Message Boards Digest

March 27, 2023

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

mal created a topic in Retirement Plans in General

Collective Bargaining Agreement and Lump-Sum Contribution?

"A collective bargaining agreement calls for a regular hourly contribution to a multiemployer profit-sharing plan. A contributing Employer is having difficulty with employee retention and would like to negotiate a lump-sum payment for each employee. This mandatory payment would be made 90-180 days after the new CBA is signed and only for those actively employed on that date. Are there any issues with this payment?"

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Draper55 created a topic in Defined Benefit Plans, Including Cash Balance

Newly Covered Employees and Prior Benefit Structure

"I have an expansion of the work force as of January [1] These newly covered employees were previously excludables. Is it reasonable to disregard them with regard to the prior benefit structure under 401(a)(26) since they were not eligible to have accrued anything prior to 1/1. The cash balance book I have discusses this issue with regard to new plans; the same issue is involved here. Hard to imagine the force of 401(a)(26) is somehow to require the granting of past service credits upon entry to satisfy the prior benefit structure test. Short on time to research this in depth so any existing knowledge or thoughts would be appreciated."

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#toomanyrules created a topic in 457 Plans

When Can Distributions Be Permitted from 457(f) Plan?

"When are 457(f) contributions actually payable? I know it depends on the document, but under the regulations, when can a 457(f) plan allow for distributions? Is it permissible to distribute upon full vesting, if the participant is still employed? I don't see anything in the regulations that allow actively employed participants to withdraw vested amounts, other than for unforeseeable emergencies, taxes, or attainment of age normal retirement age, or at a stated event. Would becoming fully vested be considered a 'Stated Event'?"

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R. Butler created a topic in 401(k) Plans

Insured Benefits Paid Under State Paid Leave Laws - Count as Compensation?

"Plan defines compensation as 3401(a) wages. Participant receives payment under a state paid leave law. Payment is actually made by the insurance company, but the income will be reported to employee on a W-2. It is my understanding that this would generally count as compensation under the plan even if paid by the insurance company. Does that sound correct? Plan does contain 414(s) exclusions, but I don't see that a paid leave program is a fringe or welfare benefit. Does that sound correct?"

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Jakyasar created a topic in 401(k) Plans

Excess Deposits/415 Issues

"Hi Here is a new one never dealt with before. I found out that the client (over age 50) has an excess situation and not sure how to tackle it The plan has the following features: 401k+NESH (3% mandatory)+PS. The plan is also used as a QRP -- qualified replacement plan During 2022, $136,000 was deposited with the following breakdown

  • April 2022 -- $6,500 -- from biz -- 2021 catch up
  • July1 2022 -- $58,000 -- from QRP -- 2021 NESH+PS
  • July2 2022 -- $6,500 -- from biz -- 2022 catch up
  • November 2022 -- $65,000 -- from biz -- towards 2022 NESH+PS

The July2 and November deposits created a $4,000 excess deposit during 2022 i.e. over the 415(c) limit. (71,500-67,500 (max 2022 415(c) limit) = 4,000 How is this to be corrected?"

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Dougsbpc created a topic in IRAs and Roth IRAs

Non-Model SEP and Qualified Plan Both Adopted

"We may or may not take over the administration of this small defined benefit pension plan. I know this is somewhat common but do not know the solution. What happens when a company adopts and funds a non-model SEP on December 1, 2022 for the 2022 year and adopts a qualified Defined Benefit Pension Plan on January 15, 2023 effective for the 2022 year? Does this work like if a SIMPLE IRA were adopted in the same year as a qualified plan. I think in that case there is an exclusive plan rule where the SIMPLE would be invalidated and distributed under VCP. A non-model SEP and qualified plan cannot be maintained at the same time. Is the SEP or the qualified pension plan invalidated?"

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Nate S created a topic in Employee Stock Ownership Plans (ESOPs)

Installment Payments Miscounted, Is Correction Necessary?

"An ESOP has a standard distribution policy, 5-year wait, payment thereafter in 5 equal installments (no acceleration below $5K, no segregation of stock accounts, fees fully paid by the Sponsor). Last year the installments were incorrectly counted and participants who should have received their 4th installment (i.e. 50% of the available balance), their payment was calculated based upon a 3rd installment and received only 33% of the available balance. While this may be an operational failure for not following the terms of the document, is there a correction to be made? If future company stock gains are neutral or positive, I don't see that the participants were disadvantaged in any way that would produce a basis for a correction. What about a participant who was due their 5th installment(100%) but only received 50% of their available balance and now will need an additional distribution? Are they harmed vs a comparison to the broader stock indexes? How should future installment amounts be calculated, does the missed amount all get made-up in the next payment, or are they calculated normally based on the remaining periods?"

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ANONY0611 created a topic in 401(k) Plans

Excluding a Family Member from Profit Sharing/401(k) Plan

"The central issue is whether or not a family member can be excluded entirely from the plan (0 deferral, 0 SH 0 PS)?"

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