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Message Boards Digest

February 16, 2022

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

TPApril created a topic in 401(k) Plans

Titling S/D Accounts When Company Name Always Changing

"Professional services firm where participants have their own accounts with the broker-dealer. Partners always changing, firm name always changing. How important is it that the trustee name be updated?

2 replies so far   |    Click Here to Add a Reply

Ananda created a topic in Correction of Plan Defects

Late Plan Contributions and DOL VFCP?

"A client of less than 100 participants made late plan contributions in 2020, meaning participant elected deferrals were deposited into the plan a few days after 7 business days. This was reported on Form 5500 and only involved around $10,000 in total late contributions with lost earnings and interest calculated to be around $80. The DOL sent the client a letter suggesting use of the DOL Voluntary Fiduciary Correction Program to correct the error. My understanding is that given the late plan deposits, the 4975 excise tax of 15% would be calculated on the lost earnings of $80 not on the $10,000. Therefore, if the excise tax is only around $14 why not just pay the excise tax on the Form 5330 and not bother with a VFCP application? The counter argument is that by filing VFCP the plan would avoid a DOL investigation over the matter and the VFCP filing and resolution would satisfy the IRS. Any thoughts or suggestions?"

11 replies so far   |    Click Here to Add a Reply

Bri created a topic in Retirement Plans in General

Can a KSOP Have Late Deferrals?

"If a KSOP plan holds all the stock to the sponsoring company, then if late deferrals are still commingled with the sponsor's general assets... what consequences, if any?"

2 replies so far   |    Click Here to Add a Reply

DJL created a topic in Correction of Plan Defects

Empoyee Missed Opportunities for Deferrals and for Roth Contributions; Separate QNECs Required by Rev. Proc. 2021-30?

"I work for a TPA firm. We have a client who missed offering its 401(k) plan to one eligible employee for 2021 and will be making a QNEC for the missed deferral opportunity under Rev. Proc. 2021-30.

The client's 401(k) plan is not a safe-harbor plan. It permits pre-tax deferrals, Roth contributions, catch-up contributions. It does not permit after-tax contributions (other than Roth contributions). It is a deferral-only plan so does not have a matching contribution.

The conditions are met to use the safe-harbor correction method for elective deferral failures that exceed 3 months but do not exceed the SCP correction period. (Appendix A, Section .05(9).) The employer will make a QNEC equal to 25% of the missed deferral for this eligible employee. This employee is not catch-up eligible.

The question: does Rev. Proc. 2021-30 require a QNEC for the pre-tax contribution and another QNEC for the Roth contribution? I think it does, but my colleagues do not.

The eligible employee is a non-highly compensated employee. The average of the ADP for the group of non-highly compensated employees is 2.25%. Since the plan permits both pre-tax contributions and Roth contributions, I think that the employer makes a QNEC of .5625% of this employees' 2021 compensation for the missed pre-tax contribution and a QNEC of .5625% of this employee's 2021 compensation for the missed Roth deferral. (Compensation as defined in the plan document.) Do you agree?"

2 replies so far   |    Click Here to Add a Reply

SM created a topic in Retirement Plans in General

Self Employed Paired Plan with Possible After-Tax Contribution for Use with Roth Conversion

"I have a self employed client that has DB/DC combo plan. They are maxing out their deferral and contributing 6% to the profit sharing account and putting $200k into the DB plan. He asked if they can also contribute after-tax money with the intent of a Roth conversion. For example:

  • Client is 58
  • Client's earned income is $800,000
  • He contributes $27,000 in 401(k) deferrals
  • The company makes a 6% Profit Sharing on $305,000 or $18,300
  • The company makes a defined benefit contribution of $200,000

Can he contribute an additional after-tax contribution to the 401(k) plan of $22,200 ($67,500 - ($27,000 + $18,300))?"

2 replies so far   |    Click Here to Add a Reply

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