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Message Boards Digest

March 21, 2023

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

TPApril created a topic in 401(k) Plans

Top Heavy Plan with Only 401(k) Contributions

"Non safe-harbor 401(k) plan (integrated discretionary PS plan design) has become top heavy. The key employees defer > 3% 401k. (great NHCE participation so they never fail and thus no safe harbor provision) If I recall correctly, even if they do not make a nonelective PS contribution, they still need to contribute the 3% top heavy for non-key (as indicated in adoption agreement) just because of the key ee 401k contribs?"

2 replies so far   |    Click Here to Add a Reply

Tegernsee created a topic in 401(k) Plans

Pass Through Dividends on Company Stock Held in 401(k) Plan

"We have a client that has company stock (NYSE traded) as an investment option in their 401(k) plan. The plan also allows participants to invest all money types, including Roth contributions, in the stock fund. Further, the plan gives participants the option to either reinvest dividends or pass them through. The question is if a participant invests their Roth money source in company stock and elects pass through of dividends, are the dividends taxable or tax exempt?"

8 replies so far   |    Click Here to Add a Reply

metsfan026 created a topic in Defined Benefit Plans, Including Cash Balance

Who Must Get The 7.5% Gateway?

"I'm working on a new client that has a group of participants who are eligible for the 401(k)/Profit Sharing, but are excluded from the Cash Balance Plan. Are these participants required to get the 7.5% to pass the gateway? Or can they be given a lower amount into the Profit Sharing? Basically, I wanted to confirm that the people who get 7.5% are those who are eligible to participate in both the Profit Sharing and Cash Balance Plan? If someone is only eligible for the Profit Sharing, can they just get the minimum gateway to pass the New Comp testing? Their contribution, as well as the Safe Harbor Match, does get included into the 6% max going into the Profit Sharing, correct? (I'm pushing to move this to the 3% Safe Harbor, as it will obviously help), but I wanted to confirm I was correct."
2 replies so far   |    Click Here to Add a Reply

AlbanyConsultant created a topic in 401(k) Plans

Mega Backdoor Roth That Actually Works... Now What?

"No, really, this one works -- it's a one-person plan. The owner is maxing his Roth deferrals. He's even going to make his max $20K PS as Roth because he's in a self-directed brokerage account, so we can make that work. That leaves $20K to be put in as voluntary after tax, which the document allows. I figure that should be put into a different account since that has a different tax treatment. And then what is the best way forward? My thought was that it was better to roll that VAT money to a Roth IRA instead of doing an in-plan Roth conversion; it helps keep the plan under the $250K to avoid the 5500-EZ for a little longer. Are there any particular benefits or problems one way or the other? I don't see any rules about the timing of the Roth conversion. I'd think that depositing the VAT on Day One and, say, converting it to Roth inside the plan is just a thinly veiled excess Roth plan contribution, but I guess the regs don't see it that way. Obviously, the goal is to minimize gains in the VAT so there is no taxable income to report (maybe leaving it in cash will take care of that). I suppose there's still a 1099-R to report the base amount.... another reason in favor or rolling to an outside Roth IRA!"

1 reply so far   |    Click Here to Add a Reply

stainedglass80 created a topic in Retirement Plans in General

Foreign Government Entity as Sponsor of U.S. Qualified Plan?

"Does anyone have information on whether a foreign government entity can sponsor a retirement plan (e.g., SEP-IRA or 401(k)) in the U.S.? I have not found any direct information on this point."

3 replies so far   |    Click Here to Add a Reply

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