Message Boards Digest

March 6, 2023

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

ftam created a topic in 401(k) Plans

Plan Liquidated but Fails Discrimination Testing

"A plan has been terminated and assets have been liquidated as of 12/31/2022. I worked on the discrimination testing for the plan and it turns out the plan fails discrimination testing. I have recharacterized the affected participant's excess contributions as catch-up and it turns out the affected participant will need a refund distribution of less than $20. When the affected participant withdrew his funds, it was a cash distribution so it makes things a little easier. With that said, which are the best options: [1] Have the asset platform create an additional 1099-R to account for the excess contributions? [2] Leave it alone since the affected contributions will already be taxed since he took out a cash distribution."

1 reply so far   |    Click Here to Add a Reply

ERISA guy created a topic in Distributions and Loans, Other than QDROs

Direct Rollover Even Without Distribution Event?

"A participant in a pure profit sharing plan is claiming that a direct rollover must be permitted at any time and for any reason regardless of whether the participant is otherwise eligible for a distribution (which the participant is not). The participant relies on Treas. Reg. § 1.401(a)(31)-1, Q/A-1. The rules I've reviewed do not explicitly say that a distribution must otherwise be available under the terms of the Plan. Anyone come across some authority to rely upon that an eligible rollover distribution is not permitted at any time and only if a distribution is otherwise available under the terms of the Plan? The direct rollover section of the Plan is not helpful."

4 replies so far   |    Click Here to Add a Reply

FishOn created a topic in 401(k) Plans

Date for Top Heavy Contribution

"Have a plan that was top-heavy at 12/31/22 (62%). From my understanding the plan is top-heavy for 2023. The prior service provider calculate TH minimum contribution for the sponsor based on 2022 census/contributions but told them it would need to be deposited by March 15, 2024. Wouldn't the top heavy minimum be based on the 2023 census/contributions instead of 2022 census/contributions?"

6 replies so far   |    Click Here to Add a Reply

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

RMD required? No documentation found for old distribution erroneously rolled into IRA

"Participant terminated from company in 1985 and requested her distribution be rolled over into a taxable account. Funds appear to have erroneously been rolled into an IRA and no one has any records anymore; individual tax returns were shredded, brokerage company was sold to another, previous Employer no longer has records. IRS and FTB say they don't have 1099s going back that far. Participant is now required to take RMDs. Is there any way to avoid taking an RMD from the IRA into which the funds were erroneously rolled over? We can't find anything to support the claim that an error was made."
3 replies so far   |    Click Here to Add a Reply

KevinMc created a topic in 401(k) Plans

Can Safe Harbor Contribution Be Changed Mid Year?

"A company with 30 employees has a non elective safe harbor contribution of 3%. They would like to change to a safe harbor match with a 4% match (or using the match formula). Can this change be made anytime with participant notice or must it be done at the beginning of the next plan year with participant notice? If it can be done during the year: what kind and how much of a notice do the participants need to be given."

1 reply so far   |    Click Here to Add a Reply

Centerstage created a topic in 409A Issues

Bank Creates Holding Company; What Part of 1.409A-3(I)(5) Excludes It as Change in Control Event?

"Bank executives have employment agreements that allow 2 times pay as severance for voluntary separation from service within one year after a Change in Control defined by reference to 409A definition of Change in Control Event. Bank wants to incorporate a Holding Company and do a statutory share exchange where all of the Bank shareholders exchange their Bank common stock shares for Holding Company shares, leaving Holding Company as owner of all shares of Bank common stock, and Holding Company will then have same shareholders that Bank had before the transaction. No Bank shareholder is related by attribution rules of 318(a) to any other Bank shareholder. No Bank shareholder owns more than 30% of the outstanding shares of Bank. Bank has asked if this is a Change in Control Event under 409A, for purposes of the employment agreements of the Bank executives. After this transaction, if one of the Bank Executives leaves voluntarily, would he or she be entitled to the severance pay under his or her employment agreement? ... Can anyone point to the regulation under 1.409A-3(i)5(v), (vi) and/or (viii) that excludes this transaction from the definition of Change in Control Event under 409A?"

No replies yet   |    Click Here to Add a Reply

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