Leaderboard

How does someone ask for a 90% deferral and not notice for 3 months?

exactly. not like we're talking 5% to 9%. 5% to 90% is quite the leap.

Details and cites here if you need it still: https://www.theabdteam.com/blog/which-plan-options-must-be-offered-under-cobra-2/ Exception #2: Moving Outside HMO Regional Service Area If a COBRA participant moves outside the HMO service region, and the COBRA participant requests other coverage, the employer must offer the COBRA participant the opportunity to elect coverage under any other option that is available to active employees and provides coverage in the COBRA participant’s new location. In other words, if the employer offers a different plan option that would provide coverage in the COBRA participant’s new location, that plan option must be made available to the COBRA participant upon relocating (or, if later, the first day of the month following the month in which the COBRA participant requests the alternative coverage). ... Treas. Reg. §54.4980B-4: Q-. 4. Can a qualified beneficiary who elects COBRA continuation coverage ever change from the coverage received by that individual immediately before the qualifying event? A-4. (a) In general, a qualified beneficiary need only be given an opportunity to continue the coverage that she or he was receiving immediately before the qualifying event. This is true regardless of whether the coverage received by the qualified beneficiary before the qualifying event ceases to be of value to the qualified beneficiary, such as in the case of a qualified beneficiary covered under a region-specific health maintenance organization (HMO) who leaves the HMO’s service region. The only situations in which a qualified beneficiary must be allowed to change from the coverage received immediately before the qualifying event are as set forth in paragraphs (b) and (c) of this Q&A-4 and in Q&A-1 of this section (regarding changes to or elimination of the coverage provided to similarly situated nonCOBRA beneficiaries). (b) If a qualified beneficiary participates in a region-specific benefit package (such as an HMO or an on-site clinic) that will not service her or his health needs in the area to which she or he is relocating (regardless of the reason for the relocation), the qualified beneficiary must be given, within a reasonable period after requesting other coverage, an opportunity to elect alternative coverage that the employer or employee organization makes available to active employees. If the employer or employee organization makes group health plan coverage available to similarly situated nonCOBRA beneficiaries that can be extended in the area to which the qualified beneficiary is relocating, then that coverage is the alternative coverage that must be made available to the relocating qualified beneficiary. If the employer or employee organization does not make group health plan coverage available to similarly situated nonCOBRA beneficiaries that can be extended in the area to which the qualified beneficiary is relocating but makes coverage available to other employees that can be extended in that area, then the coverage made available to those other employees must be made available to the relocating qualified beneficiary. The effective date of the alternative coverage must be not later than the date of the qualified beneficiary’s relocation, or, if later, the first day of the month following the month in which the qualified beneficiary requests the alternative coverage. However, the employer or employee organization is not required to make any other coverage available to the relocating qualified beneficiary if the only coverage the employer or employee organization makes available to active employees is not available in the area to which the qualified beneficiary relocates (because all such coverage is region-specific and does not service individuals in that area). (c) If an employer or employee organization makes an open enrollment period available to similarly situated active employees with respect to whom a qualifying event has not occurred, the same open enrollment period rights must be made available to each qualified beneficiary receiving COBRA continuation coverage. An open enrollment period means a period during which an employee covered under a plan can choose to be covered under another group health plan or under another benefit package within the same plan, or to add or eliminate coverage of family members.

There's no requirement for a third party appraiser. Some clients are well qualified to value these assets, that's why they invest in them, as they have some expertise. Residential real estate is often straightforward as there are usually comps available. I tell clients it depends. If it's a DB plan, the asset is a relatively small value of the total plan assets and/or the asset valuation is straightforward, and the plan is fairly well funded, it's not really a big deal, the contribution range is so wide, and if the AFTAP is comfortable then not much would be affected if the valuation changes a bit. OTOH if such an asset is being distributed as part of a DB lump sum, the valuation is of course critical. And in a pooled DC plan if any distributions are being made the valuation of such assets is critical as it affects all account balances.

To defer the taxes as long as possible.

I wouldn't

Always used an official third party appraisal and never accepted anything else. This is especially important for db plans as any incorrect valuation may result in under contributions or over deductions.

Maybe I'm asking a silly question, but if the trust is the beneficiary, why is the money still in the plan? Why hasn't the money been distributed to the trust and then the issues are trust's.?

