Message Boards Digest

September 29, 2022

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

BG5150 created a topic in Retirement Plans in General

Can I Have a Closed MEP Inside an Open MEP?

"I have a plan that was a controlled group/ASG in the same plan. This year (2021) four other companies joined the plan that aren't part of the CG/ASG, and no other business ties, so we have an open MEP. As I understand it, in an open MEP, each plan has it's own 5500, and in a closed MEP, they only file one. So, in this case, can I treat that CG as one closed MEP and file a single 5500 for those plans, and stand alone 5500's for the four new ones? Or do I have to file 14 seperate ones?"

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Peter Gulia created a topic in Distributions and Loans, Other than QDROs

How Do You Handle That a Participant's Account Changes from Less Than $1,000 to More Than $1,000?

"The sponsor of a retirement plan that yet has no provision for an involuntary distribution desires to provide an involuntary distribution if a participant is severed from employment and her balance is no more than $1,000.

The sponsor prefers to limit the plan’s involuntary distribution to the amount specified in Internal Revenue Code § 401(a)(31)(B)(i)(I) because the sponsor/administrator is unwilling to provide for a default-rollover IRA, which would be required if an involuntary distribution is more than $1,000 and the participant/distributee furnishes no different instruction.

The plan’s provision would look to whether a participant’s whole account, including her rollover-contributions subaccount, is no more than $1,000. The plan’s governing document uses no IRS-preapproved document. The sponsor would amend the document to state its desired provision (except to the extent a provision would tax-disqualify the plan).

Assume all amounts are 100% nonforfeitable.

The plan provides participant-directed investment, with a broad range of investment alternatives. Account balances are recomputed every New York Stock Exchange day.

For simplicity (and to not resume a June 2020 BenefitsLink discussion), assume the plan incurs no fee for processing a distribution, and a participant’s account incurs no charge that could result in a distribution amount less than the participant’s before-charge account balance.

What happens if, between the time the plan’s administrator sends a § 402(f) notice and the form for instructing a direct rollover and the time the administrator would process an involuntary distribution, the participant’s changes from less than $1,000 to more than $1,000?

Must the administrator cancel the distribution? What happens if, on the day the involuntary distribution would be processed, the participant’s account balance changes from $999 (based on the preceding day’s funds’ shares’ prices) to $1,001 (based on the funds’ shares’ prices on which shares would be redeemed)? Must the administrator cancel the distribution? How does a recordkeeper do that? If looking to the preceding day’s balance is good enough and the distribution is not canceled, what does the recordkeeper with the breakage between $1,000 and the funds’ shares’ redemption value?

How do plans’ administrators and, perhaps more important, recordkeepers deal with this in the practical real world?"

1 reply so far   |    Click Here to Add a Reply

mlp0816 created a topic in Plan Terminations

Leaving a PEP -- Sounds Complicated

"I have a prospect that is a part of a PEP. He wants to exit out of it and operate his own 401(k). I have never done this but from what I'm reading it's not a simple task. Anyone have insight as to if it can be done and if so, how?"

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