Message Boards Digest

September 15, 2022

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

Cobras59 created a topic in 401(k) Plans

Refinancing Participant Loans

"For participant loans that are being refinanced, can the maturity date go ever go past 5 years from the original loan?

26 CFR Section1.72(p)-1 Q-20, says that if the replacement loan satisfies Section 72(p)(2) and this section, determined as if if the replacement loan consisted of two separate loans, then to the extent the amount of the replacement loan exceeds the amount of the replaced loan, a new loan is amortized in substantially level payments over a period not later than the last day of latest permissible term of the replacement loan.

So if a refinanced loan is less than the available amount is it treated as a new separate loan and has a maturity date from the refinanced loan date and not the date of the original replaced loan?

Q-20 makes it sounds like it can. Is there any other clearer direction than Q-20?"

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#toomanyrules created a topic in Form 5500

Adopting Employer Has 106 Employees When Leaving PEO -- Plan Audit Required?

"An Adopting Employer left a PEO in 2021. For the 2021 Plan Year, there are 106 participants as on 1/1/2021. Does the Plan need a 5500 with audit for 2021, or can it file the 5500-SF under the 80/120 rule?"

1 reply so far   |    Click Here to Add a Reply

David Olive created a topic in Correction of Plan Defects

Two Participants Did Not Get Deferral Opportunity under Owner's 'Solo 401(k)'

"I have a client that maintains a solo 401(k), and while meeting with them to prepare their plan restatement, it appears that they let their two children work part-time during 2020 and 2021. The plan document provides no conditions for eligibility, and only excludes non-resident aliens and union employees. So, it appears that the children should have been allowed to defer to the plan and their missed deferral opportunity constitutes an operational failure. As a result of the daughters working as part-time employees, it appears that the plan can no longer be considered a solo 401(k), and thus must now: [1] Distribute a Summary Plan Description. [2] File a Form 5500-SF instead of 5500-EZ. [3] Perform non-discrimination testing. [4] Perform coverage testing. Is there anything else I may be missing?

Upon review of EPCRS, the missed deferral opportunity itself seems like an 'insignificant' operational failure, and thus eligible for SCP, but concerned that the overall effects of making it no longer a Solo 401(k) may require a VCP correction. Your thoughts?"

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TPApril created a topic in Form 5500

Controlled Group Membership's Effect on Partner's Eligibility for Form 5500-EZ

"Without judging the setup of this company's legacy multiple retirement plans, they have the following:

  • One plan for all employees
  • Each partner has his or her own plan

(Not related to this question, but the plans are tested as one controlled group. All plans mirror each other and all participants have the option for self direction.)

Situation: A new partner has set up a new plan, and ultimately contributed $400 for the past plan year (prior to plan year end), simply to get the trust set up.

Because a one-person plan with less than $250k does not need to file an Form 5500-EZ, my understanding is that, because of the controlled group situation, a 5500-EZ is indeed required in this case. Agree?"

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Bob Demontigny created a topic in 401(k) Plans

Document Limits Deferrals to 17% of Pay But Exceeded by Some Participants

"Takeover document for 2021 limits 401(k) contributions to 17% of pay. Some are over that percentage for 2021. Are those considered 402(g) or Excess 415 contributions?"

3 replies so far   |    Click Here to Add a Reply

LarryDavid created a topic in 401(k) Plans

Multiemployer 401(k) Plan Needs ADP Testing -- Treat as Single Employer?

"I have a multiemployer 401(k) plan that is comprised of 20 employers, with all participants collectively bargained (i.e., there are no non-union employees in the plan), and all part of the same CBA.

When performing the ADP testing for this plan, would I test each employer on its own or am I required to test the entire population as one employer?

The regs indicate that I must test the entire plan as one employer, but I could have sworn that testing for multiemployer plans was always done on an employer by employer basis. (Meaning that, for this plan, if 19 of the 20 employers had no HCEs, I could ignore those groups and just test the 1 employer that has an HCE.)"

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austin3515 created a topic in 401(k) Plans

Compensation in Chinese Money Affects HCE Determination?

"Executive spends 6 months in US and 6 months in foreign country. Paid for part of the year in each country. US compensation is just under $130,000. If the Chinese compensation for the work done in China counts towards being an HCE, then he would be an HCE. Does it count? My definition of comp for 415 is Form W-2 wages."

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metsfan026 created a topic in 401(k) Plans

Husband Has a Business and Wife Has a Business -- A Controlled Group?

"I just wanted to double-check if this would be considered a controlled group or not: Husband owns 100% of Company A. Wife owns 100% of Company B. The two businesses, while in the same industry, are completely unrelated and the spouses do not work or do business with each other. So would this be a controlled group through attribution or are they excluded?"

3 replies so far   |    Click Here to Add a Reply

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