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I think the most basic way of looking at it is - you cannot make deferrals from pay already received. Your 5% election will apply to future eligible pay, not any compensation previously paid. Plan accordingly.

That's what you get when you go for cheap with people who are less knowledgeable than most of the professionals occupying these halls. You need to hire someone locally who knows what they are doing and can make happen what is actually best for the employer. Maybe keeping the simple makes sense, maybe not. If this came to us, I guarantee we would figure out what is the RIGHT thing to do for the employer and then make that happen, whether it is keeping the 401(k) or the SIMPLE. But we get paid for our expertise; you need to decide if paying for competence is in your budget. Go find a good admin firm with technical expertise to be your advisor; you will never get the right answers on anything from Fidelity. Strong statement to follow!?

The plan sponsor elects whether to allow the specific distributions. If a participant is eligible, but the plan hasn't made the election, the participant can still be eligible for the CRD tax treatment, but the participant can't force the plan to do something that isn't part of the plan.

Look, you put "retired" in scare quotes in your original posting. Why? BECAUSE SHE IS NOT RETIRED, and you knew that. All that happened is she reduced the number of hours she works; she is still an employee. She is neither retired nor terminated. Your question is really whether at her age she can get an inservice distribution which can then be rolled over; that depends on the plan provisions, but most likely (statistically) that plan doesn't provide for a distribution while still employed at age 56.

In a series of questions and answers regarding FFRCA payment, the IRS said this: “The FFCRA does not distinguish qualified leave wages from other wages an employee may receive from the employee’s standpoint as a taxpayer; thus, the same rules that generally apply to an employee’s regular wages (or compensation, for RRTA purposes) would apply from the employee’s standpoint. To the extent that an employee has a salary reduction agreement in place with the Eligible Employer, the FFCRA does not include any provisions that explicitly prohibit taking salary reduction contributions for any plan from qualified sick leave wages or qualified family leave wages.” Here is the link to the Q&As: https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs Bill Sweetnam

Feline equivalent of "nose to the grindstone" perhaps.

Kids and dogs make for an interesting work from home experinece as well...

Peter, I'm not comfortable advising my clients to do this either. At least not without some sort of guidance from the IRS. While it is the participants responsibility to pay taxes, it is the plans responsibility to withhold taxes. The proposed tax treatment is essentially asking a non adopting plan to somehow adopt just the tax portion of 2202(a). Let's look at it from a different angle. Do you agree that if you cannot amend for the tax treatment alone, this could create a plan defect? Further, if you cannot amend for tax treatment alone, could the trustee or plan admin be seen as making determination as to the participants eligibility for tax treatment under CARES?

If she's truly an independent contractor, she is not an employee. But the determination of whether or not she's an IC has nothing to do with how she's paid. The sponsor can't simply start paying her via 1099 rather than W-2 and use that to conclude that she's now an IC and therefore no longer employed.

Peter, I don't see how a plan that does not plan to adopt CRD option has a choice on the 20% withholding. It will require (eventually) an amendment to the plan to match what is being done. I don't see this as a "courtesy"; it is a significant plan change and it affects all participants during this period of time. I wouldn't suggest my client do it.

The participant does not have the right to waive the 10%, because the mandatory 20% applies if the plan is not "doing" CRDs. It's 20% because that is the law. What was done is correct; no one will listen to your complaint, except for a lawyer who will be happy to charge you large sums (much greater than your 20% withholding) and then tell you that you have no valid complaint.

Are the references saying CRD's start March 27 referring to the new distributable event rather than the tax changes? I don't see an effective date for the section that added the new distributable event. It makes sense to me that the new distributable event would not be available until the law was signed. Until guidance is issued, all we have to go by is a reasonable good faith interpretation of the new law. The Act is clear that the tax treatment applies retroactively to 1/1/2020.

You are correct

I think the Notice being discussed here is Notice 2005-92 (not Notice 2005-98).

Yes, in retrospect I think it should end up being 2 different payment amounts (ignoring the suspension period where there is a zero payment). I'm just not willing to invest time in a spreadsheet where there are this many unknowns.

Well, at least now I understand the position and why some are seeing such great complexity. 2202(b)(2)(A) has two time periods in it, and (C) can point back to either. To me the policy weighs in favor of giving a full year, because of the simplicity and the likelihood of a long recovery. Will be interesting to see what happens.

