms of the option, is the price at which the stock subject to the option is purchased...'). Under section 83, both the $9 paid for the grant and the $1 paid for the exercise would be part of the 'amount paid' for tax-calculation purposes. But would this blow the 409A option exemption?"

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PS created a topic in Plan Terminations

Setting Up a New 401(k) After Termination of a Profit Sharing Plan

"Plan sponsor wants to terminate a profit sharing plan and wants to set up a traditional 401k plan, possibly within 12 months' time. The sponsor will need to complete a 12-month waiting period after the last distribution before setting up a 401k plan, correct?"

2 replies so far   |    Click Here to Add a Reply

Basically created a topic in 401(k) Plans

Determining Compensation from Employment with Multiple Controlled Group Members

"I have a small plan that has a couple of companies, constituting a controlled group. The owner, of course, earns compensation from each company. When calculating the owner's contribution, the compensation used in the calculation is the total he earns from all companies, correct?"

3 replies so far   |    Click Here to Add a Reply

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