Message Boards Digest

August 9, 2022

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

karl created a topic in Form 5500

Form 5500-SF Filed with Employer's Old Address

"Recently filed 2021 Form 5500-SF for a plan. About a week after filing the employer contacted us to let us know they realized after the fact that the filing has their old address. Address changed a couple years ago but it didn't get noticed on the filing until now. Do we need to file an amended return?"

3 replies so far   |    Click Here to Add a Reply

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Tom created a topic in Retirement Plans in General

Cycle 3 Deadline Affects Execution of New Separate Trust Agreement?

"As we know the deadline for signing Cycle 3 Adoption Agreements has passed. What if a plan sponsor has not signed the now separate Trust Agreement timely (by July 31)? The Trustees are the same before and after Cycle 3."

5 replies so far   |    Click Here to Add a Reply

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

Participation by Foreign Employees

"We have an ESOP and we would like to have certain employees outside the US participate in the plan. Tthe ESOP currently covers US employees only. Normally, this wouldn't even be a consideration because ESOPs normally allocate based on US income. We don't have that issue, because we allocate based on job classification. But we still have the remaining issue that allocations cannot exceed 415 compensation.

Do we have any options here? Is there a way that non-US compensation can be classified as 415 compensation? If not, is there a way we can pay foreign employees so that the compensation somehow qualifies as US compensation?

To the extent it is helpful, some of the foreign employees are in Ukraine, but we have others in other countries who we would also like to add as participants."

4 replies so far   |    Click Here to Add a Reply

kgr12 created a topic in 409A Issues

Retrospective and Future Bonus Payments and 'Performance-Based Compensation'

"Sorry for some very basic questions, but it seems to me that under the 409A regs the concept of 'performance-based compensation' is only invoked if there were a possibility of that compensation being deferred. In other words:

[1] If there is no opportunity to defer, an employer could pay a bonus for performance over the preceding 12 months based on criteria established right before the bonus is paid without running into 409A, correct?

[2] If there is no opportunity to defer, an employer can establish performance criteria for a bonus that would be paid with respect to a 12 month period that has already started without running into 409A, correct? (E.g., in August 2022, the employer establishes performance criteria for the period July 1, 2022 through June 30, 2023, and any resulting bonus would be paid shortly after June 30, 2023.)"

2 replies so far   |    Click Here to Add a Reply

Chaz created a topic in Health Savings Accounts (HSAs)

Can a Non-Citizen Contribute to an HSA?

"Can a non-citizen/non-green card holder living and working in the US (for example, on a visa) contribute to an HSA if he or she has qualifying HDHP coverage in connection with his or her US employment and no disqualifying coverage?

The Code and related IRS guidance state that eligible 'individuals' can contribute without any caveat that they be citizens but I have come across some sort-of-authoritative sources that say the opposite."

1 reply so far   |    Click Here to Add a Reply

jpstl created a topic in 409A Issues

Does Modification in NQDC Impact My Separation of Service Date?

"I'm participating in a NQDC that specifies that the distribution starts the January following an Elected Age + Separation of Service. I'm allowed a one time change and I changed my plan by five years (original elected age + 5 years). The change was made 13 months prior to the earliest payment date (the January following the original specified age). Change became final in November the year prior to the original elected age. Nine months after the change, my employer statement was showing the new age + separation from service (status pending -- I assume because it can't take effect for 12 months).

Several months later the plan got transferred to a major investment firm and their statement was showing new age + 'separation + 5 years.' I filed a claim stating that it should be new age + separation of service but they declined the claim and pointed to 409A.

Note that my plan states that if I attempt to change the payment election the same year as the elected age (that would be less than 12 months from earliest payment date) they will change the separation of service to separation + 5 years. In this case I made my change the prior year (Nov).

I have read countless websites that discuss 'Changes in Time and Form of Distribution' but I can't find anything that talks about adding five years to my separation date. This seems like a slam dunk but then we're dealing with the tax code. Does anyone have any insight on when separation would/should be changed to 'separation + 5 years' so I can determine if I should appeal the claim?"

1 reply so far   |    Click Here to Add a Reply

bzorc created a topic in Form 5500

Short Plan Year Audit Issue -- Schedule H

"I have an auditor friend who has brought up the following issue: Plan subject to audit terminated and all assets were distributed during the month of June, 2022.

The auditor inferred to the plan sponsor that they could defer the attachment of the 12/31/21 audit, and include it with the 6/30/22 short year filing (audit will be prepared for the short year), utilizing the answering of Schedule H, Line 3d(2), indicating that the plan 'has elected to defer attaching the IQPA's opinion for the first of 2 consecutive plan years, one of which is a short plan year of 7 months or fewer.'

The sponsor tried to submit the 2021 Form 5500 without the audit. The software vendor would not accept the return, citing the lack of the auditor's report being attached to the return.

I have always applied the language of Line 3d(2) of Schedule H to an initial plan year of less than 7 months. In the scenario above, we would insure that the 12/31/21 5500 filing had the audit report attached, and then again for the final short plan year.

Has anyone seen the scenario above, where the auditor tried to attach both audits to the final short year filing?"

4 replies so far   |    Click Here to Add a Reply

PS created a topic in Plan Terminations

Terminating a Plan Mid-Year Can Cause Excess Contributions?

"A plan's termination date is 8/31/2022 (a short plan year). Participants have maxed out for the entire year ($20,000). Will this result in excess contributions by the participants?"

2 replies so far   |    Click Here to Add a Reply

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