Form was filed a few months late but no correspondence has been received yet from the IRS.  Although it's my understanding that penalty relief can be applied for even after the IRS has sent a letter assessing penalties, there always exists the possibility that the DOL may instead send such correspondence, at which time the option to obtain penalty relief disappears. As such, it would appear that the best approach would be to file an amended return at this time (i.e., before the feds contact the client) via the IRS penalty relief program for EZ forms - agreed? Thanks in advance for all assistance.    

Effective immediately (Well at least for calendar year plans) are we no longer required to obtain any support at all for hardships?  The conversation will be "How much do you need?"  "$5,000"  "Are you able to certify it is for one of these pre-approved hardships things?"  If they say yes, they are eligible and that is that, right?  Literally anyone can take a distribution for any reason at any time as long as they are comfortable lying through their teeth to get the money they desperately need (at least as they would define that), right?  Does something bad happen to them if they lie?  Is it subject to any audit at all?

Hardship Distributions. Current law allows distributions on account of immediate and heavy financial need or an unforeseeable emergency, and the amount must be limited to the amount necessary to satisfy the financial need. Certain listed events are deemed to be on account of hardship, and employees are required to submit records documenting the safe harbor event. Effective for plan years beginning after December 29, 2022, plan administrators can rely on employee self-certification that they experienced a safe harbor event and that the requested amount does not exceed the amount required to satisfy the financial need.

Here is the scenario,

Single member plan.  Owner took a loan, then COVID hit and business fell off (non-existent).  The loan was suspended and ultimately the business failed.  To close the plan the owner needs to understand how to calculate the defaulted loan balance.  What is the process.  Should interest be added?   Just use the last principal balance?  

Thanks

Husband Owns 51% of CORP A with >50 employees

Wife Owns 100% OF Corp B.-Solo 401k. Only Employee

Both have their own 401k plans.

CORP B does not derive any revenue from CORP A but they are in the same line of business(Consulting).

Are these two considered Controlled Group or Affiliated Service Group?

thanks

Employer has a 401(k) Plan - Plan A. Employer, for reasons as yet unknown, (although I suspect sales commissions MAY have been a factor, but maybe not) established another 401(k) Plan as well - Plan B. Employer transferred most of the funds from Plan A to Plan B, but there was no plan merger agreement, no plan termination of Plan A, etc. The rest of the funds will apparently be transferred once there is no surrender charge.

Can the employer just randomly transfer funds from plan A to Plan B? No option given to participants, it was just done - and no distributable event such as a plan termination. I'm thinking this has VCP written all over it, although I'm not sure what the "fix" would be.

Am I missing something absurdly basic?

Never have I seen anything like this...

For someone born in 1959, is 73 or 75 the “applicable age” that sets a required beginning date?

The Consolidated Appropriations Act, 2023’s SECURE 2.0 Act of 2022 division includes this section 107:

SEC. 107.  INCREASE IN AGE FOR REQUIRED BEGINNING DATE FOR MANDATORY DISTRIBUTIONS. 

(a)   IN GENERAL.—Section 401(a)(9)(C)(i)(I) is amended by striking “age 72” and inserting “the applicable age”.

(b)  SPOUSE BENEFICIARIES; SPECIAL RULE FOR OWNERS.—Subparagraphs (B)(iv)(I) and (C)(ii)(I) of section 401(a)(9) are each amended by striking “age 72” and inserting “the applicable age”.

(c)  APPLICABLE AGE.—Section 401(a)(9)(C) is amended by adding at the end the following new clause:

“(v) APPLICABLE AGE.—

(I)  In the case of an individual who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, the applicable age is 73.

(II) In the case of an individual who attains age 74 after December 31, 2032, the applicable age is 75.”.

(d)   CONFORMING AMENDMENTS.—The last sentence of section 408(b) is amended by striking “age 72” and inserting “the applicable age (determined under section 401(a)(9)(C)(v) for the calendar year in which such taxable year begins)”.

(e)   EFFECTIVE DATE.—The amendments made by this section shall apply to distributions required to be made after December 31, 2022, with respect to individuals who attain age 72 after such date.

Someone born in 1959 attains 73 in 2032, and attains 74 in 2033. Someone born in 1959 fits both clause (I) and clause (II).

Imagine six Congresses (for twelve years) begin and adjourn with no enactment of any revision.

Is there any reading of this statute that harmonizes clause (I) and clause (II)? If not:

Is age 73 or age 75 the applicable age for someone born in 1959. What is the reasoning for your choice?

And here’s a perhaps more immediate question:

A summary that explains a plan—whether a summary plan description or a summary of material modifications—must “be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan. A summary of any material modification in the terms of the plan . . . shall be written in a manner calculated to be understood by the average plan participant[.]” ERISA § 102(a), 29 U.S.C. § 1022(a).

How would a summary you write explain the “applicable age” that sets a required beginning date?

Section 603, Elective deferrals generally limited to regular contribution limit. Under current law, catch-up contributions to a qualified retirement plan can be made on a pre-tax or Roth basis (if permitted by the plan sponsor). Section 603 provides all catch-up contributions to qualified retirement plans are subject to Roth tax treatment, effective for taxable years beginning after December 31, 2023. An exception is provided for employees with compensation of $145,000 or less (indexed).    

I think I know the answer, but thought I'd solicit opinions.

