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?

Company is sold to another larger company which brings all employees onto their set of benefit plans.

Employees are covered by selling company for 2 months after the purchase date so as to finish the year off at 12/31 with the same benefits.

At 1/1 they are under the new company's benefits.

1 employee stays on the old plan for two more months (ie the plan exists until 2/28).

No need to file an additional 5500 since beginning of final year < 100.

So seems logical to file the 12/31 5500 with Code 4R and then mark as Final?

Facts: 

Suppose you have a husband and wife with no kids living in a community property state. Also, suppose he owns 82% of his corporation with no employees and is eligible for his companies' retirement plan. She also owns 82% of her corporation has 3 employees except she is not eligible for her corporation's plan. 

Question: 

A controlled group seems to exist here but would both plans need to be aggregated for testing when she is not eligible for either plan?

Thanks.

Transmeroca sent out a piece indicating tha the IRS now requires W4R every time someone wants to increase their withholding.

Can that be right??  Those forms are notoriously nonsensical.

An accountant posed this scenario to me:

His client established a traditional IRA and made a $7,000 contribution in 2022 and then converted it to a Roth IRA.  In doing year-end projections, the accountant determines that the client does not have any earned income for 2022 and therefore the IRA contribution is an excess contribution.  The current account value is $6,700.

Ordinarily, excess contributions must be withdrawn from the IRA to which made but in this case the original IRA no longer exists.  Seems the only logical thing to do is withdraw the $6,700 from the Roth IRA.  The client is going to get a 1099 for the conversion to Roth.  Since he can't claim the $7,000 as a deductible contribution (which, if it wasn't an excess contribution, would result in a wash for tax purposes) is he now facing taxable income of $7,000?  The 1099 issued for the refund of the excess contribution from the Roth is a non-taxable transaction.  Any thoughts on how this individual avoids picking up $7,000 of taxable income?

Thanks for any input.

The SECURE 2.0 Act of 2022’s provisions for a “pension-linked emergency savings account” include not only Internal Revenue Code provisions but also a new part 8 of subtitle B of title I of the Employee Retirement Income Security Act of 1974.

Am I right in thinking an emergency savings account is a part of an ERISA-governed retirement plan (if it’s not a governmental plan or church plan), and so is governed by ERISA § 206(d)(3), with its QDRO exception from a retirement plan’s anti-alienation provision?

How does a need to pay an alternate payee as a qualified domestic relations order requires affect one’s administration of a retirement plan and its emergency savings account?

Is it the same as, or different from, administering QDROs regarding a plan’s other subaccounts?

If a participant has immediate access to an emergency savings account, would a spouse or other alternate payee get no less access?

Pretty sure I know the answer to this one but just in case ... 401k/PS plan- owner gives his 2 kids (they do not work there ever - they have other full-time jobs) the max 401k and accompanying SHMatch every year.  They are on the payroll so get W2s.   They do not contribute any 401k monies where they actually work, but can they get a profit sharing contribution from both this plan and their actual plan?  No need to comment on the legality of this - been down that road with them.  TYIA!