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Message Boards Digest

May 11, 2022

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

Cecilia Veto created a topic in Defined Benefit Plans, Including Cash Balance

J&S Waiver from Incarcerated Spouse of DB Plan Participant

"A pension plan is terminating. One of the participants who has a distribution over $5,000, has to get a waiver of the J&S annuity from her spouse in order to get a lump sum distribution. Problem is: spouse is incarcerated and has been from the time they were married. How can she get his waiver, especially if she has not been in direct communication with him for years? Can she get some sort of court order that the marriage has been abandoned? Is there a precedent case for this?"

3 replies so far   |    Click Here to Add a Reply

austin3515 created a topic in 401(k) Plans

EPCRS -- Discrimination When Correcting for Mistakenly Missed Deferrals by HCEs?

"Where in EPCRS does it indicate that contributions made just for HCEs due to failures applicable to HCEs will not result in a nondiscrimination problem? An HCE's deferral election was not implemented. QNEC/match make-up not required. There must be something in EPCRS that says that if one corrects for an HCE then the correction does not create a nondiscrimination issue. Where is that?"

6 replies so far   |    Click Here to Add a Reply

ERISA guy created a topic in 401(k) Plans

NRA and Break in Service

"A plan's normal retirement age/date is the later of age 65 or the fifth anniversary of the commencement of participation. The plan also provides the one-year hold-out rule for both eligibility and vesting.

Facts: Employee is over 70 but has not yet reached the fifth anniversary of participation. The employee is eligible to participate and has not yet vested in the account.

The participant incurs a break in service and is not expected to ever work 1,000 HOS again. The participant, therefore, is suspended (likely indefinitely) from participating and will not again earn a YOS for vesting purposes.

Question: Even though the participant is suspended from participating and earning vesting credit due to the hold-out rule, is the clock still ticking on the fifth anniversary of the commencement of participation, such that the participant will become vested five years from the first day of the first plan year in which the participant entered the plan (which has not yet occurred)?"

6 replies so far   |    Click Here to Add a Reply

jkharvey created a topic in Plan Document Amendments

Amendment to Vesting. Which Schedule Applies to a New Participant?

"We have a 401k/PS plan that provided 100% vesting for employer discretionary PS contributions. When we prepared the Cycle 3 restatement, we included a change in that vesting schedule making it 2-6 graded. The restatement was effective 1/1/2021 and the employer signed it 4/15/2021. Eligibility requirements are 1 Year of Service/age 21, and January 1 and July 1 entry dates.

One employee hired 1/21/2020, so met eligibility at 1/21/2021 and entered the plan 7/1/2021. Does this participant need to be 100% vested following the pre-amendment provision, or is he subject to the amended graded schedule because he did not become a participant until after the later of the restatement's effective date or adoption date?

The plan document makes reference to an Employee who is a Participant as of the later of the date such amendment is adopted or the date it becomes effective being required to have his Vested interest as of such date not less than it would have been without regard to such amendment."

2 replies so far   |    Click Here to Add a Reply

Nate S created a topic in Employee Stock Ownership Plans (ESOPs)

Accelerated Distributions and BRF Considerations?

"An ESOP's normal form of distribution is a 5-year installment; the plan document allows that the remaining payments may be accelerated to a single lump sum distribution at the Plan Administrator's discretion. The sponsor then adopts by resolution a distribution policy that restricts the acceleration to terminated participants, depending upon available cash flow; retirees will be paid installments.

Their ERISA counsel insists that this class-based distinction is non-discriminatory, and besides, the retirees benefit by continuing to enjoy gains from the future stock value growth.

As of 12/31/21 there are three retirees(2 non-HCE & 1 HCE) paid by installment; and two terminees they want to accelerate, 1 non-HCE of less than $5k and 1 HCE (former 5% key) with a $750k account balance. The retirees' installments are less than $300k, and their total balances are less than $700k.

[1] Is the determination to accelerate distributions subject to BRF? [2] How would you structure that test, amounts distributed this year vs total balances, ratios of eligible distribution amounts, other?"

1 reply so far   |    Click Here to Add a Reply

Will.I.Am created a topic in Cross-Tested Plans

Terminated Employees with No Vesting

"I have a plan where all the NHCEs who are eligible for profit sharing have terminated and are 0% vested. I'm trying to max out the owner and his wife to their respective 415 limits via a profit sharing contribution using a new comparability formula which I can easily do; however, I have to give the employees a roughly 20% profit sharing contribution. Luckily, they didn't get paid very much in the current year and the owner and his wife are getting over 95% of the employer contribution.

I know I can't rely on NHCEs for general testing if they don't have some vesting. What are my options to make the employees somewhat vested so I can rely on them?

I have heard of an amendment that you can make to give them testing? If you can do this, do you just list the employees names in the amendment and state what level of vesting you are giving them? Can you just give the employees you are relying on more vesting but exclude others?"

4 replies so far   |    Click Here to Add a Reply

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