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Message Boards Digest

May 18, 2022

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

CelloFan created a topic in 401(k) Plans

Missed the Deferral Opportunity for Auto Enrollments

"What is the right basis for correcting an MDO for automatic enrollment? 50% of the ADP, or the percentage of the auto enrollment? Here it looks like it would be 50% of the auto enrollment percentage:

https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-correcting-a-failure-to-effect-employee-deferral-elections

Our situation: elections are made on our recordkeeper site, and transfer over to our payroll system. Due to human error, some elections were not transferred. These non-transferred errors include automatic enrollments as well as positive elections.

It seems to me that all these participants were given the option to defer, because they received info from the recordkeeper and were directed to the site. Because they were given the opportunity, this 401k plan fix would not apply:

https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-eligible-employees-were-not-given-the-opportunity-to-make-an-elective-deferral-election-excluding-eligible-employees"

1 reply so far   |    Click Here to Add a Reply

Ananda created a topic in Correction of Plan Defects

Audit CAP Maximum Penalty? Your Experience?

"The IRS states that the Audit CAP correction penalties will not be excessive and will bear a reasonable relationship to the nature, extent and severity of the plan failures. However, Rev Proc. Section 5.01 states that the Maximum Payment Amount would be the tax imposed due to plan disqualification including tax on trust income, failure to file Form 1041, income tax due to loss of employer deductions, etc., Has anyone experienced this type of an Audit CAP penalty or a similar severe penalty imposed on a client plan? Typically, given my experience with Audit CAP, I've seen penalties in the $15,000 range due to multiple plan qualification failure issues. Has anyone had a client that experienced the Maximum Payment Amount penalty, or severe high dollar penalties, and if so, what amounts?"

1 reply so far   |    Click Here to Add a Reply

wizwor created a topic in Health Savings Accounts (HSAs)

HDHP Newbie Participant Has Questions

"I don't generally use healthcare. If something breaks or stops working, I get assistance via the emergency room. My wife is deceased. My youngest child is about to get his own healthcare. This year I decided to switch to a High Deductible Healthcare Plan and open a Healthcare Savings Account. HDHP went into effect the first of the year. On March 14th, I fully funded the HSA ($8,300). I expect to use the account to pay my deductible and other expenses like dental. I found Publication 502 which I believe lists covered expenses for the HSA. I have just a few expenses this year:

  • OPTUMRX, April 05, 2022, $883.01
  • OPTUMRX, March 18, 2022, $2.62
  • DENTALCARE, March 15, 2022, $50.00 (date of 2/5/22)
  • MASS GENERAL, February 04, 2022, $798.94 (date of service 12/23/21 and 12/28/21)

Does date of service or date of billing determine whether cost of a service can be reimbursed from my HSA? Can charges incurred prior to the creation of the HSA be reimbursed? What kind of documentation do I need to keep as evidence of eligibility? Also, my company's HDHP is not 'creditable'. My understanding is that people who delay Medicare past 65 who do not have creditable coverage face penalties when they enroll in Medicare. Should I switch to a creditable plan the year before enrolling or enroll on the first day of eligibility?"

1 reply so far   |    Click Here to Add a Reply

Plan Doc created a topic in 401(k) Plans

Employer Made 'Deferral' Contributions for Participant with Zero Compensation

"Employer contributed $10,000 in January, 2022 as a 12/31/2021 elective deferral to the account of the business owner's wife, who is a participant but had zero compensation during 2021. Should/can the contribution, adjusted for earnings/losses, be returned to the employer? Any way the funds can stay in the plan someplace other than the participant's account?"

2 replies so far   |    Click Here to Add a Reply

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