Message Boards Digest

March 16, 2023

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

ftam created a topic in 401(k) Plans

Safe Harbor Correction: Plan in Effect for Only One Payroll Period

"A brand new plan for the 2022 plan year has a safe harbor match provision. The plan document states that safe harbor contributions are determined at the end of the plan year. However, there was only 1 payroll in 2022 that was in effect. Plan sponsor provided safe harbor match for that one payroll. Is the plan sponsor required to true-up the safe harbor match for the entire year and if their original intention was to fund it on a per payroll basis, can this be corrected under SCP?"

8 replies so far   |    Click Here to Add a Reply

ASC Webcast – EPCRS (IRS Employee Plans Compliance Resolution System) Case Studies

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MattHSC created a topic in 401(k) Plans

Coverage Test/Waiver of Participation

"Plan had 3 employees (2 owners and a non-HCE). The only contributions allow to the plan are a Profit Sharing allocation in which all receive an equal proportion to compensation. This contributions is on a 6 year graded vesting schedule. They have a 1 year of service required of 1,000 hours to which a new employee met. They became eligible based on reaching 1,000 using their anniversary date as their determination period. The employee did not reach 1,000 in a calendar year and will not meet this requirement at any point. The concern is putting profit sharing money annually when this employee will never meet any level of vesting service would cause frustration with the employee as they will receive a profit share and statement annually while continually having 0% vesting. The client and participant are curious if she is able to put something in writing to opt out or waive the rights to a profit share to avoid this. Our concern is that since this employee reached eligibility, the plan would fail coverage testing and require a corrective contribution. If the employee has opted out of the plan entirely, would they be owed a QNEC for a failed coverage test or would the opt out from the plan apply?"

4 replies so far   |    Click Here to Add a Reply

Tom created a topic in 401(k) Plans

Key Employee and Family Attribution

"Probably a simple question -- I don't see where there is family attribution required for officers, only for >5% owners. I need to be 100% sure since top heavy status can be a VERY ugly surprise to a plan sponsor with many employees."

1 reply so far   |    Click Here to Add a Reply

401kology created a topic in 401(k) Plans

Clawbacks and 401(k) Plans

"Wanted to ask if anyone has any experience with clawbacks of sign on bonuses when the plan has immediate entry and the employee defers from this compensation but it is clawed back at a later date. My understanding is that the impact on employer contributions depends on the definition of compensation in the plan document (one of the safe harbors). It is also my understanding that the 401(k) deferrals, once made are eligible deferrals at the time of deposit so that the clawback would not impact the amount of 401(k) deferrals in the employee's account. The employer contribution, and any adjustment, will depend on whether the clawback occurs in the same tax year or crosses over tax years. Does anyone have a good reference point or other items to consider? Noting here that my recommendation would be to not have these included in eligible compensation to prevent any impact on the 401(k) plan, but many large companies have immediate entry these days."

No replies yet   |    Click Here to Add a Reply

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