That is how I interpret it. My understanding is that this is also how most of the policy folks at the recordkeepers are interpreting it. The safe harbor under 2005-92 2005-98 uses remaining period of the loan, plus suspension period. Absent IRS guidance on CARES, I think that is the logical interpretation considering previous guidance in 2005-98. 2005-92 2005-98 says that loan payments must resume at the end of the suspension period. If we apply that to CARES, regular loan payments must resume in January of 2021. The suspended payments won't be due until after the one year delay (Most likely no earlier than April), but the maximum period you are disregarding from the 5 year term is 9 months (Apr-Dec). It doesn't make sense to add 12 months to the term when you had 9 months of non-payment. A more extreme example would be taking a loan in December, start paying in January, re-amortizing in December, and get a full 6 year term to pay it off. I think it comes down to what @Bird mentioned above. If the IRS comes out with CARES guidance that says that since the suspension period is less than 12 months, you get to delay all payments up to March 26, 2021, then I agree you would add 12 months to the end of the original term. The guidance would need to be inconsistent with 2005-92 2005-98 in order to make it work. Im not so sure they will focus on suspending all payments for 12 months rather than suspending all payments on or before December 31 though. Either way I think it will be a hard stop at December 31 or March 26. So the only way you get a full 12 months added on is if you had an existing loan at enactment.

I think I concur, but the specifics still bog me down. Going back to the detail of the loan that Luke and I have discussed (monthly payments at the end of each month), are you arguing for the following: Original payment amount per month: $200. Payments on and after 4/30/2020 through 12/31/2020 are delayed for one year. Payments from 1/31/2021 through 3/31/2021: $200 per month Payments from 4/30/2021 through 12/31/2021: $200 * (1 + i) where i is the loan interest rate. If i = 4%, each of those 9 payments is $208. Payments from 1/31/2022 through a date which is 9 months after the original loan due date which reamortize the loan on a level basis through the date which is 9 months after the original loan due date That is, the reamortization period ends on the date which is X months after the original loan due date; where X is the number of months where payments are not made AT ALL. Alternative 1: The reamortization period ends on the date which is 12 months after the original loan due date. Note that in this case the monthly payments during the reamortization period are likely to be less than the original payment of $200. In either case you are arguing for 4 different monthly payment amounts: 1) The initial amortization amount 2) $0 for the period that ends 12/31/2020 3) [1] * 1 + i for the balance of the payments before the end of the 12 month period 4) Reamortization amount Anybody care to tweak this?

I think there's a potentially important distinction. EPCRS says to treat the corrective distribution as described in Rev. Proc. 92-93. Section 3, dealing with distributing elective deferrals following a 415 violation, says the payment is a "corrective disbursement" and not a "distribution of accrued benefits" and therefore not subject to spousal consent, 72(t) penalties, and other code "sections governing distributions of accrued benefits." Say the participant died, leaving his/her estate to a surviving spouse, but named a child as the plan's beneficiary. For a "corrective disbursement" that is not a "distribution of accrued benefits," I think the proper payee is the participant's estate (and flowing through to the surviving spouse).

I think it comes down to whether a deemed distribution is in fact a distribution, or just a taxable event. An offset is clearly a distribution, one that could even be rolled over, so that is a CRD if all other requirements are met. EDIT: Im going to send this one to Derrin to see if he can include it it on his "Fireside chat" webcast next week...

That the plan’s sponsor is defunct, or even legally dissolved, does not change the plan administrator’s responsibility to file an annual report. Or to engage an independent qualified public accountant to report on the plan’s financial statements. If the retirement plan’s administrator is a corporation, even a dissolved corporation has powers to wind up the corporation’s duties and obligations. If the plan’s administrator is in a chapter 7 bankruptcy proceeding, the chapter 7 trustee “shall continue to perform the obligations required of the [ERISA § 3(16)(A)] administrator.” Bankruptcy Code (11 U.S.C.) § 704(a)(11).

Don't forget the audit costs can be paid from the plan. That might not be popular but there is a way to get the auditor paid to do it. It is just a matter of the fiduciary doing their job. I am about to send out the final distribution forms for a company sold back in 2015. For a number of reasons the ESOP is only being shut down now. The former CEO has had to handle all of this and not get paid since 2015. He is the only one left. He got the big bucks while CEO and got a healthy balance from the ESOP this is the other side of that coin.

