Message Boards Digest

May 19, 2023

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

Coleboy1 created a topic in 401(k) Plans

5500 When Life Insurance Policy Is the Only Plan Asset

"I have a 2 person profit sharing plan. Husband and wife. The only asset in the plan is an insurance policy for the husband. The cash value of this policy is now over $250K so I'll be doing a 5500EZ. My question is do I count the premium paid as a contribution? Is there anything else I need to do?"

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justatester created a topic in 401(k) Plans

Plan Merger and Prior Year Testing

"Company A: Plan uses prior year testing method. Company A acquires company B on 9-1-21. Company B uses current year testing method Effective 12-1-22, Company/Plan B merges into Company/Plan A. We are testing Plan A for full year and including Plan B only from 12/1-12/31. Both populations are approximately the same. What average do I use for the prior year testing adp/acp average? Do I need to do a weighted average? (Ideally, they should have waited to merge until 1/1/23. Or tested together for entire plan year). Thoughts?"
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Chaz created a topic in Health Savings Accounts (HSAs)

Mistaken FSA Election and HSA Contributions

"During open enrollment, an (childless) employee elects HDHP coverage and therefore (implicitly) to receive the employer's HSA 'seed' contribution. Unfortunately, the employee also intended to enroll in the general purpose health FSA but instead enrolled in the dependent care FSA. The employer's systems obviously would not catch this error.

"Well into the year (the employer's cafeteria plan does not currently provide for a time limit of providing notification) and after the employer HSA 'seed' contribution was made, the employee notices the mistake and notifies the employer. Pursuant to IRS guidance, the employer corrects the mistake and converts all of the year's prior and subsequent FSA amounts to the health FSA.

"The change would certainly make all HSA contributions, including the 'seed' amounts, excess contributions. The employee can avoid the tax penalty if he or she takes a timely curative distribution. If the employee does so, the effect would be that he or she would get additional compensation from the employer but only as a result of the employee's mistake. Under these circumstances, can the employer ask the HSA custodian to return the 'seed' contribution to it? Under the HSA regulations, there are only limited circumstances when this can be done, most notably when the employer was never HSA-eligible. Here, the conversion means that in effect the employee was 'never' HSA-eligible but it was solely as a result of a change made mid-year."

1 reply so far   |    Click Here to Add a Reply

austin3515 created a topic in 401(k) Plans

Convert QACA Match to Regular SH Match Mid Year

"Plan has QACA Match, so changing to SH Match effective 7/1 would be an amendment that increases everyone's match for the whole year. Do we think this is possible? The primary objective is to eliminate the auto enrollment."
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