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Message Boards Digest

December 1, 2022

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

Coleboy1 created a topic in 401(k) Plans

Calculation of Discretionary Employer Match

"This client is putting in their discretionary match on a payroll basis. They are putting in 10% of the participant's deferral amount. So if a person is putting in a flat $100 amount, they are getting a $10 match. If a person is putting in 20% of pay and it comes to $2,500 then they are getting a $250 match. I always thought the match had to be based on percentage of compensation, not deferral amount. Am I wrong or am I just confused?"

2 replies so far   |    Click Here to Add a Reply

EBECatty created a topic in 409A Issues

Valuation of Non-Account Balances at Termination of a Nonqualifed Deferred Comp Plan

"In the context of terminating and liquidating a deferred compensation plan, does anyone have advice or a good rule of thumb for valuing the liquidation payments to participants in non-account balance plans where the ultimate benefit (had the plan continued) would be uncertain?

For example, a 45-year-old participant who must work until age 60 to vest, at which point she would receive fixed installment payments for, say, five years? Would you discount the liquidation value not only for time, but also likelihood of reaching vesting?"

2 replies so far   |    Click Here to Add a Reply

pmacduff created a topic in 401(k) Plans

Exclude Canadian Employees from Plan Eligibility?

"I have a US-based company that may be hiring a Canadian employee. The client tells me that the employee will be paid on a W-2 form and therefore would otherwise be eligible for the client's 401k. Is it possible for the plan to have 'Canadian based employees' as an excluded category for eligibility?

I'm not sure whether that category would be considered discriminatory in any way, or if there is a better way to accomplish what the client wants. This particular client plan will easily pass coverage."

2 replies so far   |    Click Here to Add a Reply

hsctpa created a topic in 401(k) Plans

CARES Amendment Needed for 401(k) Plan Becoming Effective in 2023?

"We have a brand new plan starting up in 2023. We have been including the CARES Act amendment with every new plan document we've drafted but now we are wondering if there is any reason to actually adopt the amendment for new 2023 plans. I can't find anything indicating that we should. Anyone else have input or support otherwise?"

1 reply so far   |    Click Here to Add a Reply

truphao created a topic in 401(k) Plans

Unhappy with Freebie Plan Document Provided by Fidelity; Fancy Footwork Desired by Year-End

"The prospect (S corp, just husband and wife) has started 401(k) Plan in 2021 using the free plan doc from Fidelity(?). Year-to-date no contributions/deferrals have been made so the account is sitting pretty with a zero balance. The free plan document does not allow for any 'fancy' stuff like Voluntary After-Tax ('VAT') contributions.

Now the prospect would like to do the VAT contribution and do an In-Plan conversion to Roth (for 2021 -- what else is new -- why not wait until New Year's Eve?).

So, I am trying to think through viable options (given we are already in December):

[1] Take the Plan and restate it on our plan document system, have the additional brokerage account opened (to accept VAT and conversion to Roth in the Plan) and help the prospect to get it done. I am concerned that Fidelity might not accommodate the existing account without them sponsoring the plan document. And it might take some extra time to sort it through which will diminish the opportunity to meet the objective by December 31.

[2] Leave the Fidelity Plan alone (and not fund it at all) and start a new 401(K) plan for 2021 using our platform. That would leave an 'empty' plan for some time and then later on I would terminate it. The shortcomings are having an extra plan lingering around, cost of termination, extra Form 5500, etc. The whole nonsense, but squared.

[3] Terminate Fidelity plan and start another one. Obviously this triggers the 'replacement' plan issue. But the Fidelity plan is empty and it should have never existed in a first place.

All thoughts with pros and cons are appreciated. I apologize in advance if this does not make much sense because I am not a '401(k) guy' -- just an actuary."

4 replies so far   |    Click Here to Add a Reply

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