Message Boards Digest

June 13, 2022

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

KMMB created a topic in 401(k) Plans

Participating Employer Agreement for QSub

"Under the terms of the 401(k) plan document, a related employer must complete a participating employer adoption page for employees of that related employer to participate in the 401(k) plan. The 401(k) plan sponsor is an S Corp, and employees of a QSub of the plan sponsor also participated in the 401(k) plan but a participating employer adoption page was not completed for the QSub. We know that a QSub is disregarded for federal tax purposes because its assets, liabilities, and items of income, deduction, and credit are treated as owned by the parent S corporation, so this may make sense. Has anyone else seen a QSub participate without completing a participating employer adoption page?"
1 reply so far   |    Click Here to Add a Reply

bzorc created a topic in 401(k) Plans

Employer Stock in 401(k) Plan

"Here is a question from an ERISA attorney that I have discussions with from time to time. He isn't sure of where to go here, and, after reading it, neither do I. Any opinions would be appreciated, thanks. The only thing I could think of here would be for the employer to buy back the stock from the plan, but don't know if that would fly. Private employer has for a number of years permitted employees to elect to invest in employer stock through the 401k. The employer stock is darn-near illiquid from a trading perspective – there just isn’t any real market for it. But, the employer stock regularly pays a pretty decent cash dividend. A lot of the employee population is approaching retirement age. People are starting to request distributions that can’t be processed because the stock is illiquid. If this was an ESOP, I’d say the trustee should have been managing the stock/cash mix for this. In this case, I think there is still a fiduciary responsibility to act but I’m sort of stuck on what that responsibility might be. I’m also concerned that we’d be violating distribution rules if we just say “sorry, illiquid stock.”"
2 replies so far   |    Click Here to Add a Reply

TPApril created a topic in 401(k) Plans

Plan Document Requires Top Heavy Contribution to HCE - Can That Provision Be Removed?

"Prior Plan Doc states that both HCE and NHCE will receive top heavy minimum. Any reason it cannot be removed for HCE for new restatement? Assuming yes, with last day required, any reason it would be treated as accrued? In other words I believe it can be removed for current plan year without removing an earned benefit by the HCE."

2 replies so far   |    Click Here to Add a Reply

TPApril created a topic in Plan Document Amendments

Terminating Before July 31 to Avoid Restatement

"I understand a plan is not required to restate if it terminates prior to 7/31/22, albeit it must be fully up to date, including at this time the Hardship and SECURE amendments. That being said, if a plan does terminate but does not yet distribute assets in full by 7/31/22, would there be any qualification issue? I'm thinking it's okay but wanted to throw that out."

3 replies so far   |    Click Here to Add a Reply

Peter Gulia created a topic in 401(k) Plans

How Many § 401(a)-(k) Plans Cover No Employees?

"Recently, I was asked for advice on State-law fiduciary issues about a retirement plan. The plan's sponsor, a profit-seeking limited-liability company (treated as a partnership for Federal income tax purposes), has no employee, and no intent to hire an employee. Everyone who works in the business is an LLC member. And yes, I checked that the LLC interests are real, and not a sham to evade treating a worker as an employee. How often does this happen -- that every worker is a partner, an LLC member treated as a partner, or otherwise an owner treated as not an employee? Does it happen often enough that a service provider would plan for these situations?"

11 replies so far   |    Click Here to Add a Reply

TPApril created a topic in Correction of Plan Defects

Terminating a Plan W/Out Formal Correction Application

"Plan sponsor has finally agreed to correct a plan by depositing long overdue safe harbor contributions (w/earnings). They would like to terminate the plan, but they do not want to do the following:

  • Submit a formal VCP correction
  • Restate their plan document

I cannot stress enough, getting this deposit made is a tremendous achievement that we celebrated with jellybeans in the office. I know we are not the only ones with awful clients. I also know the standard recommendation is to 'fire the client', but that frustrates me because that doesn't really solve the problems. That being said, I'm just looking for thoughts on helping them terminate the plan under those conditions, aside from incredibly caveated letter at what their risks are going to be."

4 replies so far   |    Click Here to Add a Reply

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

Is QDIA Required for Fully Self Directed Plan?

"I guess I never saw this situation before -- All participants have self directed brokerage accounts. Plan is set up as a 404(c) plan. There is no QDIA. I thought 404(c) plans had to have a QDIA."

3 replies so far   |    Click Here to Add a Reply

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