FYI: 401(k) Plan Design and Administration Questions Answered
By Cindy Van Bogaert
July 24, 2009
Here is your latest FYI: Employee Benefits Update from Cindy Van Bogaert, Partner and Chair of the Employee Benefits Practice Group at Boardman Law Firm LLP.
This FYI provides information about a variety of 401(k) plan design and administration issues that I recently answered in my BenefitsLink 401(k) Q&A column.
Question 89: What is the legal authority for the requirement to file a Form 1099-R?
Answer: Distribution reporting generally is required by Internal Revenue Code of 1986 ("Code") Section 6047(d) which refers to Code Section 3045(e)(1). Form 1099-R is specified for use by Temp. Treas. Reg. Section 35.3405-1T Q&A E-9. To get more details, go to: http://benefitslink.com/modperl/qa.cgi?db=qa_401k&id=89 .
Question 90: A participant has a total account balance of $6,000, but a vested account balance of $800. Assume there have been no rollovers into the participant's account. Does the $5,000 involuntary cash-out provision apply?
Answer: Yes. The $5,000 involuntary cash-out threshold is based on the nonforfeitable amount. Assuming the plan includes language reflecting the involuntary cash-out, the vested balance of $800 would be used to determine whether the account could be paid to the participant pursuant to Internal Revenue Code of 1986 ("Code") Section 411(a)(11)(A) without participant consent. For a more complete discussion, see: http://benefitslink.com/modperl/qa.cgi?db=qa_401k&id=90 .
Question 91: There are three companies in a controlled group. Each has a separate but identical 401(k) plan. None of the plans has 100 participants but collectively they would have in excess of 100 participants. Would these individual plans qualify for an audit waiver in connection with the Form 5500 filings?
Answer: I will assume for purposes of your question that the Form 5500 and audit would be required for each plan if the plan met the 100 participant threshold. Eligibility for the audit waiver is based in part on the number of participants in the plan being filed. Thus, depending on your facts, it appears that each of the plans might qualify for an audit waiver. To find out why, go to: http://benefitslink.com/modperl/qa.cgi?db=qa_401k&id=91 .
Question 92: Can an employer decide to only make a safe harbor matching contribution to employees still working at year end? For example, if an employee leaves her company after four months of the year, can a plan be designed to make that employee ineligible for her four months' worth of matching contribution?
Answer: No, a safe harbor matching contribution under Code Section 401(k)(12) or 401(k)(13) may not be designed with a last day requirement in order to receive the safe harbor match. For more information, go to: http://benefitslink.com/modperl/qa.cgi?db=qa_401k&id=92 .
Upcoming seminars:
- 401(k) Training Seminar, September 23, 2009, in Madison, WI. For more information and to register: http://www.boardmanlawfirm.com/events/401kSeminar.php
- HIPAA Privacy Training Seminars, September 10, 2009, in Madison, WI. For more information and to register: http://www.boardmanlawfirm.com/events/HIPAAseminar.php
Please contact me if you would like more information or assistance.
This FYI is not legal advice. Individuals should seek advice based on their particular circumstances from their own counsel.
If you have any questions or need assistance, please contact Cindy Van Bogaert at (608) 283-7543 or Email.
Would you like to have FYI: Employee Benefits Update sent directly to your e-mail inbox? If so, please send your request, with e-mail address, to Cindy Van Bogaert at Email.
