BenefitsLink® Message Boards Digest

December 1, 2023

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

Nic Pospiech created a topic in 401(k) Plans

Late Deposits to a Solo K

"I am taking over a plan that was previously a Solo K. The plan was making deposits after their tax deadline with extensions for a few years. For example. They would fund their 2022 contribution after their tax deadline with extensions -- but, not actually extend their taxes. They were provided bad advice by the previous administrator that they had until 9/15 -- of any given year to make the previous years contribution. I am not exactly sure how to fix this or what the ramifications might be -- as it is all owners money -- Solo K. Any thoughts?"

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

Plan Sponsor Wants to Close Small Cash Balance Plan After Two Years

"Financial Advisor convinces one-person business owner to start up Cash Balance Plan. It is explained clearly that the plan is meant to be long term, at least 5 years. Nice contribution made in first year. Nothing in second year and Plan Sponsor decides it's not for them. No 5500-ez filed as of yet. Contemplating how to react."

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

Death of Nonhighly Compensated Employee with RMD Due

"A terminated 75 year old employee died prior to completing distribution forms. It was her intention to take a lump sum distribution after paying her RMD. Since there are no papers to support this distribution, what should be done? There is a living spouse. The lump sum = $140,000 2023 RMD 18,000 Does her 2023 1099R show 158,000 with !8,000 taxable. Or does the husband have a say regarding the distribution. Any advice would be gratefully accepted"

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Dougsbpc created a topic in Retirement Plans in General

Excess 415 limit Correction: How to Apply Earnings and Losses

"A participant in a 401(k) plan ended up with lower than expected salary and consequently violated the 100% of compensation limit. This is a 415 violation and we are in the process of correcting this by forfeiting some of his employer contribution allocation from last year and refunding some of his salary deferrals. The participant is an NHCE. In applying the earnings on the corrections, we are lucky because the plan has self-directed investments that make it easy to determine the applicable earnings. Question: suppose his account has 11% losses. Can we apply those losses to the $4,000 of salary deferrals to be refunded and $3,200 of employer contributions that will be forfeited and kept in a suspense account? I would think this should be ok, especially since he is an NHCE."

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

Maximum 415 Accrued Benefit for Cash Balance Plan

"We are setting up a Cash Balance Plan with two participants. One participant is age 41 with an average annual compensation (3 year) of $49,263 at 12/31/2023 and she has 3 years of service with the employer. Interest credit rate = 5% and Actuarial Equivalence is 5% and '23 417 AMT. How do others calculate her maximum account balance at the end of the first year of the Plan? My process is: 415 Maximum Accrued Benefit as of 12/31/2023 payable at NRA (62) as a life annuity = the lesser of 1) Comp Limit = $49,263x(3/10) = $14,779 or 2) $ Limit = $265,000x(1/10) = 26,500. 415 Maximum Accrued Benefit = $14,779 payable as a life annuity at age 62 (NRA). Based on the 415 Maximum Accrued Benefit, her Account Balance as of 12/31/2023 must be limited to ($14,779 x a62) / 1.05^21 = $71,779. My understanding is that the Accrued Benefit under the plan is the actuarial equivalent of the Account Balance. The Accrued Benefit cannot exceed the 415 Maximum Accrued Benefit. I think this is pretty straight forward, but we took over a plan from a large TPA/Actuarial Firm who seemed to ignore this. Is there something I am missing?"
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