Leaderboard

Not too concerned about ADP/ACP. Worst case some refunds to HCEs, not the end of the world. Far more significant is relief from TH minimum. Many key ees will have deferred in Jan/Feb with no concern about TH minimum due to the SH. Now the company has to stop the SH due to COVID-19, they may or may not be in business by the end of the year, they may be scrambling to stay in business and we are going to hit them with a required 3% TH? Not good.

How do you not notice for 5 years that no 401(k) deductions are coming out of your pay check? And how do you not ask for a statement for the 401(k) account you thought you signed up for? There are IRS fixes for failure to implement a deferral election but you probably have to show that you did turn in a valid enrollment form that your employer failed to implement. That said the fact that you are just now bringing this up 5 years later will likely not work in your favor.

So? Ever read other statutes? Congress has no concept of how plans are operated.

it makes no sense to do it this way.

Everything I have read says a "qualified person" can treat a distribution received in 2020 as a CRD. From NAPA Q&A, and read similar in other places as well. Plan treatment and Participant treatment are independent. CD4: Are terminated participants eligible for a COVID-19 distribution? A: Yes. The treatment to an individual participant is independent from the treatment by the plan. In other words, it doesn’t matter to the participant what the distributable event from the plan was. It may have been due to the plan permitting a COVID-19 distribution or due to another triggering event, such as termination of employment. If the participant is a qualified individual and receives a distribution in 2020, then the individual is entitled to treat the distribution as a COVID-19 distribution—there is no 10% additional tax; the amount can be included in income over three years; and there is a three-year repayment right.

participant cannot treat a distribution as a CRD if the plan does not offer CRDs... Correction: participant can treat a distribution as a CRD for tax purposes even if the plan does not offer CRDs... No. If the plan does not permit CRDs, the cat is officially dead. Correction: The cat is jumping around in the CARES box...

I've been searching for a definitive answer to that for a couple of days and have not seen anyone (industry group and/or legal summaries) explicitly say that if a plan does not permit CRDs that they still w/h 20% even though a qualified participant can treat a 2020 distribution as a CRD. Maybe it's there between the lines - that a 2020 distribution can be both not a CRD as determined by the plan, in that it doesn't permit, and a CRD as determined the participant. Each treats distribution in that fashion. I can get there, was really hoping someone "official" would come out and clearly state it. Both a CRD and not a CRD at the same time? I am hereby renaming CRDs as Schrodinger's Distributions.

(A) makes it clear that it applies only to payments between enactment and 12/31/2020. There is no other way to interpret that. I interpret subsequent repayments in (B) to mean the subsequent repayment of the delayed payments, adjusted for interest. It means that rather than re-amortizing the remainder with accrued interest over the original loan term, you get to add the delay to the loan term If it was meant to apply to other payments, there is no need to limit the period in (A), they could have just said no loan payments for the next 12 months. (C) is your exception to the loan term limit for the time you add back to the delay. I agree with @MoJo, plain reading of the statute is clear on which payments may be delayed. It is not logical to read "subsequent repayments" in (B) to mean payments in addition to the payments explicitly limited in (A). Logically, (B) refers to the subsequent repayment of the delayed payments, allowing you to extend the repayment term for the period of delay, but requiring that you add interest. In order to not have a conflicting statutory requirements, (C) tells you to ignore the delay added on in (B) for purposes of the maximum term under 72(p).

There is no "prior year filing".

I wasn't paying much attention (and sorta wished I hadn't) but there is no doubt in my mind that the text "any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under subparagraph (A)..." means...just that. A payment due Jan 15 2021 may be deferred, as may one due Jan 15 2022, etc. I agree with C.B. Zeller on all counts. The loan will be reamortized when the participant wishes, but not later than one year hence. And I agree the changes in the payments are pretty small.

It's not "subsequent" if it's due before the delayed payment. Going back to my earlier example, and using monthly payments. Payment #10 was originally due April 2020. It is delayed by 1 year under CARES. It is now due April 2021. According to the amortization schedule, payment #n+1 is due 1 month after payment #n. Therefore, after adjusting as required under CARES 2202(b)(2)(B), payment #11 is due May 2021, #12 is due June 2021, etc. Payment #19, which was originally due January 2021, is now due January 2022. Under your interpretation, if I'm understanding correctly, you would say that Payment #19 remains due January 2021. That would be before the due date of payment #10, which is the payment that was originally delayed. This is a logical contradiction, you can't have payment #19 due before payment #10. That would make #19 your actual 10th payment, meaning that the participant did not receive the full 1 year delay afforded under CARES.

