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Message Boards Digest

June 10, 2022

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

Tom created a topic in 401(k) Plans

In-Plan 401(k) Roth Conversion

"This may be a good year to consider an in-plan Roth conversion within one's 401(k), provided the plan document allows. If someone converts now and the market drops a lot further, can they reverse their conversion before the end of the year? I recall this was possible a few years ago. If it is allowable, it may also depend on the record keeper. Thank you, Tom"

3 replies so far   |    Click Here to Add a Reply

tsrl01 created a topic in Health Plans (Including ACA, COBRA, HIPAA)

Virta and COBRA

"Looking for thoughts on whether the Virta diabetic add on program would be subject to COBRA. I'm inclined to say no, that it is an independent, non-coordinated benefit (disease-specific, excepted benefit, but wanted to see what everyone else's thoughts are. Thank you!"
1 reply so far   |    Click Here to Add a Reply

Peter Gulia created a topic in Investment Issues (Including Self-Directed)

How do participants get managed-account documents?

"I hope BenefitsLink neighbors will help me by responding to this survey about methods and customs in delivering documents for a managed-account service. Assume an individual-account retirement plan that provides participant-directed investment. Assume the plan’s top fiduciary approves a registered investment adviser’s offer of its managed-account service. The service is provided only to a participant (or other investment-directing individual) who agrees to the extra service, and agrees that the investment adviser’s fee is charged against her plan account. Does the adviser deliver its investment-advisory agreement: 1) as a paper document? 2) as a pdf attached to an email? 3) by showing a hyperlink that points to a webpage on which the agreement is hosted? 4) by some other means, and if so what? Does the participant/advisee sign the agreement: 1) with ink on paper? 2) using an electronic-signature service? 3) by clicking an “I approve” button in the plan’s or the adviser’s website? 4) by some other means, and if so what? When the adviser later must deliver a required disclosure, is it: 1) paper sent by US mail? 2) a pdf attached to an email sent to each participant/advisee? 3) a notice-and-access email with a pointer to the website on which the document is hosted? 4) notice in a quarterly statement? 5) by some other means, and if so what? Thank you for your good help and practical observations."
No replies yet   |    Click Here to Add a Reply

cheersmate created a topic in Cross-Tested Plans

Safe Harbor Cross-Tested Plan - forfeitures triggering 3%

"A cross-tested Safe Harbor 401k Plan has approximately $14,000 in forfeitures. The plan permits them to be applied towards ALL employer contributions or pay Plan expenses. The Plan is Top-Heavy. The employer does not want to contribute much if anything because 2021 was down. 1 HCE/Key employee; 6 NHCEs, 1 of whom terminated before end of year. The Safe Harbor Matching contribution plus the discretionary Matching that satisfies ACP Safe Harbor total approximately $11,000. This leaves $3,000 in forfeitures on the table.

  1. The $3,000 is not sufficient to fully fund the 3% Top Heavy Minimums - this means the employer will have to fund the difference.
  2. Since it is cross-tested the Key/HCE could provide 0% Profit Sharing for himself (Plan does not require THM for Keys) - this would then permit a zero PS allocation to the 1 terminated NHCE; fund only the 5 Active NHCE staff but this still requires some employer funding to satisfy the 3% Top Heavy Minimums to the Active NHCEs. Note: the NHCEs must receive the full 3% because the HCE/Key allocation is greater than 3% even with Profit Sharing at zero.

QUESTION: Is there any prohibition in using $11,000 towards the Safe Harbor Matching contributions (ADP and ACP), and not allocate any Profit Sharing to avoid the Top Heavy Minimum trigger; use the balance of the forfeitures towards the Plan's Annual Fees (that is usually paid by the employer)? Would this be prohibited since it is avoiding the Top Heavy Minimum requirement? Thank you."

2 replies so far   |    Click Here to Add a Reply

austin3515 created a topic in 401(k) Plans

Elapsed Time Eligiblity

"PArtcipant hired February 1, 2021 and worked 2 months before quitting. They are rehired tooday, which is more than 12 months after their termination date so they had a break in service. Plan uses elapsed time. When would this participant satisfy a 6 month eligibility? Does their 2 months pre-break count is really the question? My Basic Plan Document only says "If any Eligible Employee who had not satisfied the Plan's eligibility requirements is rehired after severance from employment, then such Eligible Employee shall become a Participant in the Plan in accordance with the eligibility requirements set forth in the Adoption Agreement and the Plan." I'm inclined to say the 2 months pre-break counts but I cannot find anything straight on point, including the EOB..."
1 reply so far   |    Click Here to Add a Reply

BG5150 created a topic in 401(k) Plans

Employer Made 'Elective' Contribution with Cash Bonus Option

"So, unbeknownst to me, the ER wanted to give everyone $1,000 in their 401(k) plan. However, if they didn't have an account, it was paid as a bonus. If they had an account, but chose otherwise, it was paid as a bonus. I know this is a no-no. The contributions will be considered deferrals for 402(g) purposes. (I think it pushed one person over the threshold) But what other correction needs to be done? Could they give all the missing people the $1,000 and just call it a PS? (I'm not sure if they filed their 2021 taxes yet.) I've heard of situations like these, but never encountered one first hand."

4 replies so far   |    Click Here to Add a Reply

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