Employed or not, the plan fiduciaries remain fiduciaries until the plan is completely shut down. That said, they may not be willing to continue to function in that capacity post termination - but if the DOL get's involved, they could change their mind. I believe the audit is still required - along with other responsibilities in administering the plan, and then shutting it down (properly). How are distributions being handled? Even in those cases where we handle distributions without employer intervention (non-fiduciary outsourcing), we consider that authority to cease when the employer does, and suspend distributions. That usually triggers DOL intervention - and after a sufficient time (if the fiduciaries can't be found) the Abandoned Plan Program becomes the option, depending on who holds the assets, and then the 5500 issues become easier to resolve.

Well, it's not a hardship distribution - so no, I don't agree. Yes, if they are an eligible person and the plan allows for CRD. The reason or date of their termination doesn't matter. And furthermore, I think for anyone who already took a distribution, or takes a distribution from a plan that doesn't specifically allow CRD, then the participant will have the option on their own personal return to classify the distribution as a CRD, without any plan involvement at all.

I think it is highly likely that compensation for the period 4/1/2019 through 3/31/2020 will be used by the plan which now covers all three employers. A certainty for 415 purposes and top-heavy and some parts of gateway (if applicable). Most likely for plan benefit purposes, too, but this is rebuttable by merger documentation.

Not enough info. Of course, we start with "what does the acquirer want to do?" Since you say it was a stock sale, in fact the company was not "acquired", there was just a change in who owns the stock. Therefore, the same issues that would always apply if your client called you today and said I want to terminate the plan apply. Nothing special because it is still the same employer with no change.

No, the merging in plan does not need to sync to the same plan year end. The plan merging in just files a short year return for the period 1/1/20 - date of merger, if that is in fact necessary...that date of merger can be an art form. I've generally taken the position that if the documentation says the plans were merged "as of 12/31/19" but the actual transfer of assets occurred in early January, that the final return is for the 2019 year and the assets belong to the new plan then (12/31) even if they weren't physically moved until later. Not the biggest deal to file a short year return if the documentation calls for it. What does the merger documentation say?

(A) IN GENERAL.—Any individual who receives a coronavirus-related distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make 1 or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), of the Internal Revenue Code of 1986, as the case may be. (B) TREATMENT OF REPAYMENTS OF DISTRIBUTIONS FROM ELIGIBLE RETIREMENT PLANS OTHER THAN IRAS.—For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a coronavirus-related distribution from an eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received the coronavirus-related distribution in an eligible rollover distribution (as defined in section 402(c)(4) of such Code) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.

But doesn't the Act specifically allows for it to be repaid - and treated as a rollover - in the three years subsequent? So maybe not a rollover eligible distribution in the traditional (or technical sense), but certainly a rollover (rollover contribution? not sure what the terminology should be) is allowed for the CRD amount. Thus, in effect, making it a rollover. I could see this being particularly useful for folks who try to get around the typical 60 day rollover issues - there is no withholding, and they can use the money for longer than 60 days with a CRD.

I agree that the Kennedy case is not on point and the theory doesn't apply to this set of facts as presented to us.

I disagree. I'm no lawyer but this didn't make sense to me so I reviewed the case...ok, I read a review of the case. I believe that drawing an inference from that case to this situation is not valid. The Kennedy case was one where an ex-spouse gave up her right to any pension benefits as part of a divorce settlement. But the participant did not change the beneficiary designation which named her as the primary beneficiary. Both she and the estate filed claims and the plan decided she was the beneficiary. I won't get into the legal reasoning but it went to the Supreme Court and they sided with the plan - she was the beneficiary because the beneficiary designation said she was, and a separate document waiving her rights had no impact. The first sentence of the (Trucker Huss) review said: "In a victory for plan sponsors and administrators, the Supreme Court ruled recently in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 129 S.Ct. 865 (2009), that retirement plans may rely on the plan terms and beneficiary designation forms in determining the proper recipient of survivor benefits." (My emphasis in bold.) Plan terms in the instant case say wife is beneficiary. No ifs and or buts; the designation signed by the participant before the marriage is simply invalid.