I don't know where you are, but in the counties I'm familiar with assessed valuation bears little relationship to fair market value. The plan assets have to be carried at FMV. Showing an incorrect value on a 5500 isn't fatal, but yes it will affect the MRC and 404 DB contribution calculations as well as the AFTAP. And in a pooled DC plan it would affect the value of accounts and distributions (where an incorrect valuation could lead to a qualification failure). And an incorrect value could lead to a qualification failure in a DB distribution, undervalued could result in a 415 violation, overvalued would lead to a benefit being underpaid. Fair. Market. Value.

There are fee-only advisors who charge too much and commission-based advisors who will do a good job and not "charge" (receive) too much. Granted, it is tough for a layperson to know what is "reasonable" and what is "too much" but I don't subscribe to the mantra that fee-only is always better. It's not unfair to ask exactly how much either party is charging and/or receiving.

If it was distributed by the plan in 2020, then it is taxable to the participant in 2020 and a 2020 1099-R should be issued. Whether the participant cashes the check in 2020 or 2021 is irrelevant. See Rev. Rul. 2019-19.

They will have a qualification failure and need to correct it under EPCRS. If eligible to self-correct, they have until the end of the 2022 plan year to do so, or longer if it is not a significant failure.

sam248, you should also be applauded for your apparent willingness to "do the right thing". I'm sure that most of us on this Board have experienced similar situations from the Plan side, where participants who were mistakenly overpaid resisted returning these funds to the Plan, resulting in unnecessary time, expense and misery for everyone involved in attempting to recover the overpayment.

Here are my general rules (because there are always exceptions): 1. If a 401(k) plan is going to be deferral only, I recommend against it or prefer they go somewhere else. Past experience shows that they almost never work out successfully. 2. If an employer qualifies and the limits are acceptable. a SIMPLE IRA is quite often the best choice instead of a 401(k). I know that doesn't work here because of the employer contributions, but I still often recommend it. 3. While our industry exists because of "state" supplied rules, I'm generally opposed to state run programs.

Unless you opted into electronic notification point out specifically that the first time you were notified was the bill collector as you have no prior written communication from them. Ask them to indemnify you from any losses, taxes, fees or tax preparation services you may require as a result of their error. Also require them to removed the bill collector and ANY negative reporting to your credit that may result from them having sent this to collections without notifying you in writing that the error had occured. Tell them while you are happy to return any funds erroneously deposited to your account to the Plan, you will not be dealing with any bill collectors on this matter. Also you will need a detailed accounting of how they arrived at the over payment figure in question and why you are not entitled to that payment. If they do not agree let them know that your next call will be to the local branch of the Department Of Labor.

My advice would be to cooperate, but not to the point that it disadvantages you beyond where you would have been had the mistake never occured. And that's tricky, to say the least. I doubt the bill collector will just say "sure, you work it out" because then they don't get paid. Of course they shouldn't have been involved in the first place. Just be very careful about taking money out of the IRA - if you "just" ask for it to come out, it will be taxed to you, plus subject to the premature distribution penalty if you are under 59 1/2. It might be ok to take it out as an "excess contribution" (which it is) and then return it. But you really need some specific guidance from someone who can see the details of your situation.

Check the plan document. Most, but not all, plan documents require that an employer affirmatively becomes a participating employer before its employees become eligible. However, there are some plans where employees of an employer that is in the same controlled group as the adopting employer become eligible without any further action. If you find that the employer needed to affirmatively become a participating employer, than Former Esq. answered your question correctly: your client will need to make a VCP submission, not a self-correction.

Yes, you can generally adopt a retroactive amendment to the plan to reflect its actual operation (in this case, inclusion of the 4th company in the plan). As I recall, it would have to be done under VCP. This is not SCP eligible.

It might be semantics to this ER, but only the PLAN can ask that an erroneous payment be returned, not the ER/plan sponsor.

no Um...yeah, I'm uncomfortable with the idea of paying a debt collector. Did they ask you for the money back politely before going there? Well, in a short term scenario, I'd say there is no doubt that losses are not the recipient's problem. Obviously not (your) fault. If you were requested to return the money and refused, then I think it could be argued that from that point forward, you have some liabiity. Probably not. Again, I think it depends on when the error was discovered and what happened thereafter. I'm just giving gut reactions - I don't know that there are clear answers.

See the 1999 Final Regs in Federal Registry.