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Message Boards Digest

May 9, 2023

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

HCE created a topic in Retirement Plans in General

Is a Post-Retirement Commission Plan an ERISA Plan?

"The employer has a plan that provides all sales employees (having worked a specific number of years) will continue to receive commissions on the book of business they created as employees for several years past retirement. This is an actual plan, not individually designed agreements with the individual sales employees. Is this an ERISA plan? It clearly has an ongoing administrative scheme, it provides for a deferral of income past retirement, and provides for retirement income. Our concern is that the plan is broad-based. If it were limited to a 'top-hat' group, I don't think we have an issue (because we can take some relief from the 'top-hat' rules). This appears to be a pretty common type of plan, but I can't find any guidance on the topic."

1 reply so far   |    Click Here to Add a Reply

dragondon created a topic in 401(k) Plans

Qualified Compensation for a 401(k) and After Tax Contributions

"I have a client who has 8 employees, 6 of which whom earn a salary and 2 of which who get distributions from the fund each month as their compensation. The distributions are not W-2 compensation. Is there any way that these 2 employees can contribute to a 401k sponsored by the employer? Is there anything on the plan design that would allow for this compensation to be considered qualified compensation for their 401k? If that is not the case is there anyway that they can contribute on an after tax basis or since they technically are not earning any income and since a person cannot contribute more to their 401k then they earn in a year are they unable to add to this 401k?"

4 replies so far   |    Click Here to Add a Reply

TPApril created a topic in 401(k) Plans

Determination Period for Eligibility: Rehired Intern

"Plan has standard eligibility for ER contributions of 1000 hrs/1 yr of service. If 1000 hrs not reached in 1st 12 months, determination period switches to calendar year. Question --> Let's say an employee works a couple months, makes (immediate) eligibility for 401(k), but not for ER contributions. Couple years later (< than 5), ee is rehired. I'm wondering if that first period of employment means determination period must switch to calendar, or if plan calculates from date of rehire. Example

  • EE works 5/1/20 - 7/15/20
  • EE rehired 8/1/22 and works over 1000 hours in 2022
  • Eligibility for ER either 1/1/23 or 8/1/23"
2 replies so far   |    Click Here to Add a Reply

401kAllTheWay created a topic in 401(k) Plans

Recordkeeper Conversion from a Plan Sponsor's Perspective

"I tried looking for answers on this and haven't found one that gives the plan sponsor view of what it is like to change recordkeepers. We are knee deep in converting our plan and the hurdles keep coming to us. We seems to take one step forward but then 15 steps backward each day. Any advice or previous experience in converting? This is a massive change in a very condensed timeframe and very small team."

1 reply so far   |    Click Here to Add a Reply

Towanda created a topic in Cross-Tested Plans

Affiliated Service Group: 401(a)(4) / Gateway Testing for Owner Earning Income in Two Entities

"The owner of two entities in an affiliated service group earns W-2 income in one entity, and K-1 in the other. His W-2 income is lower than his K-1 income. When I aggregate the entities for 401(a)(4) / Gateway testing, the system (Datair) is disregarding the K-1 income for purposes of testing. This impacts the Gateway minimum for starters. It's the difference between a 5% Gateway and a 4.something% Gateway. The message I get is this: Compensation for 401(a)(4) Discrimination/Gateway Testing differs for sub plans for owners of a sole proprietorship or partnership. Smallest nonzero compensation will be used for testing in the Master Plan. Is this a rule, or is this a shortcoming with Datair?"

1 reply so far   |    Click Here to Add a Reply

gregburst created a topic in 401(k) Plans

Expatriates and Coverage

"One of my clients has a couple of employees that live and work in Japan. One of them has become a Japanese citizen. I have no info as to whether this person has dual citizenship. I'm trying to figure out whether these employees should be covered under the 401k plan, which uses fairly standard language in its document (see below). I believe a nonresident citizen should be covered, though I'm not sure. Is it determined by whether the person receives US-based income? And what about the nonresident former citizen? Seems like that person should not be covered. If anyone has some experience in this area, please shed some light. Thanks, Greg 'Employee': A person who is currently or hereafter employed by the Employer, or by any other employer aggregated under Code sections 414(b), (c), (m), (n), or (o) and the regulations thereunder, including a Leased Employee subject to Code section 414(n) and a self-employed owner of an unincorporated employer, but, unless otherwise provided in the Adoption Agreement, excluding (a) an Employee who is a nonresident alien (within the meaning of Code section 7701(b)(1)(B) deriving no earned income (within the meaning of Code section 911(d)(2)) from the Employer that constitutes income from sources within the United States (within the meaning of Code section 861(a)(3)); and (b) employees who are included in the unit of Employees covered by a collective bargaining agreement between the Employer and employee representatives, provided benefits were the subject of good faith bargaining and 2% or less of the employees of the Employer who are covered pursuant to that agreement are 'professional employees' as defined in Treasury Regulations section 1.410(b)-9. For this purpose, the term 'employee representatives' does not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Employer."

2 replies so far   |    Click Here to Add a Reply

waid10 created a topic in 457 Plans

Correcting 457(f) Plan Error

"I thought that there was a program for fixing 457(f) and 409A plan errors but I can't seem to find anything with the IRS. We have an erroneous deferral in our non qualified deferred comp plan. A participant reached their vesting date and should have been paid out their balance in 2021. I am looking for guidance on how to correct. Thanks."
1 reply so far   |    Click Here to Add a Reply
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