Re new 402(f) Notices. How quickly do you think these (or similarly updated Notices) need to be utilized? For distributions as of today, or are we realistically ok for a couple of weeks, etc.? Doesn't take long to manually copy the IRS model into a Word document and do this manually, but takes a little time to update systems/procedures, etc.

Curious as to how quickly folks are implementing this. Of course, sometimes these are produced by the recordkeeping platform, so that's a separate question.

Final Divorce Decree included QDRO, it was ordered that it be sent to VRS for implementation when either I or my ex retires. My ex retired August 31, 2019. Didn't tell anyone and didn't file the QDRO with VRS. I found out he retired several months later, I sent the Divorce Decree with QDRO to VRS. It was approved and implemented and I started receiving the regular amount calculated in February 2020. Question is, from the time he retired and started receiving payments to the time I finally started receiving payments, do I have to go to court to receive the payments that weren't sent to me due to him failing to submit the QDRO when he retired? Any other information would be appreciated. Thank you.

We have a client that failed to sign their DB restatement prior to 7/31/2020 - despite numerous requests from us to do so. Am I reading the IRS website correctly that, since this failure occurred after April 19, 2019 (EPCRS Rev. Proc. 2019-19 update) and will be corrected within the SCP 2-year timing, that correction for this failure is eligible under SCP? An article I've read seem to interpret this expansion to exclude restatements since, due to the late restatement, the plan sponsor may no longer rely on the prior restatement period opinion letter, but that does not appear to be how the IRS is describing correction here. 

Assuming the plan is eligible for SCP, should the document be dated as of the current date with a notation that the adoption is late but the plan is taking advantage of the correction method under SCP??  

https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-you-havent-updated-your-plan-document-within-the-past-few-years-to-reflect-recent-law-changes

From article (my highlighting added):

Correction programs available:

Self-Correction Program:

Some, plan document failures may be corrected on or after April 19, 2019 under SCP if certain conditions are met. The conditions are:

• Plan document failures must be corrected within the two-year correction period specified in Rev. Proc. 2019-19, section 9. The failure begins in the plan year that includes the end of the applicable remedial amendment period.
• Plan must have a favorable letter as defined in Rev. Proc. 2019-19, section 5.01.
• SCP is not available to correct a failure to timely adopt an initial IRC 401(a) plan document.
• Corrective amendments to resolve demographic failures that were not timely adopted are not eligible for SCP and must be resolved under VCP or Audit CAP.
• The late adoption of discretionary amendments is not considered a plan document failure.
• Refer to Rev. Proc. 2019-19, sections 4.01, 4.03, 4.04 and 4.05 for program eligibility requirements.

Example 1:
The Carrot Stick Company has sponsored a 401(k) plan since 1997. They use a pre-approved plan document.  On May 3, 2019 the plan sponsor realized that they failed to timely amend their plan for EGTRAA by the April 30, 2010 deadline and for PPA by the April 30, 2016 deadline respectively. The EGTRRA document was adopted on June 30, 2015 and the PPA document was adopted on December 5, 2018. Can these failures be considered resolved under SCP per Rev. Proc. 2019-19?

The answer is no. The failures can’t be resolved under SCP. The correction of the failures occurred before April 19, 2019, the effective date of the revenue procedure. Prior to 4/19/19 the correction of these failures needed to be accomplished via VCP or Audit CAP. Even if the failures had been uncorrected they would still be ineligible for SCP under Rev. Proc. 2019-19 because correction would be occurring after the end of the 2 year period for correcting significant failures under SCP. That period would have ended on 12/31/12 for the EGTRRA failure and 12/31/18 for the PPA failure.

Hi

Cannot seem to find if for 2020 20% withholding is waived on distributions (not hardship/Covid related, just regular distributions), it is still required, correct?. I am aware of the 10% waiver for 59 1/2.

Thank you,

Hi

My apologies if this was asked before/missed it.

PS plan terminating now. Have a 75 year old participant receiving RMD (none withdrawn for 2020 yet).

Because of the plan termination, do they need to receive the RMD or can waive it?

