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April 19, 2022

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

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

Combo Profit Sharing & Cash Balance Plan Testing -- Definition of Compensation

"We have a Cash Balance Plan and a Profit Sharing Plan that we are combining for testing. The Profit Sharing Plan defines Compensation as Compensation from date of Participation. We have several employees who became eligible 7/1/2021 so we would use their Compensation from 7/1/2021 to 12/31/2021 for allocation. The Cash Balance Plan defines Compensation as full year compensation. Can we use the two different definitions of Compensation for the 401(a)(4) testing? Is this allowed or are we required to use full year Compensation for testing?"

3 replies so far   |    Click Here to Add a Reply
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Peter Gulia created a topic in Investment Issues (Including Self-Directed)

Does Any Broker-Dealer Allow Crypto in Its Self-Directed Brokerage Account?

"EBSA's Compliance Assistance Release No. 2022-01 (March 10, 2022) attracted attention about its suggestion: 'The plan fiduciaries responsible for... allowing [cryptocurrency] investments through brokerage windows should expect to be questioned about how they can square their actions with their duties of prudence and loyalty in light of the risks described [in the Release].' Does anyone know which SDBA providers allow crypto? Does anyone know of a provider that specifically excludes crypto from its SDBA product?"

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Bri created a topic in Cross-Tested Plans

Two Plans with 2-Year Eligibility

"Just want to make sure I've thought this through properly:

Company has 3 employees. 2 owners employed since 2015 or so, and staff person hired May 2020. Staff person is a decade older than the owners, so cross-testing is not a consideration.

Generous CB plan has 2 year eligibility, so it has been owners-only so far. 401(k) plan has 2 year eligibility for company contributions, 1 year for 401(k).

For 2021, prior TPA was allocating only 3% to the staff person, as a nonelective top heavy minimum (listed as profit sharing on their report). But 6% each PS to the owners.

The nonelective test has me thinking. Even though the staff person is nominally only eligible for the 401(k), the TH requirement is forcing her to get a nonelective contribution, one that is not going to pass when compared to the owners' amounts. (As in, it doesn't matter if staff person hasn't met the normal eligibility for a nonelective contribution, the top heavy requirement made her eligible anyway, and now she's subject to her rate against theirs.)

If they give her 6%, I suppose they could be done. She's not eligible for the CB plan at all. And the DC plan would have a uniform allocation rate, so each plan passes coverage/nondiscrimination separately.

Or are they indeed okay with just the 3? The allocation to the staff person is the greater of the plan's 'normal' formula, or the top heavy formula. (Since her share would legitimately have been zero.) And the plan would pass coverage if she were not considered benefiting, because she's not 'normally' part of the coverage test anyway, having not gotten the 2 years of service yet. (Thinking 1.401(a)(4)-2(b)(4)(vi)(D)(3) here.)

Thanks. (Never mind that they didn't get any deferrals out of the staff person, so I've got other reasons to think about the 3% and how it's not enough of a QNEC if they allocated it that way.)"

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Catch22PGM created a topic in Defined Benefit Plans, Including Cash Balance

Deduction for Cash Balance Contribution

"Single-member LLC that has elected to file as S-Corp has a cash balance plan that covers the owner and a handful of employees. The contribution for the 2021 plan year was deposited on March 10, 2022. The deposit was for the recommended contribution calculated by the actuary.

The CPA who is preparing the tax returns for the business is telling the owner that the contribution applicable to the owner's benefit cannot be deducted for 2021 and must instead be reported on the 2022 tax returns.

The returns are otherwise being completed on an accrual basis. I am neither a CPA nor an actuary, but I've been a TPA for a long time and I've never heard of this. I didn't even bother asking how the CPA determined the portion applicable to the owner. Is there a rule preventing the business from taking a tax deduction for the portion of the accrued cash balance contribution that is applicable to the owner's benefit?"

2 replies so far   |    Click Here to Add a Reply

BG5150 created a topic in Retirement Plans in General

Date for Late Refunds: Process or Check Date?

"I've heard that we are supposed to go by the check date to determine if a refund is 'late' or not. For example, if a refund is processed March 15, but the check date is March 16, then it's considered late and the penalties apply. Do the IRS folks really look at the check register? Wouldn't they use a transaction report that shows the distribution was done on 3/15? has anyone ever been dinged on that? What if it's an ACH that doesn't happen for two or three days? There is no check register to, pardon the pun, check."

1 reply so far   |    Click Here to Add a Reply

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