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July 10, 2024

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

rblum50 created a topic in 401(k) Plans

Hardship Distribution with No Mandatory Withholding

"I have acquired a client that has an existing plan participant that took a hardship distribution for $20,000 in calendar year 2023. Rather than paying this participant the net amount after 20% withholding of $16,000, he had the entire gross amount $20,000 distributed to him. When the 1099-R was prepared, It showed that the distribution made to him was the entire $20,000 with all of it being taxable and no taxes being paid in calendar year 2023. What are the implications of distributing the gross amount and not the net amount? Not trying to make excuses, but the participant paid the taxes on the entire amount of $20,000 and it is basically a timing matter."

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mal created a topic in Health Plans (Including ACA, COBRA, HIPAA)

DOL Challenging Health Plan Grandfathered Status

"A self-funded plan is under audit from DOL. The investigator alleges the plan lost grandfathered status a decade ago when switching networks. The rationale is that the schedule of benefits under the old network arrangement offered an incentive for participants to seek care from certain high-quality providers. In other words, the copayment for office visits for certain specialty physicians has always been $30, but under the old network agreement, participants benefitted from a $15 copayment when using certain highly-qualified providers. This program was proprietary and designed to ensure participants were receiving the highest level of care for certain conditions. The incentive program stopped when a network change was made and participants could no longer benefit from a lower copay when using the specialty network. The DOL argues this was a change in cost-sharing that cost the plan its grandfathered status. However, the plan had no access to the specialty program when the network change was made. Any input is appreciated."

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KevinMc created a topic in Distributions and Loans, Other than QDROs

Tax Free Transfer from IRA to Qualified Charity

"I had a client ask me about taking his RMD and directing it straight to a charity tax free (and still have it count as his RMD). I have a couple questions on this topic and any input would be appreciated:

  • Can the RMD be taken from a Profit Sharing Plan or 401-k or must it come from an IRA?
  • If the answer is just IRA than can the client accomplish this by rolling funds from the Profit Sharing to an IRA and then directing it to the charity tax free?
  • Does it have to be an RMD or can any distribution directed straight to a charity receive the favorable tax treatment?
  • Obviously if the transaction is tax free (and still counts as RMD) then the funds going to the charity aren't eligible to be deducted since they are already tax free?
  • Does it have to be the whole RMD or can you direct a portion to a charity tax free and take the balance as a taxable distribution?"
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Jakyasar created a topic in Retirement Plans in General

Combo plan testing and early retirement age (ERA)

"Looking into a proposal for DC/CB combo. DC plan already exists and has early retirement age (ERA) provisions

  • NRA is 65/5 and date on which participant attains NRA
  • ERA is age 59.5 and at least 6 years of service for vesting purposes (1000 hours) and on anniversary date with/next following satisfaction of ERA

I am confused the way written as at least I would this the retirement date would need to be the same (again, no idea and/or experience). The above aside, for CB plan design, other than NRA being 65/5, do I need to include ERA in the CB plan and cross test as well or just 65/5 is sufficient? How is the testing done? Any comments/suggestions?"

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

Qualified Replacement Plan: Determining 'Active Participants' Under 4980

"Working with a client who has a small excess in a term'd DB plan and wants to use the excess for matching contributions under the client's existing 401k plan. The 401k plan provides for immediate eligibility for FT and PT employees with autoenrollment. We have assumed, therefore, that the replacement plan will satisfy the 95% rule b/c all of the active employees who participated in the DB plan would be immediately eligible for 401k plan with an auto-election and would have had to affirmatively opt-out. But do folks actually go through the plan rosters and count the number of active former DB participants who are active participants in the replacement plan? (These are big plans and counting would be somewhat manual.) Second, can anyone point to guidance on who constitutes an 'active participant' in a replacement plan? Is it mere eligibility or does the active participant have to have a balance? Third, I realize that there are restrictions in the PLRs on using the excess for match. But I'm pretty comfortable that if the excess is applied to match earned in the previous payroll period w/r/t previously made elective contributions, we should satisfy the match rules. Any thoughts?"

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justatester created a topic in 401(k) Plans

Interesting Match Formula

"We have a client that has a crazy match. Defer 2% get 300% match (6%) Defer 4% get 150% match (6%) Defer 6% get 100% match (6%) No match on deferrals less than 2%. If you defer something other that 2,4,6...then match is 100% of deferrals. No one in the plan defer more than 6% even though they could defer up to 100%. We think the plan sponsor verbally doesn't allow it. It is a very small company (45 participants). It doesn't seem correct. For BRF, everyone has the ability to defer and receive the match. Any thoughts?"

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