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Message Boards Digest

February 25, 2022

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

Coleboy1 created a topic in 401(k) Plans

Failed ACP Test Results in Forfeiture of Certain Matching Contributions

"A client failed the ACP Test. When calculating the refunds, the system is also calculating match forfeiture refunds. All of the people receiving refunds are 100% vested. Can someone explain to me what's happening?"

1 reply so far   |    Click Here to Add a Reply

Melissa2115 created a topic in Distributions and Loans, Other than QDROs

Calculating an RMD Before the Year's Profit Sharing Contribution is Allocated

"For a trustee-directed plan, we have historically calculated the RMDs once we've accrued the contribution. The participant's ending balance at 12/31/2021 would be equal to the actual investment balance plus their contribution receivable. A particular participant wants his RMD in January before we know the accrued contribution amount. Can we modify our methodology and calculate the RMD based on just the value of the investments going forward? We don't have the accrued contribution amount available in January."

1 reply so far   |    Click Here to Add a Reply

Jakyasar created a topic in Retirement Plans in General

Part-Timer Gets Gateway Contribution?

"Looking at a combo plan with an existing DC plan.

DC plan effective 2018 had a special entry that let in a part-time employee in 2018. This employee always worked under 500 hours.

Elapsed time method is used for all provisions (I am by no means experienced in using elapsed time).

DC plan has deferrals, non-elective SH and PS.

For PS, last day rule is required. In addition, participant must complete period of service under elapsed time -- I don't see any provisiosn as to what period is, and I will be checking with the other TPA.

Adding a CB plan for 2021 (assume all OK for top heavy) which will have 21/1 assumption with 1000 hours for eligibility and accrual.

This part-time employee will never be eligible in CB.

Cross-testing both plans.

Does the part-timer get gateway? He is in the testing because employed on 12/31 and also has 401k deferral and SH (possibly PS too). Can he be tested under otherwise exclude (the only one and non-HCE)."

8 replies so far   |    Click Here to Add a Reply

RestAssured created a topic in 401(k) Plans

Remove Roth Deferral Option Going Forward While Grandfathering a Current Participant?

"I am a TPA. I have a small employer client (5 participants) which would like to remove the Roth as an option. Currently 1 participant is making Roth deferrals. I understand that we can remove the Roth provision, but is there a way to 'grandfather' in the 1 participant who's actually using it (and eliminate it for any participants going forward)?

BTW (the story behind the question) -- there has been a lot of rigamarole in cashing out a participant who had a total of $1,300 in the plan, some of which was Roth. It has been a pain in the patoot explaining all the nuances to the accountants (ha!) and the investment advisor, as you all know, and even harder on the plan sponsor. Hence she has asked if we can just discontinue the Roth. The one participant who is still employed there and makes Roth deferrals might not be pleased if we remove it, so we're trying to allow only her to continue Roth deferrals."

2 replies so far   |    Click Here to Add a Reply

Dawn Marlar created a topic in Cross-Tested Plans

Increasing Profit Sharing Plan's Cross Tested Percentage to Pass Testing for a Participant Who Worked Less Than 1000 Hours

"There are two Company Plans, a Cash Balance Plan and a Cross Tested Profit Sharing Plan. Together the plans are Top Heavy. The cash balance allocations must be tested with the Profit Sharing allocations.

When non-discriminately testing the Cash Balance Plan with the Profit Sharing Plan, only one Participant, let's call him John, would need to have his PS percentage increased from the 5% MTH allocation (the 5% MTH allocation provided to all NHCEs passes the Gateway test) to 8.35% of compensation. This provides the minimum increase needed to pass 401a4 testing.

As stated above, the Profit Sharing Plan is X-tested and to receive a Non-Elective PS allocation, the Plan Document has a 1000 hour and last day requirement. Even though John was there on the last day of the plan year, he only worked 600 hours during 2021.

Can John receive a NE contribution greater than the 5% of compensation MTH contribution in the PS plan, or do I need to increase another Participant’s PS allocation that did work 1000 hours and was there on the last day of 2021 to pass 401a4 testing?"

3 replies so far   |    Click Here to Add a Reply

Ken_BenefitScape created a topic in 401(k) Plans

401(k) Payroll Missed 3 Loan Repayments of $57.02

"Small $ when using Calculator... de minimis. Using VCFP Model Form. Is there a fee required? Is Form 5530 Required?"

No replies yet   |    Click Here to Add a Reply

PensionPro created a topic in 401(k) Plans

Nondiscrimination Testing for Amendment Permitting Early Entry Into 401(k) Plan

"The plan allowed 1 HCE and 2 NHCEs to enter the plan prior to satisfying the eligibility requirements. My understanding is that the amendment needs to pass 401(a)(4). Who do we include in the 401(a)(4) test -- eligible employees, or ineligible employees?"

2 replies so far   |    Click Here to Add a Reply

Logan401 created a topic in Cross-Tested Plans

$0.00 Allocations?

"The plan has each participant in their own allocation group. Is it okay to allocate $0.00 to NHCEs and $0.00 to HCEs and test them on an accrual basis, and test the NHCEs and HCEs receiving the same flat dollar amount on a contribution basis providing that the ratio testing passes?"
6 replies so far   |    Click Here to Add a Reply

52626 created a topic in 401(k) Plans

QACA Plan

"Employer currently offers a 401(k) Plan, no match. Vendor has recommended QACA for the 1/1/2023 Plan Year. Question - When setting up the QACA, I know you can not elect that the Automatic Deferral percentage does not apply to existing participants. If a participant is currently deferring 0% and there is a affirmative election showing they declined, does this mean the 3% QACA does not apply to this participant? The employer has about 40 employees currently not deferring, I am trying to figure out if the addition of the QACA means this group is swept up in the Auto Enrollment unless they make an affirmative election not to participate. Thanks"
3 replies so far   |    Click Here to Add a Reply

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