Leaderboard

Your previous employer may be able to convince them to cooperate. It is standard procedure in the industry to cut two checks (and two 1099-R forms) when pre-tax and Roth are distributed from the same account. Apparently their call center staff knows this. Your former employer may not appreciate that their bank will not comply with the usual process.

If they are not willing to issue two checks, are they at least willing to provide a letter explaining where the funds originated from. If not, you ask for a statement or print your transaction showing the funding from Pre-tax and Roth and see if your new employer will accept that.

Participants who were terminated but receiving RMDs didn't need to be reported on the 8955-SSA because they were receiving at least some portion of their benefits. With 2020 and the RMD waiver, many RMD-eligible participants did not take their RMD. So when we're working on the reporting this year, they need to be reported on the 8955-SSA for 2020 because the "payment of the deferred vested retirement benefit cease[d] before ALL of the participant's vested benefit is paid to the participant..." (from the 8955-SSA instructions). I'm wondering if there was something covering this specific situation out there. Otherwise, there are going to be a bunch of additional people reported... and we know how well the SSA maintains this list, even when the Code D is properly reported at the time of payout. *cough* not overly well *cough* I certainly don't want to make the decision for my clients and not report people and run the risk of incurring the $10/person/day penalty, and it's not like it's a particularly large amount of work for the typical-size clients we service, but I just figured I'd check the hive-mind since I didn't see anything addressing it myself. Yes, I know that if the participant has taken their 2021 RMD by the time of the 8955-SSA filing, that would put them back in "pay" status and make them not need the form... but sometimes, getting that information is harder than just completing the form! Thanks.

I'd say it didn't "cease" it was "suspended."

While I lack expertise on tax law’s coverage and nondiscrimination provisions, one who knows those rules might consider these steps: 1) Define the employer, applying IRC § 414’s provisions and rules implementing or interpreting those provisions. 2) Once the employer is defined, define the to-be-measured workforce. That might include USA citizens and resident aliens, and might exclude nonresident aliens. A plan might exclude a nonresident alien who has no USA-source income. Also, a plan might exclude a nonresident alien “if all of the employee’s earned income from the employer from sources within the United States is exempt from United States income tax under an applicable income tax convention.” 26 C.F.R. § 1.410(b)-6(c)(2). 3) Once the workforce is defined, apply § 401’s and § 410’s rules to discern whether coverage and nondiscrimination conditions are met.

1. You can determine the account balance either on a cash basis, or on an accrual basis. If you use a cash basis, his account balance on 12/31/2020 would be zero, so his 2021 RMD would be zero. Has the business been around for a while? For RMD purposes, you are only a 5% owner if you owned 5% during the year you attained age 70½ (or 72, post-2019). If he started the business at age 72, for example, then he would have been a 0% owner in the year he turned 70½ (because the business didn't exist) and therefore would not be a 5% owner and would not be required to commence RMDs until actual termination of employment. 2. I don't see any problems.

I want to caution you on doing that, however. If a participant has rollover money in an IRA, there's likely 0% chance they will roll money into the plan if they are then restricted from all access to that money until termination, death or disability.

I believe you can eliminate it prospectively. That is, r/o money in the plan now (and the future earnings thereon) is protected. But any r/o money coming in after amendment date can be restricted.

I'm not aware of any definitive guidance on the subject. However the buyer should be aware that failure to provide the 204(h) notice carries a substantial penalty. They may wish to consider the cost of the penalty at 30 days multiplied by the number of participants versus the minimum required contribution that would be owed if the plan were frozen 30 days later. The rest of this post is pure conjecture. I would advise you to disregard it entirely and seek ERISA counsel. If I were going to rely on the exception to the 45-day requirement, I would want it to be as clear as possible that the amendment is being made in connection with the acquisition of the plan sponsor, and not for any other reason. For example, I might do the following: In the 204(h) notice itself, state that "In connection with the acquisition of Sponsor Co by Bigname Inc., the Sponsor Co. Defined Benefit Plan is being amended..." Put similar language in the resolution adopting the amendment, e.g. "Whereas Bigname Inc has agreed to acquire Sponsor Co on the condition that the Sponsor Co. Defined Benefit Plan be terminated..." Commit in writing - either in the amendment itself or by a separate resolution - that if the acquisition falls through, or is not completed by X date, that the termination is rescinded and benefit accruals will be reinstated retroactive to the date of the freeze.

You knew what the deferral % was supposed to be, so you don't need to worry about ADP percentages. Calculate how much was to come out of each paycheck and you have the missed deferral. Your QNEC is 50% of that. From EPCRS:

I'll take a stab at it, and I could be wrong... If its a plan expense account, it is a plan asset because it is for the benefit of that plan rather than revenue sharing deposited into a service providers operating account. As a plan asset, it is subject to the qualification requirement that all funds are allocated to participants based on definite plan formula. This requirement then means that funds cannot carryover unallocated from year to year (same reasoning as the plan forfeitures). So it goes back to the Code.