Message Boards Digest

February 16, 2023

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

Ananda created a topic in Retirement Plans in General

Brother Sister Company and Family Attribution Rules

"For 401(a) testing purposes would Company A which is owned 50/50 by husband and wife, and Company B owned 50/50 by their children be considered a brother sister company part of a controlled group? It's clear that if these individuals were unrelated the answer would be no because 5 or fewer individuals do not have more than 50% common ownership. So for example the children have 0% ownership in Company A and the parents have 0% ownership in Company B. However the Section 318 family attribution rules state that husband and wife are deemed to own each others shares and parent and adult children similarly are deemed to own each others shares. Further Reg Section 1.414(c)-2(c)(2) states that if an individual is in effective control of a company, (greater than 50%) then he or she is deemed to own their parents or children's interest in that company. However, I interpret Section 318 and the 414 regs to only apply to family attribution within a single company, not among 2 companies. So even though the husband and wife are deemed to each have 100% effective control of Company A, this shouldn't mean that the parents are deemed to effectively own their children's 50/50 ownership interest in Company B and vice versa? If this were correct then Company A and B would be deemed to be a brother sister controlled group of companies which I don't agree with especially since each owner does not have a greater than 50% interest.. Any thoughts or experience with this issue?"
2 replies so far   |    Click Here to Add a Reply

Tom created a topic in 401(k) Plans

Short Plan Year and Top Heavy Minimum Calculation

"Plan sponsor opened a 401(k) plan effective March 1, 2022 but has been in operation for some years. It is top heavy as of 12/31/2022 and so the first/short 2022 plan year is top heavy. I assume the 3% top heavy minimum is required only on pay from March 1 through December 31?"

1 reply so far   |    Click Here to Add a Reply

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

Plan Was Never Set Up

"Back in 2020, CPA asked me to run a proposal for a DB plan. Did projections for 2020 and 2021, big numbers, provided consulting and also all the mandatory deadlines. Never heard again from the CPA and the prospective client. Last week I got a note from the CPA saying the client did not make any money in 2022, is $0 contribution ok? I went "huh???" Apparently, plan sponsor (one lifer) made deposits into an account (do not even know what kind as there is no plan document) for 2020 and 2021. So

  • No document
  • No valuation
  • No signed SB
  • No 5500 for 2020 and 2021 (EZ - easy fix)

Other than getting an ERISA attorney involved, has anyone dealt with a situation like this and if yes, what steps were taken?"

2 replies so far   |    Click Here to Add a Reply

Peter Gulia created a topic in Retirement Plans in General

May a Military Make-Up Deferral Be a Roth Deferral?

"An individual-account (defined-contribution) plan has no nonelective contribution and no matching contribution, only a participant’s elective deferrals. The plan allows participants a choice between non-Roth and Roth deferrals. After qualified military service, a reemployed participant invokes her right to make her contribution regarding the time she was away on military service. The participant’s wages are not enough to support her current-year deferrals and extra reductions for prior years’ deferrals. Fortunately, the reemployed person has savings. For the prior years’ deferrals, she sends her personal check to the plan’s recordkeeper/trustee. The participant asks that her make-up contribution be credited to her plan account’s Roth subaccount. Is there any reason the plan would not do this?"

No replies yet   |    Click Here to Add a Reply

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