Message Boards Digest

October 3, 2023

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

RatherBeGolfing created a topic in Retirement Plans in General

Proposed Rule: Use of Forfeitures

"Proposed rule published 2/27/2023. It did not receive many comments (ERIC, ARA, ABA, and ABC among the few that submitted comments). The proposed rule would establish a requirement to use forfeitures no later than 12 months following the close of the plan year in which the forfeitures were incurred. There is also a transition period for forfeitures incurred during plan years beginning before 1/1/24. These forfeitures will be treated as having been incurred in the first plan year that begins on or after 1/1/24, and have to be used no later than 12 months following the close of the PY. Proposed applicability date of 1/1/24, no final rule yet, but plan sponsors can rely on the regulation now. How are you handling this? Fire drill to use up forfeitures from past years to get in compliance? Plan document/amendment issues? Absent clarification, would you consider the use of forfeiture for the 2025 PY but allocated in 2026 as being used no later than 12 months following close of the PY?"

10 replies so far   |    Click Here to Add a Reply

MGOAdmin created a topic in 401(k) Plans

Missed Deferrals

"As I understand it, if an employee is not offered a 401k plan when they are eligible, as long as their deferrals start within 3 months of entering the plan there are no penalties/QNECs due. What happens if a plan if an employee signs up for a plan but the deferrals don't start until 3 months after signing up. This is dissimilar from the first scenario since the employee is offered and opted in but deferrals did start for a short time. Would a QNEC be due for the employee that signed up but wasn't started for 3 months? The IRS website gives the example of the first scenario where an employee is never offered the plan but I could not find the second scenario."

2 replies so far   |    Click Here to Add a Reply

Belgarath created a topic in Correction of Plan Defects

Failure to Follow Participant Direction for Investment Choices

"A somewhat simplistic example: Plan has a default investment -- investment (A). Participant chooses to invest funds in (B) and (C). There is a failure on the part of the Employer/Plan Administrator to implement these investment choices, so for some period of time, Employer continues to deposit the Participant's funds into (A). What is the proper remedy here, IF the default investment underperforms the investment returns under (B) and (C)? I can't find that this falls under one of the fiduciary breach correction options under VFC. It does appear that the Participant can perhaps seek relief under IRC 502, as per the LaRue case, but I'm no lawyer, and the implications of various court cases can best be interpreted by those who are! Can the fiduciary simply compare the returns, and if the Participant 'lost' higher investment returns, just deposit the lost gain? If they don't, then does the Participant then have to go through the steps for an ERISA claim and first exhaust the administrative remedies available, then bring suit? (And an ERISA suit for very small returns would cost far more than the potential gain....) I'm sure this can't be all that uncommon, yet I find very little discussion of specific remedies or options. Maybe just a 'regular' PT -- correct and pay the penalty?"

5 replies so far   |    Click Here to Add a Reply

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