Message Boards Digest

March 30, 2023

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

cathyw created a topic in Retirement Plans in General


"Dealing with a typical A-org ASG for a professional service organization. The partners of an accounting firm (LLP) are each individual PCs. The PCs receive K-1 share of profits, and then pay W-2 salary to the owner of the PC. The individual PCs have each adopted the 401(k) plan maintained by the LLP. Suppose Jane Smith PC owns 4% of LLP, and Jane Smith owns 100% of Jane Smith PC. Through 318 attribution, Jane Smith is deemed to own 4% of LLP, but she also owns 100% of Jane Smith PC which is a participating employer in the 401(k) plan. Is Jane Smith a 5% owner for purposes of determining HCE status? The plan uses top paid group and she falls below the top 20% in salary. We have a difference of opinion here. Is there any authoritative guidance on the correct analysis?"

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Jakyasar created a topic in Retirement Plans in General

What Is the Minimum Gateway in a Combo Plan?

"Looking into a proposal, all plans are calendar year. DC Plan already exists. Provisions are 401k+NESH+PS Entry is first day of the month following completion 1 YOS Compensation is defined as from DOP CB plan will have 1 year wait, dual entry and full compensation For all purposes, all top heavy. DC plan top heavy provision states last day rule. PS states last day rule+1000 hours EE data for DC plan:

  • DOH 3/15/2021
  • DOP 4/1/2022
  • DOT 5/1/2022
  • 2022 w-2 $12,000
  • Salary from 4/1/2022 to 5/1/2022 - $3,000

From above, never eligible to enter CB plan so top heavy is only 3% and under DC plan only Gateway is 7.5% (3% NESH+4.5% PS) For gateway, $3,000 salary is used and thus $225. Top heavy is based on full salary i.e. $12,000*3% = $360 however, plan has last day rule. What amount is supposed to be allocated?"

5 replies so far   |    Click Here to Add a Reply

Zach Del created a topic in 401(k) Plans

401(k) Plan with Multiple Discretionary Match Formulas

"A plan came to our attention that has been making the same discretionary matching contributions for the past three years at least. The first formula is 100% of the first 3%, but they also pay 100% of the first 6% if a participant is employed longer than 10 years. I've never seen this before. I thought the maximum service requirement for an employer allocation is 1000 hours. Would they need to pass ACP testing on each formula separately?"

1 reply so far   |    Click Here to Add a Reply

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

Start-Up Plan Retroactive to 1/1/2022 But Taxes Have Been Filed?

"LLC taxes as an S Corp. Taxes have been filed by March 15th. I do not know yet if the extension has been filed or not. Is there a creative approach to install the Plan retro to 1/1/2022?"

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SadieJane created a topic in Employee Stock Ownership Plans (ESOPs)

Freeze ESOP Share Value for Terminated Employees?

"A client claims that some ESOPs freeze the share value on termination of employment for the terminating participant. That participant's share value/account balance would not change in the future, regardless of how long the participant waits to receive distribution. There would also be no interest credit or any other adjustment to the account balance at termination. The purported rationale is that a terminated participant should neither share in the upside of future stock increases nor bear the potential risk of share price decline in the future. I can find nothing on this. Seems dubious to me. Has anyone heard of this?"

3 replies so far   |    Click Here to Add a Reply

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