My understanding is that he might be able to. If he meets the criteria to be considered a "qualified individual" as outlined in the CARES Act, couldn't his RMD from earlier this year qualify as a Coronavirus Related Distribution as defined by the CARES Act, which would allow him the ability to pay it back and not take the tax hit? If he doesn't meet the criteria, then I do think he is out of luck.

No

An Eligible Retirement Plan refers to the definition in 402(c)(8)(B), which includes a qualified trust. It appears that as long as a DB participant is otherwise eligible for a distribution, up to $100,000 of that distribution can be treated as a CRD. sec, 2202 (a)(4)(C) 4-16-2020 addition: The published analyses are either ignoring the question or saying DB plans aren't included. Who am I to argue? However, I agree with Larry Starr that the plan perhaps cannot treat the distribution as a CRD but the participant may do so on his tax return. (someday I'll learn how to insert links and stuff for reference)

The way I'm reading this is that repaid amount is treated as a rollover contribution, and would therefore not be included in the top heavy ratio. If the coronavirus-related distribution were an in-service distribution, that amount would of course be included in the top heavy ratio for 5 years.

I have a loan that originated on July 1, 2019. The loan ends on June 30, 2024. I am a qualified individual, and starting on April 1, 2020 I take advantage of the 1-year delay. My next payment is due April 1, 2021. As of April 1, 2020, before applying the provisions of CARES, I had a maximum term of 4 years, 3 months left to finish paying off my loan. Under CARES, the period of time between April 1, 2019 and March 31, 2019 is disregarded with respect to the 5-year limit of 72(p)(2)(B). Therefore, As of April 1, 2021, I still have 4 years, 3 months left to finish paying my loan. Therefore my final due date is now June 30, 2025.

*I* determined that we meet the financial operations of the MA advisory list, so that's all we need. If accounting firms are specifically listed, I don't see how we could not fit the same bill.

I know now isn't the best time to invent how to get your systems to work while people work from home. But maybe this should be the event that moves your firm to doing that. Most of the TPA firm I work for works from home 100% of the time. I have worked from home since I took my current job back in May of 2012. You couldn't get me to work for a TPA that doesn't allow me to work from home and/or pays me enough I can live in the same town I work in. And even if I live in the same town I worked in I would still want to work from home some. I will never go back to a 30 min commute again unless I am desperate for a job. That was my longest commute and it lasted for 16 years and once I stopped doing it I came to realize how much I disliked it. Most TPA work can be done remotely in my mind. I would add since I started this job and I was the only person in this region we have gained over 8 new clients. I am not in business development and I didn't do most of the work to get the clients. But my presents and speaking at local conferences has gotten the firm I work for a lot more exposure and looks from local ESOP companies. So it has been good for my bottom line and the firm I work for bottom line.

Our state has deemed Human Resources and professional entities that provides HR services as essential. As a TPA firm, we believe we do provide HR services and thus have elected to remain open. Some of our staff have elected to work from home. Some of our staff have elected to work from the office.

FWIW - our State actually has a method online whereby you could submit for a determination/designation of whether or not your particular business was essential (on the State website). Another local TPA did submit a request for determination, which they shared with us. In the response (which came rather quickly I might add) they were advised that they were considered essential based on the information provided in the application. There were some caveats that" only those employees necessary to perform the essential functions should be permitted to be present and provided they follow all other guidelines of the Executive Order".

Perhaps it’s feasible to do something sensible without needing to answer a question of law about what qualifies under a particular State’s or city’s order. Even when one qualifies to allow regular operations at a place of business, many recordkeepers and third-party administrators tell people to work from home. The key exceptions I’ve heard about are sending in: a technician to make sure computer servers, firewalls, and virtual private networks function; someone to retrieve postal mail that wasn’t rerouted, and scan the items that require immediate action.

To amplify @Belgarath Homeland Security has issued guidance not mandates on "essential bussinesses". I quote: "This list is advisory in nature. It is not, nor should it be considered, a federal directive or standard. Additionally, this advisory list is not intended to be the exclusive list of critical infrastructure sectors, workers, and functions that should continue during the COVID-19 response across all jurisdictions. Individual jurisdictions should add or subtract essential workforce categories based on their own requirements and discretion."

