Message Boards Digest

June 30, 2022

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

PamR created a topic in 401(k) Plans

Employer Not Depositing Employee Deferrals; Should TPA Report It to DOL?

"A client has stopped depositing the employee deferrals. No deposits since January of 2022. We had to beg and do manual entries to get some of the payrolls in that did go in. It's a very small doctor's office and the plan is safe harbor and new in 2020, the year she started the practice. The plan has automatic enrollment and there were employees that have become eligible in 2022. We have emailed, texted and called and we aren't getting any response. We have sent a certified letter letting the doctor know that we are resigning.

The question is, should we report our client to the DOL for not depositing the payrolls? We are signed on as a Fiduciary on the Investment Advisory side. We are also the TPA, but not a 3(16) so we aren't a fiduciary in that capacity.

Part of me wants to report it, but then I guess I can't say with 100% certainty that there were deferrals withheld that haven't been deposited. I guess only someone in the office would know that for sure."

4 replies so far   |    Click Here to Add a Reply

jsample created a topic in Employee Stock Ownership Plans (ESOPs)

ESOP Gets Cash Contribution for Making of Distributions But Portion Seems Nondeductible

"I have a company who has never funded their ESOP with cash (non leveraged, S Corporation, all company shares are held in the ESOP, 9 active employees, 8 terminated employees). When employees are entitled to distributions, they fund the trust account with the distribution amount(s) and pay out the employee. I allocate the amount(s) contributed during the year as contributions to eligible employees who then repurchase the terminated shares.

The employer now has a problem because the distributions are becoming much greater than 25% of compensation of the eligible employees. Their accountant told me that the company is not deducting any of the 'distribution contributions' on their corporate return. I have to allocate the contributions based on compensation and I believe that they have nondeductable contributions and need to pay an excise tax of 10% on the amount greater than 25% of eligible wages. CPA disagrees. Has anyone ever come across this situation?"

1 reply so far   |    Click Here to Add a Reply

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

Participant Lied About Being Married in Order to Get a QJSA

"Somehow a participant started his pension on a QJSA without actually being married. He already was divorced prior to initiating his benefits and apparently just lied on the application. The participant has now died and the lack of marriage discovered. No payments have been made to the would-be surviving spouse.

Any thoughts about how the plan should correct this, if at all? The plan has not been made aware of any QDRO. It seems to me that the plan is just done now, and doesn't have any obligation to pay out the difference between what his single life annuity would have been and what the QJSA was."

3 replies so far   |    Click Here to Add a Reply

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

PBGC Coverage in This Controlled Group Situation?

"Husband owns 100% of a real estate agency (single-member LLC) with one employee who is eligible for benefits. Wife owns 100% of a law firm (single-member LLC) with no employees. Husband and wife have two minor children so this is a controlled group.

Husband received a 401(k)/Cash Balance illustration just for him and his employee. These will be start-up plans -- no PBGC coverage was assumed, however. (The illustration was from some 'online' 401(k) provider.) Husband wants this plan design but has wisely chosen to use a local TPA and financial advisor. This guy definitely does not want to deal with PBGC insurance premiums because the illustration and quote he received assumed there would be no PBGC coverage.

Can the wife's law firm sponsor the Cash Balance Plan, then she gets a 0% benefit in the Cash Balance plan, and have the plan exempt from PBGC?

Testing is fine and I haven't found anything that would prevent this but I don't know that I'm 100% comfortable with it either."

6 replies so far   |    Click Here to Add a Reply

TPApril created a topic in 401(k) Plans

Document Expresses 401(k) Limit for HCEs as a Fraction

"While restating a plan document prepared by another service provider, I see a limit on the rate of 401k for HCE's of the current dollar limit divided by the comp limit. Considering that the ADP test takes into account discrimination issues, what would be the purpose of this limit?"

3 replies so far   |    Click Here to Add a Reply

James created a topic in Continuing Professional Education

Should I Get QPA, QPC, or QPK Designations?

"I’ve been working more and more with combination cash balance/401k plans, and have been looking to gain additional knowledge of 401k plans in general. Are the QPA, QPC, QPK designations worth obtaining for a retirement FSA, or would just familiarizing myself with the various rules and regulations be good enough?"

No replies yet   |    Click Here to Add a Reply

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

RMDs after Plan Termination

"Single-employer defined benefit plan is terminating this year. The plan is distributing the assets through the purchase of annuities from an insurance company for those participants who don't take a lump sum at termination. Participants can elect an immediate annuity that will commence benefit payments right away, or they can elect a deferred annuity and can commence benefit payments any time after plan termination - even if they are still employed by the company at the time they elect to begin benefit payments. The plan currently has an RMD provision that does not require distributions until the later of age 72 and termination of employment. Does that rule continue to apply after the plan is terminated to the participants who receive a deferred annuity? In other words, does the insurance company have to verify employment status witht the plan sponsor for those annuitants who are 72 or older to begin RMDs, or does the participant's employment status not matter for purposes of RMDs under Section 401(a)(9) once the plan is terminated (or RMDs don't apply at all)?"

1 reply so far   |    Click Here to Add a Reply

Mumble created a topic in 401(k) Plans

Does a Disclaimer Revive a Beneficiary Designation?

"A participant executes a beneficiary designation naming her son as beneficiary. She was not married at the time of the designation. Within a year, she gets married. She does not change the beneficiary designation and does not have her new spouse sign the consent. She passes away. Under the plan, the new spouse is the beneficiary because he did not consent to the beneficiary designation. The new spouse wants to disclaim. Does his disclaimer, where he is treated as predeceasing the participant, revive the previous beneficiary designation such that the son becomes the beneficiary?"

2 replies so far   |    Click Here to Add a Reply

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