Message Boards Digest

April 14, 2022

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

K-t-F created a topic in Distributions and Loans, Other than QDROs

Can Designated Beneficiary Waive Right to Distribution?

"Deceased participant. Spouse is the primary beneficiary. Can she waive her right as the primary thus passing the benefit onto the secondary beneficiaries (the kids)?"

4 replies so far   |    Click Here to Add a Reply

Cynchbeast created a topic in Retirement Plans in General

Employee Working Here with Visa Doesn't Want to Open 401(k) Account

"Our client has a PS 401(k) plan with 3% SH non-elective. They have a new employee with a Visa; she is from Germany. She has chosen to defer, but does not want to open an account (TD Ameritrade). They have her first deferrals, which have been held for a couple weeks, as well as her 3% SH. But there is presently no account for them to deposit the money to. Can participant continue to defer if she refuses to open an account? How long can employer hold the money before it becomes a problem? Even if she does not defer, what do they do with her safe harbor contribution? (Plan excludes 'non-resident aliens.' She's here legally as a resident alien.)"

2 replies so far   |    Click Here to Add a Reply

R. Scott created a topic in 401(k) Plans

Prospective Client Wants Us to Administer a ROBS Plan

"We have a prospective client that wants our help in administering their ROBS plan. Our firm has no experience in administering these types of plans. Can anyone with experience tell me what goes into the administration and 5500 for this type of plan that's beyond what is normal for a regular 401k plan?"

6 replies so far   |    Click Here to Add a Reply

acm_acm created a topic in VEBAs

Pros and Cons of Starting to Fund in a VEBA -- A H&W Trust

"I'm working on presenting pros and cons to a client. I can think of fairly long list of cons, but the only *pure* pro I can think of is benefit security for the members/participants. Anything else I can think of has significant cons working against it.

A taxable entity could get a deduction for contributions, but for medical that is significantly limited and would require an annual determination. The trust could invest in assets the plan sponsor can't invest in directly, but that's problematic.

Should any plan sponsor do this when the presumably have a core business/mission that they should focus on? Funding would lower the GAAP expense for the plan sponsor, but that's offset by the opportunity cost of using the money for something else. What am I missing as a pro(s)?"

No replies yet   |    Click Here to Add a Reply

MeetMeInTheBackdoorRoth created a topic in 401(k) Plans

Company with No Pre-Existing 401(k) Acquires Company with Safe Harbor 401(k)

"We're getting ready to onboard Company X, who will be offering its employees a 401k for the first time. However, Company X acquired Company Y recently in a total stock purchase. Company Y has an existing Safe Harbor plan.

Our belief is that Company X is now the sponsor of that plan. Is that correct?

It isn't a merger of plans because there was no plan at Company X to merge with. If Company X is in fact now the sponsor of that Company Y plan, how can we get rid of the Safe Harbor provisions (Company X did not want a Safe Harbor plan)? Are Company X's employees eligible for the plan right now if they meet the general eligibility requirements? We believe yes. Can the SECURE Act provisions around Safe Harbor be utilized here for making a midyear change?"

2 replies so far   |    Click Here to Add a Reply

Jen S created a topic in Qualified Domestic Relations Orders (QDROs)

Forms of Distribution to an Alternate Payee; QDRO Is Specific

"If a plan provides multiple forms of distribution to a Distributee (definition includes employees as well as Alternate Payees), can the QDRO specifically eliminate some of those options? Specifically, if the QDRO provides for Immediate Payment, does that effectively eliminate the ability for the Alternate Payee to choose a deferred benefit (one of the allowable forms of distribution), leaving them with only options that would provide for an immediate determination such as a lump sum payout or single life annuity?"

1 reply so far   |    Click Here to Add a Reply

BG5150 created a topic in Retirement Plans in General

Member Leaves Controlled Group; Results in a Partial Termination?

"One company in a controlled group got sold. The new employer does not have a plan, nor does it want one. What happens to the folks in the old employer who were in the plan? Numbers-wise, this is not a partial plan term -- 6 participants out of about 85. So, do these people have to be 100% vested? I would think not, but just want to make sure."

2 replies so far   |    Click Here to Add a Reply

BG5150 created a topic in Retirement Plans in General

Taxable Vacation Award -- How to Deduct 401(k) Deferrals?

"From the client: We recently awarded a trip to Jamaica through a raffle drawing for employees that elected to make contributions to AFSAPAC. This trip is taxable to the employee. We currently have a TFB (fringe benefits code) that we use for car allowances through payroll. This code taxes them on the income but does not pay them a net amount in their paycheck. For the annual 401k audit, we exclude this TFB amount from their gross income. Can we use this code for the trip as well?

Document specifically excludes 'taxable fringe Benefit for car allowance' from compensation and that's it. So, to me, that means this 'income' is subject to 401(k) deduction. But how do they deduct for it?"

1 reply so far   |    Click Here to Add a Reply

pixiebear created a topic in Plan Terminations

Defined Benefit Plan Termination -- Some Participants Have $0 Accrued Benefit

"We are terminating a defined benefit plan and have some participants with $0 accrued benefit. The Plan Sponsor has decided to file for approval with the IRS and we are filing with the PBGC. When do we consider a participant with no accrued benefits to have been fully paid out by plan? Would it be on the termination date, or once we get approval from the IRS and pay out the participants with accrued benefits?"

2 replies so far   |    Click Here to Add a Reply

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

Loan Taken from Rollover Account

"A physician left a practice and started his own practice. He rolled his pension into a new plan established by his new practice. This money would be an unrelated rollover, correct?

He promptly took a $40k loan. Made payments. COVID comes along and he suspended his payments. He forgot to re-start his payments so now the loan is in default. If I am correct and the loan was taken from his rollover account, can't we just distribute the remaining balance, issue a 1099-R and be done? Would it be an offset? Dr. Loanshark is only 55, if that makes a difference."

2 replies so far   |    Click Here to Add a Reply

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