Leaderboard

Thanks Bill. I was so concerned about attributing the father's ownership, that I forgot you don't make the attribution in the first place. Appreciate your response.

Old 404 regs supported three different ways: (1) The deductible limit determined for the plan year commencing within the taxable year, (2) The deductible limit determined for the plan year ending within the taxable year, or (3) A weighted average of alternatives (1) and (2) It appears that under the new law only second option is supported. There are no new regs yet. Some assume that when new regs will be issued, all 3 ways will be supported. Some prefer to be conservative, which in your case means that 2020 plan year contributions will be deducted in FYE 6/30/2021.

So the plan could be amended to read: "In the event of the death of a participant who has an accrued benefit under the plan (whether or not he is an active participant), 100% of the participant's account balance(s) as of the date of death ..."

I was reading it differently. this statement implies he did not receive the payment by the date illustrated on the election form. Maybe he returned the paperwork late, maybe the PA issued the check late, but either way, it was issued after the date illustrated.

Ditto.

I think some of the "long story short" might be relevant. Did the PA tell him he needed to respond by a certain date? Did he submit the paperwork timely? Did the election package contain information about the impact of delaying the election? Whose "fault" was it that the distribution wasn't paid the first time? Once the timing became impossible on the first payment, I don't think the PA can just issue a check for a lower amount. They had no participant election to pay the smaller amount and therefore no authority to pay it.. They should have sent a new election package with updated amounts. Then the participant could have decided if they wanted the lower payment, or continued to defer the election. You might be able to argue that not cashing the check was the only avenue available to the participant. Now that rates are lower, he should re-submit his application and request an updated election package.

I agree the participant could have elected to postpone commencement, but if I'm understanding the situation correctly, it sounds like the participant agreed to a certain benefit date, received payment on that date, then changed their mind after the fact. Based on that fact pattern I would say it's too late. The IRS said (last year, I think) that once the plan cuts a check the benefit is considered distributed, regardless of whether the participant cashes it.

Because it's an excise tax on the PLAN SPONSOR and not considered a reasonable expense of the PLAN.

No.

No. But he can roll it into an IRA and get the same results.