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Message Boards Digest

December 15, 2022

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

AnnCK created a topic in Distributions and Loans, Other than QDROs

When Is W-4R Necessary for Lump Sum Distribution?

"I am a bit confused on the W-4P and W-4R usage. Lets assume a lump-sum distribution, rollover eligible. If a participant requests a distribution from a plan and completes a distribution form that includes a section where he/she can elect the withholding that they want to apply, is it also necessary that the participant complete a W-4R? Along the same lines, I have seen some TPAs use a distribution form that has an election to pay the participant "In a single payment of my entire account balance, less required 20% withholding". If the person chooses that election, do they also need to complete a W-4R form? Thanks!"

9 replies so far   |    Click Here to Add a Reply

rblum50 created a topic in Distributions and Loans, Other than QDROs

Who Is Responsible for Ensuring the RMD is Paid?

"I have a 401(k) plan with an plan participant who retired from the plan and needs to take an RMD for Plan Year 2022. She has not taken any of her account balance out of the plan to date. My question is who is responsible (liable) to make sure she received her distribuition in a timely manner: 1. The Plan Sponsor or 2. the Plan Participant In other words, if she does not get paid out, who was responsible for getting her paid out?"

1 reply so far   |    Click Here to Add a Reply

The 401k Whisperer created a topic in Distributions and Loans, Other than QDROs

Feasible for Recordkeeper to Accept Distribution Elections Over the Phone?

"Would it be feasible under ERISA/the Code for service provider to design a process to allow qualified plan participants to elect distributions over the phone without completing a form of any kind? In other words, call center reps would orally guide participants through the election process, complete the online payment distribution form on behalf of the participant while they're on the call, and enter their choices in to our system. Totally verbal. It's the call center rep that's completing/submitting the election, and the participant is doing everything over the phone.

"Assume, for the sake of argument, that (1) we could authenticate the caller (2) the call would be on a recorded line and would be scripted, (3) the plan document doesn't say anything specifically requiring a written election, and (4) we would have a separate process to obtain spousal consents or other documents that required a notarized signature.

"Personally, I don't expect this would be allowed. I can think of about a half dozen reasons why this is a bad idea, (miscommunications, risk of offering "investment advice," etc.) However, the business folks are convinced that "other companies do this" and that somehow it would easier/more efficient than just helping the participants go to the website and complete the online form on their own. So if someone could tell me to find a definitive reason to shut this down it, I'd greatly appreciate it. I have researched it and I cannot find much DOL/IRS guidance about it -- nothing forbidding it but nothing to suggest they would allow it either.

"The best guidance I can find seems to be 26 CFR 1.401(a)-21 - Rules relating to the use of an electronic medium to provide applicable notices and to make participant elections. Maybe there's an argument that the call itself would be an "electronic medium" for making elections? FWIW, it appears that the E-Sign act says that consumers could conceivably use an oral or voice signature to sign a document. Has anyone had any experience with service providers allowing something like this? 'Please' and 'Thank You' for any insights you care to share!"

4 replies so far   |    Click Here to Add a Reply

bzorc created a topic in 401(k) Plans

Withholding/Gross Up for Qualified Birth Distribution Under SECURE

"A participant is requesting a $5,000 withdrawal related to the birth of a child under the SECURE Act- The plan allows for this type of withdrawal. The question is whether the participant can 'gross-up' the withdrawal so as to net $5,000? I truly have no idea."

3 replies so far   |    Click Here to Add a Reply

AmyETPA created a topic in Form 5500

Year-End Participant Participant Count When Terminated Paid Out Participants Shown as Receivables

"Plan reporting is done on an accrual basis. We are at 121 participants at beginning of plan year in part due to several participants who received a profit sharing contribution who had previously terminated and been paid out but now had this showing as in their account at the end of the plan year. Any chance we could exclude them from the count?"

1 reply so far   |    Click Here to Add a Reply

L. S. created a topic in 401(k) Plans

C Corp Employer Securities & Participating LLC Employer

"We have a 401(k) plan with qualified employer securities. The plan sponsor is a C-Corporation and is privately-held. The owner formed a new business in 2022 under a separate LLC that they own 100% and hired employees in early-2022. Since the C-Corporation is in a controlled group with the newly-formed LLC, the LLC was added as a participating employer of the plan effective 1/1/2023, recognizing prior service with the LLC. We expect there to be employees that meet the plan's eligibility requirements in July 2023. My question is -- how does the qualified employer securities investment option work with the employees of the LLC? Would the LLC employees simply be treated the same as the employees of the C-Corporation and have the option to purchase stock in the C-Corporation? Or, is there some other piece that I'm missing.... such as, since the C-Corporation is technically not their employer, would the option to purchase employer securities in the C-Corporation be unavailable? Although, if this is the case, I would presume this would run into benefits, rights and features issues."

2 replies so far   |    Click Here to Add a Reply

metsfan026 created a topic in Defined Benefit Plans, Including Cash Balance

Can These Plans Be Tested Separately?

"This company currently has a 401(k) Plan and are looking to add a Cash Balance on top of that. I don't believe there are currently any employer contributions going into the 401(k) Plan. In that situation, do the Plans have to be tested together or can the Plans be separated and tested individually? So when we are collecting EBAR for Rate Group testing, etc., can the 401(k) contributions going into the other plan be ignored? Hopefully this question makes sense."

2 replies so far   |    Click Here to Add a Reply

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