Leaderboard

Interesting issue that I have never seen arise, but it looks like it's covered in Treasury Regulation 1.402A-1, Q&A 11 below. Reinvesting the dividends in employer stock that continues to be held in the participant's Roth account would allow a qualified distribution of that account balance later. Q-11. Can an amount described in A-4 of § 1.402(c)-2 [note: subsection (e) of this cite is 404(k) dividends] with respect to a designated Roth account be a qualified distribution? A-11. No. An amount described in A-4 of § 1.402(c)-2 with respect to a designated Roth account cannot be a qualified distribution. Such an amount is taxable under the rules of §§ 1.72-16(b), 1.72(p)-1, A-11 through A-13, 1.402(g)-1(e)(8), 1.401(k)-2(b)(2)(vi), 1.401(m)-2(b)(2)(vi), or 1.404(k)-1T. Thus, for example, loans that are treated as deemed distributions pursuant to section 72(p), or dividends paid on employer securities as described in section 404(k) are not qualified distributions even if the deemed distributions occur or the dividends are paid after the employee attains age 59 1/2 and the 5-taxable-year period of participation defined in A-4 of this section has been satisfied. However, if a dividend is reinvested in accordance with section 404(k)(2)(A)(iii)(II), the amount of such a dividend is not precluded from being a qualified distribution if later distributed. Further, an amount is not precluded from being a qualified distribution merely because it is described in section 402(c)(4) as an amount not eligible for rollover. Thus, a hardship distribution is not precluded from being a qualified distribution.

Millennium Trust will probably accommodate. No basis for recommendation other than an investment manager I know and respect uses MT for property that is not publicly traded securities. I have little observational experience, but I have seen no problems with transactions or reporting. I know not about valuation questions. I am also not commenting on the idea of holding real estate in an IRA.

Peter, interesting question because there are two penalties under the heading of failure to provide an SPD upon request. Your question relates to when a participant requests an SPD. The DOL sets the amount in §2575.502c-1 - Adjusted civil penalty under section 502(c)(1) at $110 per day. Per the EOB, that number is not indexed and has been constant for while. Common literature references this as a DOL penalty (it is set by the DOL) but you correctly note it is the court that can direct the payment of this amount to the participant. I believe that the penalty is based on days exceeding 30 days of receipt of the participants, but I don't have a handy source to confirm. The DOL has its own penalty if the DOL requests the SPD and the plan does not provide it to the DOL. This is under §2575.2(e) and is indexed. The current amount is $184 per day, not to exceed $1,846 per request (as confirmed in the link above from C.B. Zeller to the 2023 adjustments).

Not having a SOC1 in and of itself doesn't mean they cant finish the audit. It just means they can't place any reliance on the recordkeepers controls and have to do more testing. Obviously no one wants to do that, but that's an important distinction in terms of why the client isn;t able to file the audit report. Not to be confused with the fact that I would not finish the audit either (if I was the auditor), I would want to wait for the SOC1 to be finished. If the DOL comes calling, I would not hesitate to throw the recordkeeper under the bus. I agree a traditonal TPA (such as yours truly) doesn't have a SOC1 (we're not doing high volume/systems heavy work). So if they are waiting for a plain vanilla TPA to produce a SOC1 they'll be waiting a long long time! We definitely get asked for our SOC1 all the time so it's a common question.

If the TPA is running the daily val platform, that would be the reason.

So 6/30/22 PYE and most recent TPA SOC covers 1/1/21-12/31/21? 1. TPA can get gap letter to cover 1/1/22-6/30/22 2. IQPA can make a note that it wasn't available yet 3. Question why the IQPA requires the TPAs SOC. Plenty of small TPAs don't have a SOC audit and work on large filers.

If you're talking about SECURE 2.0 sec. 312, it says "the administrator of the plan may rely on..." which implies that is is not mandatory. If the plan allows self-certifications and it later turns out that the employee lied about the hardship, I do not believe that there would be any penalty on the plan or on the plan administrator, unless the plan administrator had actual knowledge that the hardship did not exist and allowed the distribution anyway. That is what it means to "rely on" the self-certification. The law does say that the IRS may issue regulations addressing what happens if it turns out that the employee misrepresented their hardship. If the plan does not allow self-certification, and the plan administrator allows a distribution for a hardship which later turns out not to exist, then the plan faces disqualification.

You have one gateway for your one aggregated plan. You can't test the gateway on a restructured or component plan basis. I'm disregarding disaggregation of otherwise excludable employees here, since I don't think that's what you're asking about. This person would need the 7.5% gateway (if that's the gateway minimum).

The question asked about a "foreign government entity". It seems clear that a "foreign entity" (e.g., corporation, business, commercial activity, individual...) can sponsor a plan. It seems probable that a "foreign government" can sponsor a plan where the sponsoring entity is an organization operating as part of the foreign government (e.g., embassy and consulate staff, trade representatives...) There are discussions that indicate both qualified plans and non-qualified plans (403(b), 401(a), 457, 409A...) may be available. The common denominator is individuals who can benefit from these arrangements must have income that is taxable in the US. If the question ultimately is about a plan for US-based employees with income taxable in the US, then it seems likely they can be covered under a plan. Looking for information on this topic felt like trying to see if Sasquatch, Big Foot or a Yeti can participate in a plan. Hopefully, one of BenefitsLink colleagues with the very special expertise can enlighten us all.

I could be wrong, I don't work on any plans that have company stock dividends paid to participants but I believe the answer to your question is: it depends. That is if the the participant is over 59 1/2 and they meet the 5 year period, then the dividend would be a non-taxable as a qualified ROTH distribution, if the participant doesn't meet both the over 59 1/2 and 5 year period, then it would be taxable just like it was not held in a ROTH account. Is the typical 1099-R code you give on these "U" like when an ESOP pays the dividends? If yes, then if it's also Qualified ROTH I think you can use the Codes "UB" At least that's how I see the instructions to Form 1099-R and the various codes.

I have seen a plan that pretty much has all of these provisions including the last day rule, and it had a 1000 hour rule. Administratively, the match throughout the year was accounted for separately and allowed participants the ability to direct the investments. If the employee reached the end of the year without meeting all of the plan provisions, the year's match account was taken away and used to offset the matching contributions beginning with the next year (much like a match forfeiture account). It was not the best plan design from the standpoint of employee relations.

I think the carve-out rule is technically separate from the normal disaggregation rules. So if you're willing to throw any otherwise-excludable HCEs in to your statutory ADP test, then you technically haven't disaggregated for coverage, nor discrimination testing.