Leaderboard

If it's a 401(a)(30) violation, e.g. they allowed the participant to exceed the limit in that plan (or in multiple plans within the same controlled group), then they have to distribute, as the plan never should have accepted the contribution in the first place. In other words, the plan document probably says that a participant will not be allowed to contribute more than the annual limit, so by allowing the participant to contribute in excess of the limit, there is an operational failure and that can be corrected by distributing the excess under EPCRS. If it's only a 402(g) failure, and not a 401(a)(30) failure in any plan, then there is no qualification issue and no need to distribute any of the contribution. In fact, there is no ability to distribute the excess unless the participant has a distributable event, such as age 59½ or termination of employment. There is a tax consequence for the participant but that is not the plan's problem.

The plan sponsor is asking... and as I read his email closely he's got to be off with his thoughts. Full disclosure, I think he is asking a hypothetical question. He feels he has a good price for the bond from Hartford and is worried they won't go any higher. IDK why they wouldn't. I'm going to tell him he just needs to have one bond... just keep it simple. sorry to waste any time.

A participant (or her beneficiary or alternate payee) might prefer to know the amounts of the previously taxed participant contributions. Why? Not every distribution is a retirement benefit. For example, a distribution before age 59½ with no condition about “a stated period of employment” might not be a retirement benefit. See 61 Pa. Code § 101.6(c)(8)(iii)(A)(I). If a distribution is not a retirement benefit (and is not a tax-free transfer or rollover into another plan), the distribution “shall be included in income to the extent that contributions were not previously included in this [compensation] income.” 61 Pa. Code § 101.6(c)(8)(iii)(A). The previously taxed amounts are recovered first, not proportionately over periodic payments. 61 Pa. Code § 101.6(c)(8)(iii)(B). Pennsylvania’s instructions and other publications tell a taxpayer to keep records of her previously taxed amounts.

The client will need to wait for an IRS notice assessing late filing penalties. If the plan does not have a history of filing Form 1099-R late, the IRS has a First Time Penalty Abatement policy https://www.irs.gov/irm/part20/irm_20-001-001r#idm140198826274112. Client calls the IRS number on the notice and requests first time penalty abatement. If the agent says no, hang up and call again until you get an agent that says yes.

Yea, I clearly misread that! Sorry, 8(f) it is! I agree, including them as part of the gain/loss isn't accurate. I've seen people do it as well

How is #2 "Fees and expenses for...investment management.." not a "management fee on the investments"??

JackS, it's got its own law. Go here: https://www.law.cornell.edu/uscode/text/5/part-III/subpart-G/chapter-84/subchapter-III Section 8440 of above says you treat like a 401(a) plan.