Suppose you have a state where state withholding is NOT mandatory - let's use NY as an example. Can a plan refuse to do state withholding on a taxable distribution, since it isn't required, even if the participant WANTS to have state tax withheld? I know that many platforms will accommodate the request, but I believe it is not required.

Thoughts? Thanks, and Happy New Year!

Let's say a 457f plan says participants balance becomes vested at age 55.  The participant is currently 50.  Can the plan be amended (At the employers election) to become vested at age 54 instead?  What about 53?  Is this strictly forbidden no matter what, or can these kinds of changes be made within certain parameters? 

For services about an individual-account (defined-contribution) retirement plan, here’s a few key due dates, and whether each is (or isn’t) adjusted under the Treasury department’s rule about a return or payment due on a Saturday, Sunday, or legal holiday. For Form 5500 reports, the Labor department follows Treasury’s rule.

January 15, a Sunday, is adjusted to Tuesday, January 17.

March 15, a Wednesday, is not adjusted.

April 15, a Saturday, is adjusted to Tuesday, April 18.

If a Federal tax return is due on a Statewide legal holiday of the State in which the filer resides or a holiday of the District of Columbia, the return is timely if filed by the next day that is not a Saturday, Sunday, or legal holiday. 26 C.F.R. § 301.7503-1. In 2023, the District of Columbia’s Emancipation Day is observed on Monday, April 17. D.C. Code § 28-2701.

Internal Revenue Code of 1986 § 7503 might provide no adjustment for something a retirement plan provides—for example, a corrective distribution—rather than an act the Internal Revenue Code commands.

June 29 (180 days after 2022 ended), a Thursday, is not adjusted.

July 29 (210 days after 2022 ended), although a Saturday, is not adjusted.

See 29 C.F.R. § 2520.104b-3 (Summary of material modifications to the plan and changes in the information required to be included in the summary plan description).

July 31, a Monday, is not adjusted.

September 15, a Friday, is not adjusted.

October 15, a Sunday, is adjusted to Monday, October 16.

What does the little Champagne bottle call his father?
Pop!

Happy New Year 2023

An employee was re-hired after incurring five 1-year breaks in service.  He never took a termination distribution from the plan.  Since he is now an active employee but not yet eligible to re-enroll in the plan, is he able to borrow against his account in the plan?

I believe that you should be able to set up a solo 401k just as you would any other 401k but wanted to make sure that the automatic enrollment feature was available and that then you could also receive the government tax credit for this?

Law firm that is a partnership.  Bill and Mary and married and both work for the firm. Bill owns 5% profits interest and Mary owns 5% profits interest.

When they reach RMD age, must they start the RMDs while they are still working?  Neither one  has more than 5% profits interest.

I am reading several articles that state that the reference in 416 to the constructive ownership rules of 318 will require Bill to be deemed to own Mary's interest, and vice versa.  Therefore they will each be deemed to have 10% profits interest and therefore must start the RMDs.

My question is, "what is the significance of 416(i)(1)(B)(iii)(I) which says  that “constructive ownership” only applies if a person owns more than 50% of the stock of a corporation, or (II) in the case of an employer that is not a corporation, principals similar to the principals of (I) apply.

To me, this seems to be saying that Bill would not be deemed to own Mary's profits interest unless Bill owned 50%, and vice versa.

 So while 318 requires constructive ownership, it seems like 416 is saying that for purposes of determining a 5% owner, the constructive ownership rules will only apply if a person owns at least 50%. 

Thanks!! 

As BenefitsLink yesterday informed us, this morning’s Federal Register publishes the Treasury department’s proposed rule that would permanently allow remote witnessing of a spouse’s consent, whether to a distribution not a survivor annuity or naming a beneficiary not the spouse.

Some plans’ sponsor/administrators and those who advise them might use this as an occasion to reconsider what a plan allows for a spouse’s consent.

ERISA § 205(c)(2)(A)(iii) permits recognizing a spouse’s consent “witnessed by a plan representative or a notary public[.]”

But does anything require allowing both those means?

May a plan provide that only a consent witnessed by a notary public allows something that requires the spouse’s consent?

And further, may a plan provide that only a consent witnessed by a notary public who is neither an employee nor a nonemployee contractor of the plan’s sponsor/administrator is recognized?

Hi

I am pretty sure the answer is no but wanted to see if I missed something here.

A QRP with excess assets from a terminated DB plan which is allocated every year to the plan participants as PS allocation.

The plan sponsor wants to make a contribution/donation to a charitable contribution using some of these assets that are in a suspense account.

As far as I know, these kinds of contributions can only be made from IRAs.

Just wanted to check and see if anyone has a comment on this.

Thank you

Apparently, the withholding tax on a distribution made in 2021 was paid in July 2022.

How would Form 945 be filed, on a 2021 Form 945 showing amount due?

How would IRS know the tax was paid and when paid, or is it up to the client when IRS sends a notice.

I don't know if there is a penalty for late filing.

Accountant paid the withholding for a participant in 2022, but payment was for a 2021 distribution.

How to handle?  Client knows there will be penalties

Looking to confirm what date for plan termination can be for a qualified plan. 

For DC plans and non-PBGC-covered DB plans is it at least 15 days prior to the date of termination when notices need to be provided to participants?

For PBGC-covered DB plans is it 60 - 90 days before date of termination when notice have to be provided?