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Message Boards Digest

March 10, 2022

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

Rose created a topic in 401(k) Plans

HCEs Declined Regular Employer Match Despite Eligibility Under Plan Document

"We have a smaller plan where the owners (only HCEs in the plan) decided not to put in the regular match for themselves but did fund for all of the NHCEs. Per the plan document, everyone is eligible for the match and the formula is discretionary each year. Because the plan document does not specifically exclude the HCEs from the match, aren't they required to receive it even though they are HCEs?"

2 replies so far   |    Click Here to Add a Reply

Jakyasar created a topic in Retirement Plans in General

PBGC Covered -- or Not?

"I own Company A 100%. No employees. I'm not on the payroll. Company A owns Company B 100%. Company B employs me and my spouse. We both get salaries. Company B sets up a DB plan sponsored by Company B only. Is the DB plan covered by PBGC? None of the companies are professional entities."

4 replies so far   |    Click Here to Add a Reply

thepensionmaven created a topic in Retirement Plans in General

Entry Date In Overlapping Years Situation

"Participant hired 1/20/20. Eligibility computation period 1/20/20-1/19/21 - 1,000 hours minimum. Overlap is 1/1/21-12/31/21, when she worked 870 hours. Plan defines eligibility for contribution as 1,000 hours OR last day. I think she is eligible 1/1/21, and because employed on last day of the year, must receive a contribution. Agree?"

7 replies so far   |    Click Here to Add a Reply

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

SAR/AFN Required for Plans Adopted After Year-End?

"If we do not file a 2021 Form 5500 for a plan adopted after year-end, is the plan still required to distribute an AFN or SAR (whichever applies) to Participants? It wouldn't make sense to distribute a summary of a 5500 that isn't being filed, but I haven't seen this addressed specifically."

1 reply so far   |    Click Here to Add a Reply

Tax Cowboy created a topic in Employee Stock Ownership Plans (ESOPs)

Statute of Limitations as Applied to an IRS Retirement Plan Audit

"Early 2020 (after a 3-year IRS audit of ESOP and related entities), IRS issues NOD (Notice of Deficiency) stating the retirement plan is not qualified.

Plan years under audit: 2011-2018.

Due to Covid and a number of other factors, US Tax Court case is still pending.

One of our arguments is that the plan was disqualified per the IRS NOD and that the IRS erred for a variety of reasons. Fast forward to this past week, gov't counsel calls and states that it's now the gov'ts position that the plan was never disqualified.

If the plan was never disqualified for the 2011-2018 tax years, and the 2017 5500 return was filed July 2018, is there any argument that a 3-year statute of limitations has run out for the 2011-2017 tax years? The 3-year statute of limitations would have run out in all tax years except 2018. It's been my understanding that for the IRS to use the 6-year statute of limitaitons the burden of proof would then shift to them.

Or does the IRS have carte blanche until they finish their audit even after 6 years?"

1 reply so far   |    Click Here to Add a Reply

metsfan026 created a topic in Defined Benefit Plans, Including Cash Balance

Maximum Pay Credit Per Year under a Cash Balance Plan?

"Can someone please direct me to the regulations that state what the maximum pay credit per year can be in a Cash Balance/Profit Sharing combo plan? Taking over another case where they added the owner's spouse onto the plan, and the 401(k) + Profit Sharing + Cash Balance credit exceeds the salary they are giving her. Just wanting to make sure what they were doing is OK (they're the only two participants, so there aren't as many testing issues)."

3 replies so far   |    Click Here to Add a Reply

PS created a topic in Plan Terminations

Huge Balance in Forfeitures Account at Date of Plan Termination

"A plan is terminating because the company is closing. The balance in the forfeiture account is $843,650.03 (!) Per the plan sponsor, they discussed this with counsel and was advised to return the funds to the company (employer). The owner was never involved with the administration of the plan. The employee who was handling it is no longer with the company. The owner is the only one left, and wants to close the plan because the company is closing. The huge amount is because there were participants who had forfeited the funds since 2014, however no part forfeited the unvested amount during the plan termination because the plan was made 100% vested as of the termination date 01/31/2022. The funds seem to have just accumulated, which is a operational defect.

  • There are no forfeited checks
  • No outstanding checks
  • The forfeiture in the forfeiture in only the employer match

The plan sponsor and they counsel have advised to return the funds to the company. I've never seen such as huge amount in a forfeiture and because they are asking to return the funds is it something doable? Is there any exceptional clause (IRS) since they have submitted the letter from counsel is there anything that we will need to look into/consider from compliance perspective?"

5 replies so far   |    Click Here to Add a Reply

PS created a topic in Plan Terminations

How to Use a Form 1099-NEC at Plan Termination?

"I've never come across a Form 1099-NEC. Can anyone provide me little detail on this and how this is applicable for a 401k plan at the time of its termination?"

2 replies so far   |    Click Here to Add a Reply

metsfan026 created a topic in Defined Benefit Plans, Including Cash Balance

Contribution Conundrum -- Minimum Greater Than Maximum?

  • Total Normal Cost (which is the minimum contribution) - $120,000
  • Maximum Deductible Contribution - $25,000 (due to positive asset performance)

So, does this mean that they can't deduct the entire contribution or can they still take just the required minimum contribution and nothing more?

4 replies so far   |    Click Here to Add a Reply

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