Prior discussion on the topic:

The law itself is clear. Why would additional guidance be necessary? It says “any act”. Doesn’t get much broader than that. https://www.law.cornell.edu/uscode/text/26/7503

What was the actual transaction? Did XYZ buy the stock or the assets? How did XYZ take over as plan sponsor? Was an amendment done? What else did the amendment say? Did the plan year change? Or did it remain the same?

What data would you use for the 2nd ADP/ACP tests? You would add the missed people in? At what rate? 0%? What rate are you using as their missed rate? The NCHE and HCE averages for those that were given the opportunity to defer? Then wouldn't the second run be materially the same as the first? Though even after correcting routine failed ADP/ACP test - the test don't always pass. If doing HCE refunds, the refund calculations aren't designed to result in a passing test. Do you have a failure to implement a deferral election? (in which case that is different - and I can understand your quote from the IRS website) Or do you have a failure to be offered the ability to defer? Perhaps I misunderstood your original post - I thought it was the later - that people weren't offered deferrals at all. I guess what I am saying is I have never re-run the ADP/ACP test after doing a missed deferral correction after an ADP / ACP test fails. Nor am I aware of anything in the Rev Proc that requires it. Which is what I cite to in SCP and VCP documentation. Not the IRS website.

No. Catch ups must be deferrals.

See Rev Proc 2019-19, Appendix A.05(2)(g). The excluded employees with the missed opportunity to defer are not included in the ADP/ACP tests. "(g) The methods for correcting the failures described in this section .05(2) do not apply until after the correction of other qualification failures. Thus, for example, if, in addition to the failure of excluding an eligible employee, the plan also failed the ADP or ACP test, the correction methods described in section .05(2)(b) through (f) cannot be Page 79 of 125 used until after correction of the ADP or ACP test failures. For purposes of this section .05(2), in order to determine whether the plan passed the ADP or ACP test, the plan may rely on a test performed with respect to those eligible employees who were provided with the opportunity to make elective deferrals or after-tax employee contributions and receive an allocation of employer matching contributions, in accordance with the terms of the plan, and may disregard the employees who were improperly excluded."

Is there any reason why any left over money in the ERISA bucket account is not allocated to the plan participants as earnings at the end of the year?

Is there/should there be a concern that if the totality of the compensation is unreasonable then the TPA is engaged in a PT?

How can the plan sponsor be okay with this? Having the participants pay excess TPA fees beyond what is necessary and prudent is a problem. I would work with the investment advisor and the sponsor to eliminate (or at least reduce) the revenue sharing by changing the investment share classes to avoid the excess. The TPA can then attach an asset charge or a flat fee paid by participants. Having the participants pay excess fees (even if the sponsor is okay with it) via revenue sharing would not be the prudent route.

However, so may argue that the date does, in fact, relate to the determination of taxes. Because after that date, the 10% excise tax gets assessed. There is a little writeup on it in the ERISA Outline Book:

it doesn't surprise there is confusion. It is argued about all the time. my research came up with the following: at least this is what I included in The Coverage and Nondiscrimination Answer Book, 2008 Supplement, based on everything that I have been able to find. Q 12:72 ... What happens if this date falls on the weekend? It is unclear. According to one recent IRS source, unlike the due dates for other forms, the two and one-half month period is not extended to the following Monday for excess contributions if the period ends on the weekend. For example, March 15, 2008 falls on a Saturday. For a calendar year plan, to avoid the 10% excise tax the excess contributions must be postmarked by that date. See Page 9 of IRS publication Retirement News for Employers (volume 4, Winter 2008) found at http://www.irs.gov/pub/irs-tege/rne_win08.pdf The confusion arises because of Section 7503 of the Internal Revenue Code, Time for performance of acts where last day falls on Saturday, Sunday, or legal holiday provides: When the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday, or a legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday. For purposes of this section, the last day for the performance of any act shall be determined by including any authorized extension of time; the term “legal holiday” means a legal holiday in the District of Columbia; and in the case of any return, statement, or other document required to be filed, or any other act required under authority of the internal revenue laws to be performed, at any office of the Secretary or at any other office of the United States or any agency thereof, located outside the District of Columbia but within an internal revenue district, the term “legal holiday” also means a Statewide legal holiday in the State where such office is located. However, in Revenue Ruling 83-116, the IRS concluded that this section does not apply if it is not in connection with the determination, collection or refund of taxes. Thus, since the refund of excess contributions is not an IRS filing, there is no extension.