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There are 2 ways to correct this under Rev. Proc. 2019-19: Treat it as an excess allocation. Move the amount (adjusted for earnings) to an unallocated account (aka suspense account) which must be used to reduce future employer contributions. The employer may not make any further contributions to the plan, other than elective deferrals, while money remains in the unallocated account. Retroactively adopt an amendment making the employee eligible as of the date they began receiving contributions. This is only available if the employee is NHCE. It doesn't matter if the failure crossed more than one calendar year or plan year, as long as it is not beyond the end of the second plan year after the year in which the failure occurred.

We have a handful, all "elective procedure" type of practices who had to shut down. The last one dragged their feet but finally allowed it, and the flood gates have opened....

There have not been any additional guidance yet from IRS. However, and I have said this a number of times on this board, the participant will simply self-certify that "I meet the requirements for a Coronavirus Related Distribution" and no reason for why he qualifies is needed nor should it be requested. And if the plan does not offer CRD, then the participant can simply call an "audible" by self certifying on their own that the distribution was a CRD when they do their tax return. I think people are overthinking this. Just about every distribution can be a CRD. Now, as a matter of information, we have exactly ONE PLAN where we are currently discussing having a CRD option adopted and I doubt it will actually happen even in that plan. For us, this is just a non-issue (and happily so). The participant doesn't need to KNOW that he is a qualified individual. He self-certifies that he is and that's the end of it. There will be NO "auditing" of those certifications; it would be impossible and IRS does not have the resources. And that's the truth!

The two significant issues still out there: 1) Can you fund whatever you want into your retirement program in your (now) 24 weeks, regardless of whether it is 2019 or 2020 funding, and without regard to some pro-rata contribution limit. I believe that you can put in anything you want (that is legitimate contributions) and it counts towards the forgiveness. 2) Is there any restriction on C or S corporation stockholders who are also employees, like the restrictions on Schedule SE filers (sole props, partners)? I say there are NOT. There are a few other minor issues but resolving the above two will quiet most of the noise out there. It really didn't solve anything; it extended the 8 weeks to 24 and changed the 75/25 to 60/40 but in the process screwed up the language about the 60% (which they are already saying needs to be fixed: the "cliff" issue).

Id say qualified individual without hesitation.

Yes, but.... Has anyone ever seen this challenged by IRS? You can terminate a plan even after one year if you have a good reason; and a good reason is that "we aren't making money any more but last year we had extra money given to us by the government so we decided to share it with the employees via a retirement plan; we would have like to continue it but business just doesn't allow". Yes, "permanency" is ostensibly required; in practice it is easily avoidable if need be.

Hey Luke, in our client's case, which is a group of engineers, the owner hammers home that they aren't going to get a match unless they defer 4% so participation is great. For them it works well, but you are correct, this would not be a good design for most plans.

Also check the document. If you truly convert the balance to an annuity then the balance should go to zero and you only have the annuity (if plan frozen), or if not frozen, then each year's CB credit is converted into additional annuity benefit.

The RMD is his annuity benefit in the form that he elects. That won't decrease once started but could increase if there are future accruals, which in this case sounds unlikely. Yes you reduce the hypothetical account for the withdrawal paid. Yes you have to preserve the annuity benefit to avoid anti-cut back provisions.

CB - while the 2-year period you refer to is required for a Plan Document Failure under SCP, I think this "insignificant error" is eligible for correction under SCP without the restriction of the 2-year period? See RP 2019-19, Sections 2.02 and 4.05(2)(a), as well as Appendix B.

1. We don't really know yet how to complete the 2019 SB. We don't know if delaying the deposit until 1/1/2021 is treated as an unpaid 2019 contribution, or if there will be an extension on the 5500 due date, or if there will be a way to apply it to 2019. Personally, I think treating it as an unpaid minimum is the most logical. Either way, it is definitely not $0. The due date has been delayed, but the amount due isn't $0. 2. First question, why is the 2020 MRC =$0? You are not permitted to recognize the benefits waiver to determine the MRC. At the very least the 2020 MRC will exist because they never paid 2019. The unpaid amount from 2019 becomes part of the MRC in 2020. One way to handle this is if he doesn't make either the 2019 or 2020 MRC, both would eventually be subject to 10% excise tax. Once the plan is terminated and the assets are distributed, you are no longer required to file 5500s. Therefore, the sponsor can probably get out of the MRC, but they would owe a 10% excise tax on the unpaid amounts. The IRS might try to force him to pay the full MRC, but I don't think they would waste the effort for a one life plan, assuming there weren't other issues. If he is bankrupt, maybe he gets out of the 10% excise tax as well, but the IRS will fight harder for that. Also, just as an aside, the "majority owner waiver" is a PBGC thing, not an IRS thing. One life plans are generally not covered by PBGC. The plan document should already contain language related to the distribution of assets upon termination, included provisions for excess assets, and insufficient assets.

Under the current rules, it is perfectly ok. And it is in the spirit of the program which is to spend money on employee compensation, and luckily, retirement benefits and health insurance fall into that category.

Confirned.

Assuming he has enough in the account and he qualifies for the COVID provisions, I don't see anything that would prohibit doing both.

VCP is needed if they never had a document.

Unless the plan’s administrator is confident that ERISA does not govern the plan (and that Internal Revenue Code § 6058 does not call for an information return), it seems filing Form 5500 reports makes sense. If the plan’s sponsor wants the annuity contracts and custodial accounts to continue § 403(b) tax treatment, restating the plan (if its governing document does not yet meet all tax-treatment conditions) seems sensible.