Leaderboard

https://www.irs.gov/pub/irs-drop/rp-21-30.pdf

Yes, being precise, the plan year end was 11/30 so this doesn't work. Having said that, I'd just file it as a full year and move on. Sorry to anyone who thinks that is godawful.

Mostly correct but the insurer should be paying everything to the plan, and the plan is responsible for paying and reporting to the beneficiary. No reason that the tax-free part should not be reported on a 1099-R but as non-taxable. The taxable portion just becomes part of the account balance and is eligible for rollover. Of course we know that doing things right is somewhere down the list for agents, so the bene on the policy might be the spouse, or the company, or who knows what. All bets are off then.

Makes sense, Bird, but this is not actually in the 1099-R instructions, right? I word-searched and it seemed like all the references to life insurance were to annyal reporting of term cost. That's where I'm comin' from.

Look for it here next Monday. https://www.irs.gov/irb

Here are the highlights of the new rev proc:

No need. IRS and DOL are well aware of the issue, but haven't worked out the practical solutions yet. Simply be prepared to follow up on correspondence and explain that it was a retroactively adopted plan, the filing is not late even though it is filed after the 5558 deadline.

There due date of the 5500 is automatically extended to the sponsor's tax filing deadline, as long as the sponsor's tax year is the same as the plan year. If you adopt a plan on September 14, that leaves you 1 day to get your minimum funding done and prepare and file your 5500. Another possibility is that you just add $750 for a DFVCP filing to your plan setup costs.

When (before 2006) I was inside counsel for a retirement-services provider, my client suffered many investigations about abandoned plans. The volume was enough to require internal business reporting and monitoring systems. Not once did EBSA question or criticize that the service provider had not filed a Form 5500 report. Not once did EBSA suggest that the service provider was responsible to cause someone to file a Form 5500 report.

While the DOL may not agree - the way I'd look at this is that the 7 day rule is a "safe harbor." The requirement is "as soon as practicable." If for reasons beyond the control of the employer it went that extra day, then it may be "as soon as practicable" even though it didn't meet the safe harbor. The DOL would look at the regularity of prior contributions - and in my experience would say if you can do it in x days, you should be able to do it in x days - so "as soon as practicable" to them is the pattern of behavior established. Conversely, if you do it consistently in x days, and ONCE do it in x-1 days, they have been know to hold you to the x-1 standard, and deem all other contributions as late.

Without knowing or remarking on the particular situation you describe: The Internal Revenue Service allows a method for a claimant to self-certify her hardship without submitting source documents as a part of the claim. Instead, a plan’s administrator or claims administrator relies on the participant’s written statement (made under penalties of perjury). A claimant must pledge to keep her source documents, and to furnish them if asked. But a participant’s breach of that promise won’t tax-disqualify the plan if the plan’s procedure is correctly designed and administered. Internal Revenue Manual 4.72.2.7.5.1 (08-26-2020) https://www.irs.gov/irm/part4/irm_04-072-002#idm140377115475856 The IRS’s without-source-documents method can work if the plan’s administrator and its service providers carefully meet all conditions of the regulations and that method. Under that method, an IRS examiner must not ask for source documents unless: (1) the notice to participants or the claim “is incomplete or inconsistent on its face”; or (2) some participants received at least three hardship distributions in a plan year, there is no “adequate explanation for the multiple distributions”, and the examiner’s manager approves the request for further information. If a plan’s administrator and its service provider design the software correctly, #1 would never happen (except for a paper claim, and then only if the claims administrator is careless). About #2, a plan might limit hardship distributions to no more than two in a year, making #2 not happen. Even if the plan does not limit the number of hardship distributions, #2 might not happen unless abuses are bad enough that the examiner is motivated to do the extra work of getting her manager’s approval. Yet, there is a divergence of opinions about whether it’s wise to use what the IRS calls the summary-substantiation method described in the Internal Revenue Manual. A search in these BenefitsLink forums will turn up a few discussions that air different views.

Agreed. The 4/1/22 RMD is based on the old tables and the next one due by 12/31/22 is based on the new tables because it’s for the 2022 distribution calendar year.

Keep in mind that RMDs due 4/1/2022 (for someone who was 72 and terminated in 2021) are still technically 2021 RMDs and will use the 2021 table.

All good and accurate information. Now you can decide whether you want to have an open-ended argument with the box-checkers at large financial institution, or you can provide them with your advisory letter, which as noted is public information, so they can check their box and move on.

Wall Street Journal.... article dated 7/9/2021. maybe posted to site 7/10/2021