Message Boards Digest

April 4, 2022

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

Jakyasar created a topic in Retirement Plans in General

What Is W-2 Salary for Pension Purposes?

"This is for 2021

W-2 box 1 100,000

W-2 box 5 90,000

W-2 box 14 - other - 2%

SH 10,000 - this is the difference between box 1 and box 5

What is the 2021 salary for pension purposes? "

13 replies so far   |    Click Here to Add a Reply

Bird created a topic in Retirement Plans in General

PT When Father Provides Paid Investment Services to Son's Plan?

"Is it a prohibited transaction if father provides investment services to son's plan and receives compensation?"

3 replies so far   |    Click Here to Add a Reply

cheersmate created a topic in Cross-Tested Plans

Safe Harbor Matching 401(k) - Bifurcate Testing?

"16 participant plan - 4 HCEs (2 older husband+wife, 2 teenage sons of owners, 18 and 16) and 12 NHCEs (various ages)

Plan provides 401k, Safe Harbor Match and discretionary Profit Sharing by rate group (each participant is in own). There is a 12 mos/1000 waiting period but no minimum age, no minimum hours for allocation or last day required. The sons started working during covid due to difficulties with staffing... and here we are. The plan is top heavy.

The Gateway is 5%. However, the sons enter mid-year and Keys are included in top heavy minimum, making their effective allocation rate when including the top heavy about 5.8%.

I would like to restructure for (a)4 testing:

  • 2 HCEs (older) and 6 NHCEs (youngest) based on cross-testing, and,
  • 2 HCEs (teenage sons) and 6 NHCEs (oldest) based on allocation rate testing.


Cross Testing Rate Group 1 includes HCE husband plus HCE spouse and all 6 NHCEs*: coverage is then (6NHCEs/12NHCEs) / (2HCEs/4HCEs) = 100%, correct?

Cross Testing Rate Group 2 includes HCE spouse and 5 NHCEs*: coverage is then (5NHCEs/12NHCEs) / (1HCE/4HCEs) = 166%, correct?

*The NHCEs EBARs are at least as great as the older HCEs


I assumed the Plan must provide 5.8% Profit Sharing to all NHCEs due to the top heavy "skim" increase for the sons described above. Q: could this increase to 5.8% PS be limited to just the portion of NHCE staff that is included in the Allocation Rate Component testing?

The Allocation Rate Group** includes both HCE sons plus all 6 NHCEs: coverage is then (6NHCEs/12NHCEs) / (2HCEs/4HCEs) = 100%, correct?

**The Allocation Rate is the same 5.8% PS for the 2 young HCEs and 6 oldest NHCEs

Q: Based on the above, the Plan passes, correct? Am I forgetting anything? Any need to satisfy average benefit test for cross-tested portion?

Q: While the sons did not contribute 401k in 2021, could they theoretically since it is a Safe Harbor 401k? Going forward, I realize the NHCE number will flux and thus can not always rely on the bifurcated testing but for the years where the numbers are there (i.e. sufficient NHCEs), is there any risk otherwise?

Thank you"

3 replies so far   |    Click Here to Add a Reply

AmyETPA created a topic in Plan Document Amendments

Amend to Allow In-Service for Age 45 + 10 Years of Participation?

"Client wants to amend to allow in-service distributions at age 45 + 10 years of participation from reg match and ps. The document is PPD VS 401k document, and while I could do those two options separately, I would need to use the describe line to actually get the combo of those two. Would you have any concerns about adding this type of provision? Other than it being a bad idea in general to take your retirement funds at age 45."

2 replies so far   |    Click Here to Add a Reply

Flyboyjohn created a topic in Health Plans (Including ACA, COBRA, HIPAA)

1099 Required for Director Long Term Care Coverage?

"Corporate taxpayer has been paying premiums for individual Long Term Care policies on its outside directors for over a decade, no 1099s issued. Is there any basis for excluding these premiums from director income?

If not, is the proper reporting form a 1099-NEC?

Because 'correction' of the problem will be many amended tax returns, anybody willing to venture an opinion on how many years delinquent 1099s should be filed?"

1 reply so far   |    Click Here to Add a Reply

Jakyasar created a topic in 401(k) Plans

Amendment to Eligibility Requirements -- 30 Day Waiting Period Required?

"A record keeping company (RK) that is also the document sponsor insists on 30 day waiting period for the following amendment to be effective:

Plan has 401k+ 3% NE (non-elective) SH + PS provisions

Currently, 401k and NESH has 1 year wait and age 21 with first month following completion of eligibility as entry date.

PS portion is 21/1 year with dual entry.

Plan sponsor wants to eliminate the 1 year rule (age 21 stays) for the 401k+SH portion and have immediate entry as of date of hire but does not want to change PS provisions. Is this true that they have to wait 30 days for a more favorable eligibility? RK insist on it so that they can change and provide an updated SH notice."

No replies yet   |    Click Here to Add a Reply

Insurnacegirl555 created a topic in Form 5500

Client Failed to File Form 5500 But CPA Said They Weren't Required

"If someone fails to file Form 5500 due to their CPA having provided (in writing) advice that they are exempt, does the IRS/DOL usually negotiate or waive penalties for failure to file? Or are they really stuck with $200k or more of penalties per year as they stack up?"

1 reply so far   |    Click Here to Add a Reply

Insurnacegirl555 created a topic in Form 5500

Small Welfare Plan Exempt from 5500 Filing Requirement?

"I have my CPA and my TPA both telling me that my company's plan is exempt from filing the 5500-SF. We have a small self-insured welfare plan with 20 participants. But we use a TPA to whom we transfer our contributions and employees' contributions (which appears to be a huge gray area for exemption). We're self insured.

I've seen the use of a TPA to send payments to providers causes a plan to be considered non-exempt even when it's a direct pass through, but I've also read that the plan is NOT to file if it's not required.

Listening to CPA and TPA seems best but what if in 5 years DOL shows up and says they were wrong and wants to assess $1 million for 5 years of no filing? I'm just bankrupt and out of luck? I wouldn't have done the disclosure, wrongly thinking that I was exempt."

No replies yet   |    Click Here to Add a Reply

Sue B created a topic in 401(k) Plans

Mid-Year Change from Safe Harbor Match to 3% Nonelective Contributions?

"Client has a SH match in the 401(k) plan. Could they change to a 4% SHNE for 2021? Could they change to a 3% SHNE for 2022?"

1 reply so far   |    Click Here to Add a Reply

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