Message Boards Digest

March 1, 2023

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

BG5150 created a topic in 403(b) Plans, Accounts or Annuities

Relius Coding of Part-Time Employees for Coverage Testing

"Is there a way to code people in Relius who work less than 20 hours a week to NOT show up in the coverage testing? Other than an override?"

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Trisports created a topic in Correction of Plan Defects

Participant Changed Election to 0% But Payroll Continued Deductions -- for Two Years

"The participant changed their election in 2021 from 3% to 0% but the payroll continued to deduct 3%. The failure was discovered in 2023. The plan has no match and is subject to ADP testing. How should we correct. technically, these were impermissible deductions. Are we supposed to return the contributions + earnings/losses to participant and re-run the ADP testing?"

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Taffy Auditor created a topic in 401(k) Plans

103(a)(3)(c) Audit - Not All Investments Certified

"I have a new EBP audit where the predecessor completed 103(a)(3)(c)/limited-scope audit with only certain investments certified and then had a note breaking out certified vs non-certified investments and disclosed in the notes that they did full-scope procedures on those non-certified investments. The report reads that same as a limited-scope normally would but just references the 2 custodians that certified statements were received. The 5500 is marked as limited-scope. I don't believe I've ever seen this and was wondering if anyone had and if this is even allowable to apply limited-scope procedures to certain investments and full-scope to others?"

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austin3515 created a topic in 401(k) Plans

Did the DOL Just Change the Audit Requirement?

" After considering the public comments, the Agencies decided to adopt the proposed counting method change for defined contribution individual account plans by adding a new line item on both the Form 5500 and Form 5500-SF for defined contribution pension plans to report participants with account balances at the beginning of the plan year (there already is a line item for reporting the number of participants with account balances at the end of the plan year). Instead of using all those eligible to participate, defined contribution plan filers will look at the number of participants/beneficiaries with account balances as of the beginning of the plan year (the first plan year would use an end- of- year measure) when determining if they are eligible for small plan reporting options, e.g., the Form 5500-SF. Conforming changes are also made to the short plan year filings and the “80-120” Participant Rule instructions to reflect this new counting method. See Appendix C for details on changes to forms and instructions related to this audit related participant counting method change."

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

Disabled Participant and Loan Offset

"A plan participant under age 59 and 1/2 has recently become permanently and totally disabled. He has 100,000 cash in his 401(k) plan and a 40,000 loan. He wants to withdraw his entire account balance because of dire financial hardship. The plan provides that upon disability the plan participant can withdraw the entire account balance. The plan does not deem that the loan must be paid under these circumstances and the loan is not in default. Here, even though the participant is under 59 and 1/2 there will be no 10% penalty given total and permanent disability. The participants total account balance should be $140,000, i.e., 100,000 cash and a 40,000 note receivable. However, upon distribution he will only be in receipt of $100,000 cash and not the note receivable. However, if he withdraws the $100,000 cash is this deemed a loan offset of $40,000 ($140,000 account balance less $100,000) that is included in taxable income? However, my understanding is that a loan offset only occurs if the loan is in default and here it is not. If it's not a loan offset then it's a $100,000 taxable distribution with a $40,000 loan outstanding with the plan. So the participant can ether try to make loan payments or preferably let the loan go into default whereupon its a deemed distribution not subject to the 10% penalty. Another possibility is due to concerns that the IRS may challenge his permanent and total disability diagnosis, he may decide to take a $100,000 hardship withdrawal and let the loan go into default and accept the deemed distribution. Any thoughts on this analysis especially regarding this not being a loan offset?"
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Jakyasar created a topic in Defined Benefit Plans, Including Cash Balance

PBGC Coverage for Controlled Group

"Hi Company A is a medical office, small i.e. less than 25 active participants. Owned 100% by MD MD also owns couple of restaurants with employees. 2 part question: Q1: If all included in the DB plan, Company A being the sponsor and the restaurants being adopting employers, is this DB plan covered by PBGC? The total active participants will still be under 25. Q2: If only Company A adopts the plan and excludes the restaurants, no PBGC coverage, correct?"

1 reply so far   |    Click Here to Add a Reply

BG5150 created a topic in 403(b) Plans, Accounts or Annuities

403(b) Plan Employer Contribution Limits and Timing

"Since 403(b) plan Employers generally don't file tax returns, is there a 404(a) limit to what the Employer can contribute? Is it the same a for-profit companies, 25% of pay? And when are the ER contributions due, since there is no tax form deadline? 12/31 the following year? (assuming calendar year) Is any of this discussed in the regs? Where?"

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