Message Boards Digest

March 4, 2022

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

Draper55 created a topic in Defined Benefit Plans, Including Cash Balance

Cash Balance Accrued Benefit at NRA -- Can It Ever Drop?

"For purposes of computing the equivalent accrued benefit at NRA in a cash balance plan, can the benefit decrease at a later point in time due to a decline in the projected interest crediting rate? Practically it will likely not matter since a participant will opt for the cash balance account value. There is no early retirement date in this plan for what it is worth. I would think it could decline,but not sure if the IRS has ever opined on this. The 411 regs were written with traditional defined benefit plans in mind so not much guidance there."

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BG5150 created a topic in 401(k) Plans

Handling an ADP Refund When HCE Has Both Roth and Pre-Tax Deferrals

"Plan is failing ADP test. One HCE getting a refund had both Roth and pre-tax deferrals during the year. What's the protocol for doing the refund? From which source(s) do you start using amounts? Is it a plan document issue? Administrative procedure? Does the participant have to make the final call? (Is that even feasible if we are coming up on processing deadlines?)"

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

Sole Proprietor's Average Comp When Pension Contribution Almost As Much as Earned Income

"Sole proprietor with no employees, business started in 2018, plan effective in 2018. This is a takeover plan. Using made-up numbers, this is what has happened each year from 2018 - 2020: earned income = $100,000; pension contribution = $99,000.

To my mind that means that 'plan compensation' is $1,000, which means that, because there is no salary history prior to the plan effective date, there are going to be a number of problems, not the least being the 415 limit because 3-year average average comp is $1,000. Am I missing something here with regard to plan compensation and 415?"

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t.haley created a topic in Distributions and Loans, Other than QDROs

Distribution in Error -- Entitled to Refund of Federal Income Tax Withheld?

"Plan custodian distributed participant's account upon his termination of employment, withheld required FIT, and issued him a 1099. Participant was a union employee and filed a grievance to be re-hired, which he won. Now he has been rehired and wants to put his money back in the plan, including the FIT withheld. The only guidance I can find says that the employer has to 'repay' the FIT withheld into the participant's account and then apply for a refund from the IRS. Thoughts?"

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

Spousal Beneficiary RMD -- Adjustment for New Tables?

"Question is relating to a defined contribution plan. Have a client who passed away in 2018, after his required beginning date. He had a spousal beneficiary who has dutifully been taking RMDs since his passing. Plan Document states that we established her annuity factor in the year that he died, then we reduce the factor by 1 every year moving forward.

Question that I can't seem to find an answer to: Whether and how the new life expectancy tables will affect her.

On the current tables, her annuity factor at age 60 (when he died) would be 27.1, but on the old table which the RMDs have been calculated previously, it was 25.2. Do we just continue subtracting 1 from 25.2 for every year that passed, or can we use the new tables, and subtract 1 from 27.1 for each year that has passed, and calculate based on that? Basically, do I use 21.2 -- or 23.1 -- as my factor for 2022 RMD?

Any citations of code would be greatly appreciated, and I looked through Pubs 560 and 575, and can't find an explicit answer. Hadn't checked the 1-401(a)(9) regs yet, as I assumed guidance would be forthcoming."

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