Message Boards Digest

February 14, 2022

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

MarkS created a topic in Correction of Plan Defects

QNECs Become Source for Hardship Withdrawals But Participants Never Notified

"Plan was amended to allow for QNECs as hardship source, but they weren't offered as a source to participants. Plan's only QNECs were two years of safe harbor contributions from 5 or 6 years ago. Only one participant requested a withdrawal of the maximum amount available. Can we treat as an operational error and allow a withdrawal now?"

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Silver70 created a topic in Cafeteria Plans

What to Do with Uncashed FSA Checks?

"We have outstanding FSA reimbursement checks through our third-party administrator from current and former employees. These are reimbursement checks that have been sent to the employee but the employee has not cashed them. These go back for years, and involve employees who no longer work for us. Some may be deceased. What are the options?

  1. Are we able to put a time limit on these, and if they do not cash a reimbursement check that they forfeit the reimbursement?
  2. Reissue the checks? But we would have no way of knowing whether the employee’s address is current, so it could just be another check written that goes uncashed.
  3. Is there a point where the TPA writes off the uncashed funds and returns the funds to us?
  4. Are there any IRS regs that address this?"
No replies yet   |    Click Here to Add a Reply

BG5150 created a topic in 401(k) Plans

What If a Participant Questions the Amount of an ADP Refund?

"What if a participant questions his ADP refund? What if he says to the employer: 'Prove to me my refund is correct.' What would the employer do?"

11 replies so far   |    Click Here to Add a Reply

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

Payment of Disability Benefits to 5% Owner under a Cash Balance Plan

"I'm having my first disability request in my entire career. It's a bit challenging to understand.

This is for a cash balance plan, 2 years old. Document has a few options for benefits but do not see 'lump sum.' The only other option could be under 'Other.' (I'm checking with the vendor.) The participant is an owner/HCE and unfortunately doesn't have not much time left to live. Hence he's not coming back to work. He is age 63+. He meets all the requirements for being considered as disabled, and is currently on disability. He's still part of the company, however -- i.e., not officially terminated. (At least that's what I've been told.) He's still a 5%+ owner but no salary. No interest credit as provided annual at EOY. It's a fixed rate so no interim adjustments. From all the material I could find, it looks like, the plan can pay him his lump sum now? Agree? He's already 100% vested. But because he's an HCE, I still have to perform 110% test, correct? Anything else I am not thinking of/missing?"

4 replies so far   |    Click Here to Add a Reply

Will.I.Am created a topic in 401(k) Plans

Gross-Up a Partner's Earned Income by After-Tax Employee Contributions?

"Partnership is husband and wife. No employees. Hence it's a "one-participant" plan per the definition. We started a 401(k) plan for them in 2021 and we're trying to max out their contributions to $58,000 each using elective deferrals, profit sharing and after-tax employee contributions. The husband's self-employment income on his K-1 was $120,189 and the wife's was $118,664. They each want to make a $19,500 elective deferral and a maximum profit sharing contribution and then they want to max the rest with after-tax employee contributions that we will convert to Roth immediately after funding using an in-plan Roth rollover.

I know you can "gross-up" earned income by the amount of their elective deferrals when calculating what their 415 compensation is and also when calculating the deduction limit. However, do the after-tax employee contributions reduce earned income for these purposes?

I would think you would treat them the same as elective deferrals and these contributions would come out of earned income, not reduce it. My software is reducing earned income by the amounts of after-tax employee contributions and it is making my deduction limit lower and forcing my profit sharing contribution to be less."

8 replies so far   |    Click Here to Add a Reply

thepensionmaven created a topic in Retirement Plans in General

Limited Partnership as a Plan Investment

"Strategy goes back to the '80s. Recently took over a client with profit sharing plan, owner and employee are the only two participants. Employee's funds are with a mutual fund only; portion of the owner's funds are invested in a limited partnership. I know an independent appraisal is needed, but would the whole partnership be part of the plan's investments, or just the ratio of the original investment to the total? Prior TPA used the full value."

1 reply so far   |    Click Here to Add a Reply

khn created a topic in Mergers and Acquisitions

Merge Plan of 'Acquired' Company Into 60% 'Parent'?

"A large company is acquiring 60% ownership of a small firm. The firm is keeping their own EIN and will operate as an indenpendent subsidiary. Employees will remain employees of the small firm but will be put on the benefits of the large company. Can the small firm's 401(k) be merged into the larger company's plan or does it need to stay separate? Are there any pitfalls to merging it into the larger plan?"

1 reply so far   |    Click Here to Add a Reply

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

Mistaken Continued Payment of Retirement Benefits After Death of Participant; Offset Against the Death Benefit?

"A participant who was in pay status died almost five years ago. His death was not reported and did not show up in the defined benefit plan's monthly death audits, so the plan continued to pay his monthly benefit and the participant's spouse continued to cash the checks. This error came to the plan's attention recently when the spouse called to ask that the name on the checks be changed from the participant's name to the spouse's name (!). The spouse is the sole beneficiary under the plan of the J&S annuity. The TPA is asking whether it can offset the overpayment to the participant by the underpayment to the spouse, or reduce the future amount of the spouse's benefit to recover the overpayment. It would seem to me that the answer is no. Even if the spouse was also the sole beneficiary of the participant's estate and received the checks made out to the participant, it would seem to me that we still have to address the operational errors separately: (1) an overpayment to the participant (the participant's estate) and (2) and underpayment to the beneficiary (the spouse). What do you think?"

4 replies so far   |    Click Here to Add a Reply

Dave Baker created a topic in Using the Message Boards (a.k.a. Forums)

What Do You Get Out of Your Participation on These Message Boards?

"I'd like to write up an article -- prolly six or seven paragraphs -- to attract new participants on these message boards. I'll advertise it on the daily and weekly BenefitsLink newsletters. What is it about the message boards that causes you to participate -- i.e., to ask questions and post reply/answers? What have been the benefits for you? Also, if you'd rather write the article instead (or co-write it), I'd be delighted to have a volunteer!"

2 replies so far   |    Click Here to Add a Reply

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