Leaderboard

1. no, you are correct that SoB only applies to actives 2. yes, w/o RASD, you must provide actuarial increase to the NRB

More importantly the plan should have NEVER allowed him to take 100% of his balance and put it in an IRA in the first place. The plan needs to check/change its procedures. The regulations governing RMDs are very clear on this point. In a year an RMD must be paid the FIRST dollars from the plan are the RMD. The payment in July 2017 should have been two checks: 1) for the RMD amount 2) the amount made payable to the IRA. Not trying to beat anyone up but had that rule been followed and two checks cut in July 2017 the whole problem would have been avoided. Fix the procedures to conform to the regulations and going forward your life will be easier.

What is or is not a substitution is based on facts and circumstances, so always somewhat murky and subject to argument.

Plan has to independently satisfy the RMD separate from any IRA or other qualified Plan. Personally I'd have taken the position that while the RMD was supposed to be processed at the time of the rollover in July there was an administrative glitch that cause it to not be processed. The glitch was self corrected by the Plan with the December RMD that was discovered when doing a review of the Plan's RMDs for 2017. Update the administrative policy to not do it in the future. Also if you do reverse the RMD you'll still need to send 2 1099-Rs, one for the that part that was supposed to be RMD from the July distribution since it wasn't eligible for rollover and one for the balance that was rolled over. Then he'll need to argue with his IRA custodian to reverse the 1099-R for the RMD he took or explain to the IRS why he has 2 1099-Rs but only claimed the income one. edited for clarity (though I may have just made it more confusing)

http://ferenczylaw.com/flashpoint-sticking-it-to-the-little-man-why-the-new-irs-vcp-fees-are-bad-for-small-business-tpas-and-retirement-plans/ An even better one from Ilene Ferenczy. Very good 30,000 foot take on the industry's relationship with the IRS. A MUST read. Really very enlightening.

Participant is right. A portion of the 7/2017 rollover wasn't eligible for rollover. That amount (plus appropriate earnings, if any) should have been distributed from the IRA in order to avoid an excise tax for over-contributions to participant's IRA. The good news is that the forced RMD can be rolled as it is within 60 days.

RBG, see the last line of this: http://www.napa-net.org/news/technical-competence/regulatory-agencies/change-vcp-fee-structure-bumps-fees-smaller-plans/?mqsc=E3929209&utm_source=WhatCountsEmail&utm_medium=NAPA_Net_ListNapa-Net Daily&utm_campaign=2018-01-08_eNewsNAPA_Mon

If it is a substitution, the new LLC could still offer an equity program so long as it "mirrored" the payout terms for the phantom shares, and there would be no prohibited acceleration or deferral of payment. In an LLC, I'd typically use profits interests instead of options, but I don't see how those could be structured in the operating agreement to meet the payout timing requirements. I'd use restricted LLC units instead.

Usually, in a situation like that, I inform the client that what they heard is definitely not true, and ask them to have the advisor who they believe said that call me asap so we can talk about it and I can help make sure they aren't giving out bad advice to other clients. It reinforces the relationship with the client and makes them feel good that you are willing to help make sure their other advisor has the right information. FWIW.