Message Boards Digest

March 13, 2023

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

justatester created a topic in 401(k) Plans

Grandfathered CODA

"We have a plan that has a 5% PS contribution. Many years ago they permitted employees to receive the 5% as cash instead of the PS. They eliminated that option but we still have a handful of employees still receiving the cash instead of the PS. Would this be permitted? Would that make the entire ps a coda even though they no longer have the option to take as cash?"

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52626 created a topic in 401(k) Plans

Surrender of Insurance Policy Held in 401(k) Plan

"Plan allowed insurance and the participant was paying premiums from his account. Participant decided he no longer wanted the insurance and contacted the insurance provider and cancelled the policy. The provider sent him a check for the Cash Surrender Value. The insurance company was not responsible for the 1099R. The Cash Surrender Value was $56,000. The plan issued a 1099R to the participant for the full Cash Surrender Value. The participant stated the insurance company told him he would only pay tax on the gain of the policy - difference between the Surrender Value and the investment in the policy, this was approximately $9,356. Since the premiums were paid with pre tax dollars, isn't the total Cash Surrender Value taxable income? I am not sure the insurance company realized this was held under a 401(k) Plan vs a private policy."

5 replies so far   |    Click Here to Add a Reply

Tom created a topic in 401(k) Plans

Nondiscrimination Testing - Coverage

"Simple real example: Dentist and wife are eligible as are three employees. It is safe harbor match plan. One employee terminated with <501 hours. We are allocating PS only to the doctor and the two ongoing employees to meet 410(b) and in a uniform integrated amount to pass 401(a)(4). The dentist prefers to cover the terminated employee which he can as a class-allocated plan with no allocation conditions and this employee only had $2,000 in wages. This would mean full PS to 2 NHCS and top heavy to the 3rd employee who is still working. The result is significantly less cost. My real question is with the testing software - I thought those who terminated with <501 hours were excluded from testing. That would mean only 2 eligible NHCEs in the testing and only one would have to be covered to pass ratio %, but the testing reports say fail if we only cover one. The employee is coded correctly in the software application with just a few hours and a termination date."

1 reply so far   |    Click Here to Add a Reply

Belgarath created a topic in Humor, Inspiration, Miscellaneous

Don't Forget That Tomorrow Is Happy Pi Day

"And the Nerds Cheer? Secant, tangent, cosine, sine. Three point one four one five nine!"

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Lauren3333 created a topic in Distributions and Loans, Other than QDROs

Completing Form W-4R for Distributions Under $200?

"Under what circumstances are practitioners having participants complete Form W-4R for lump sum distributions of balances under $200. Prior to 2023, based on the wording in the Special Tax Notice, the plans we administer did not withhold on lump sum distributions under $200. If the participant wanted federal income tax withheld, they would need to elect the withholding percentage on the distribution form. Is 20% withholding (or more) now the only option? Does Form W-4R not have to be provided because the plan is not required to withhold- even though it is an eligible rollover distribution, just not one that a direct rollover option is provided."

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