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Message Boards Digest

April 5, 2022

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

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

RMD Paid But No Income Tax Withheld

"So this single member plan paid out the RMD for 2022 today but did not withhold the fed and state taxes. The financial advisor is saying... 'No harm no foul... just put on the 1099-R no withholding and the participant will be responsible for the taxes outside the plan.' He said that 'The CPA will prepare some tax payment vouchers and remit the funds.' Soooo... will there be a problem? Is this ok?"

1 reply so far   |    Click Here to Add a Reply
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Ananda created a topic in Defined Benefit Plans, Including Cash Balance

Variable Annuities Not Meeting Section 415 Requirements

"A good number of DB plan customers want to offer variable annuities as a distribution option to retiring plan participants but they are raising 415 limit concerns with me because the annuity payout is based primarily on a stock index and a rising stock market could cause a 415 limit violation in any given year.

Pursuant to 415(b) the annual benefit for 415 purposes is a straight life annuity with equal installment payments. Pursuant to the 1.415(b)-1 regulations, there must be an adjustment to a variable annuity so that it is the actuarial equivalent of a straight life annuity beginning at the same time. Further, the regs. address a payout with an 'automatic benefit increase feature,' where certain complex annual limitation requirements must still be met, and it seems that a variable annuity which automatically adjusts the annuity payout based on the performance of a stock index could be an automatic benefit feature. Then there is example 10 of 1.415(b)-1(c) which seems to address a variable annuity and states that 417(e)(3) does not apply and that to determine the actuarial equivalent of a straight life annuity a 5% interest rate return on assets must be used.

This is somewhat confusing to me so does anyone have experience determining whether a variable annuity whose payout is based on a stock market index or performance, meets the 415 annual payout requirements, and if so, how?"

4 replies so far   |    Click Here to Add a Reply

Insurnacegirl555 created a topic in Form 5500

5500-SF -- Bond Compliance?

"Very small welfare plan with under $10 in assets at a given time. Question on compliance regarding covered by a bond? Never had this brought to my attention by anyone (tpa etc). Getting ready to have cpa fill it out and trying to determine how to answer this. I certainly never set up a bond but is there a good chance our tpa did since they are the ones holding the funds (they get transferred straight to them)? I asked tpa but no response back yet. if not, what do I do in this scenario? I am at a loss."

No replies yet   |    Click Here to Add a Reply

Pammie57 created a topic in Plan Terminations

Plan Terminated Mid-2021 and Assets Moved to Acquiring Company's Plan

"We had a client whose plan had been a large plan for several years, and filed the 5500 and an audit report. They terminated their plan mid-2021 and rolled all balances into the plan of the company who acquired the former plan sponsor. Their TPA is telling me that they are not required to file the 5500 for 2021, and instead can file Form 5500-SF. I thought the criterion is the participant count at the beginning of a plan year. Obviously, they had zero at plan year end. Thanks for any insights."

2 replies so far   |    Click Here to Add a Reply

austin3515 created a topic in 401(k) Plans

Lifetime Income Disclosures -- Need Tables for Calculations

"Where can I get my hands on a table to calculate the lifetime income figures? I have a couple of plans where we're not using Relius, so I want to be able to calculate the disclosures manually."

4 replies so far   |    Click Here to Add a Reply

metsfan026 created a topic in 401(k) Plans

Compensation for an S-Corp

"I have a client who is an S-Corp. They get a W-2, but also took what they call $70k in 'distributions' as bonuses that are not included in their W-2 for the year. The question is, do those 'distributions' count towards compensation during the year, or is it excluded because it's not part of the W-2?"

2 replies so far   |    Click Here to Add a Reply

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

PBGC Form 4010 Exemption for Terminated DB Plan?

"Is a calendar year plan that terminated on 12/31/2021 exempt from filing a PBGC Form 4010 for the 2021 plan year (due date is 4/15/2022)? The PBGC Form 500 is scheduled to be filed on 4/29/2022."

No replies yet   |    Click Here to Add a Reply

Vlad401k created a topic in Distributions and Loans, Other than QDROs

402(g) Limit Exceeded But Corrective Distribution Was Too Much

"We have a participant who made deferrals with 2 different plans (one of which we administer) in 2021. He contributed to Plan A (we do not administer that plan) in the first half of 2021 until he left that company, and to Plan B (the plan we administer) in the second half of 2021. The participant is not yet age 50, so not catch-up eligible.

About a month ago, he contacted us and told us that he exceeded the 402(g) limit between the 2 plans and sent us a statement from Plan A showing that he contributed $9,500 with Plan A. He contributed $12,000 with Plan B, so his total deferrals for 2021 were $21,500 -- so $2,000 over the limit. We processed the corrective distribution for $2,000 (plus gains/losses).

He contacted us a few days ago saying that the statement he sent us from Plan A was incorrect. The correct contribution with Plan A (he also sent us W-2 to confirm) was actually $8,500 (not $9,500). So, the participant was actually $1,000 over the limit (not $2,000). He already cashed the corrective distribution check. What would be the best course of action to correct this issue?"

1 reply so far   |    Click Here to Add a Reply

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