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Message Boards Digest

October 14, 2022

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

austin3515 created a topic in Form 5500

TIAA CREF Deemed Loan Reporting Issue

"Curious to see if people are seeing the same thing as me with TIAA CREF. I swear they are doing loan reporting for participant loans (NOT Plan Loans--if you work with TIAA you know there is a distinction) the wrong way. As far as I can tell this is what they are doing: 1) Including deemed distributed loans in the ending balance of participant loans 2) Reporting loan offsets as deemed distributions. Loan offsets of course should be included in the regular distribution item.

I hope I'm wrong, but honest to goodness I'm pretty certain they are messing it up. And you would never know it unless you really dig (I did not because I had faith in TIAA, but the auditor is digging, and by golly I think they are correct)."

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cpc0506 created a topic in 401(k) Plans

2 Active 401(k) Plans in Same Plan Year -- One Safe Harbor But Not the Other

"New client comes to us and asks us the establish a 401(k) SH plan for them. We generated the documents, safe harbor effective January 1, 2022 and client executed the document. We just learned that advisor aware that the client already has a 401k plan, which is not safe harbor. What options do we have now? Can a client sponsor two 401k plans in the same year (one safe harbor and one non-safe harbor)?"

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waid10 created a topic in Health Plans (Including ACA, COBRA, HIPAA)

Employer Wants to Prevent Employees from Moving Mid-Year from One Health Plan to Another Even with Qualifying Event

"My employer offers multiple health plan options to employees. The employer is considering amending the health plan to prevent employees from making a mid-year change (moving from one plan to another) even if the employee has a Qualifying Event. The employer wants to avoid the opportunity for adverse selection. Is it permissible for an employer to implement a ban like this (where an employee, with a valid qualifying event, is not permitted from moving from, say, the employer's Gold plan to the employer's Silver plan)?"

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Tom created a topic in 401(k) Plans

Prevailing Wage Contributions to a 401(k) Plan In Lieu of Wages

"A client asked about making prevailing wage contributions to a 401(k) instead of paying wages. It makes sense to save the FICA tax. So there is no eligibility requirement, no allocation conditions, 100% vested and can be used to offset the employer profit sharing allocation if there is one.

I assume it can be included in nondiscrimination testing since it can offset PS.

Of course this feature must be added in the Adoption Agreement. My question is what else has to be done?

The client is already calculating the amount and paying as wages. Does this change need to be in the service contract they are serving, the affected employees notified it will no longer be in wages? Or can our client just make this change? I told the client to check with their legal counsel and/or tax advisor."

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Belgarath created a topic in Plan Document Amendments

Summary of Material Modifications Required When Ambiguous Document Provision Is Amended to Align with Operational Practice?

"We have had an unusual situation posed to us as a hypothetical issue, although I'm pretty nearly certain it is real -- pretty hard to dream this up.

A group of several large 403(b) plans (not a controlled group or affiliated service group) that were set up with intentionally identical provisions. The 403(b) documents required a Year of Service to be eligible for employer contributions. Plan uses 1,000 hours for a Year of Service, measures the initial computation period from date of hire to the end of the 12-month period.

So far, so good. However, no election was made in the adoption agreement as to whether subsequent eligibility periods switch to plan year, or remain on anniversary years. The adoption agreement is clear -- one or the other should be chosen. But it wasn't.

The plans have been ADMINISTERED with subsequent eligibility periods changing to plan year. Given that there is an omission in the adoption agreement, this is good, as it is more favorable to employees (potentially earlier eligibility for employer contributions).

I don't believe this is a 'document failure' in the technical sense for purposes of RP 2021-30. It doesn't, 'on its face' violate a requirement of 403(b), I don't think. Thoughts on this?

Ignoring that aspect, and pushing a tenuous position -- when the plan is amended to correct this, is a SMM necessary? Obviously, the safe and solid answer is 'yes.' But is there a valid argument to be made that since the employees have been treated consistently under the 'change to plan year' option, that there's no material change that actually affects them? Beyond that, there's no specific penalty for failure to provide an SMM. I understand this is legal counsel territory, and that is what we are recommending. However, curious as to thoughts on this, and the 'risk' factor in taking the aggressive approach."

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