Thank you

Does a DB Plan with 10/31/19 YE get the extension?

this case involves a rollover to a qualified plan. we think the plan was never qualified and therefore the rollover was improper. i am thinking the tax consequences would be the entire rollover would be taxable and also subject to the 6% excess contributions excise tax.  anyone have any thoughts? 

as a side note i wonder if the IRS would allow  the TP to back out the rollover and roll it into an IRA which and them allow him to start taking RMD's and maybe pay the 6% excise tax for the years the contribution was in the plan.

per Secure Act, safe harbor nonelective plans no longer need to provide the annual safe harbor notice every year.

So, for plan that provided notice in 2018 for 2019, no notice will be provided in 2019 for 2020. Question is - does that make the safe harbor nonelective contribution optional because no notice was provided that it is indeed being contributed? Or am I totally offbase here.?

Plan currently has a dollar for dollar match on first 10%.

I think I can have a dollar for dollar match on the first 4% as safe harbor, and then dollar for dollar on the next 6% as a discretionary match.  I would still get to keep my ADP Safe Harbor, but obviously no ACP Safe Harbor.

My understanding is that this does not create any problems at all, right?  i just have to run my ACP Test.

We have a client who would like to allocate a Top Heavy contribution to both Key and Non-Key employees. 

The language in the document regarding Top Heavy allocations is as follows: Each Non-Key Employee who is a Participant, or was eligible to be a participant in the plan year, and is employed by the Employer on the last day of the Plan Year will receive a top-heavy minimum allocation for that Plan Year, irrespective of whether he or she satisfies the Hours of Service condition under the Employer's Adoption Agreement...

Based on this language, is it permissible to allocate to Key employees? 

Any feedback is appreciated! Thank you

I have a one-person Profit Sharing Plan that wants to name his daughter as a "contingent trustee", just in case something were to happen to him.  How would we go about that, or is it really more of a beneficiary (or just add her as a second Trustee)?

Thanks everyone!

Small DB plan just husband and wife. Husband is age 73, so has been taking RMDs. The annual annuity date is April 1st, so husband has already withdrawn his 2020 RMD. Now both husband and wife want to withdraw $100,000 each as CRDs. Is there anything wrong with that?

I was trying to find something in EPCRS that says that in certain situations if impractical you can use the DOL Lost Interest Calculator to adjust a corrective allocation for gains).  I routinely see attorney drafted VCP apps take this approach and have never seen it questioned.

Can anyone shed some light on this for me?  IF we're depositing a $100 into someone's account, we don't want to charge the client $250 in fees.

I haven’t seen this addressed anywhere, and I’m a little surprised. IRC section 6055/6056, as a result of ACA, requires reporting of health coverage. When the health coverage is provided under a single employer plan, is the cost to do this reporting an employer or plan cost? I think I know the answer; I just wanted to see if DOL, or anyone else for that matter, has addressed this question publicly. Thanks.

We have a client who is splitting off one location as a separate entity/company. We'll now have Company A and Company B. Each will sponsor its own 401(k) Plan. There is no common ownership for controlled group purposes, but may be as an affiliated service group due to management functions and/or as the 65% owner of Company B is the father of of the 50% of the owner of Company A. This will be passed by the company's attorney.  The intent of the companies/plans is to have zero liability to/for one another.

Question - an employee of Company A (non owner) acts as the Plan Administrator/Employer Sponsor for Company A's 401(k) plan. The plan uses a turnkey provider as Trustee, but names two individuals as Administrator/Sponsor in the Plan's documents. This person signs off on plan resolutions/amendments, approves distribution requests, handles payroll and contribution deposits to the plan, etc.  If new Company B uses the same individual in the same capacity, acting as Plan Administrator/Sponsor named in the docs, performing all of the same functions, wouldn't there be liability or a common tie there?  I have concerns for this person that would be named as Administrator on both plans.

I am trying to reconcile the rule under 424(h)(3)(C) with the accounting rules for share-based compensation. 424(h)(1) provides that if an ISO is modified, then it is a new grant. 424(h)(3)(C) provides that "the term “modification” means any change in the terms of the option which gives the employee additional benefits under the option, but such term shall not include a change in the terms of the option in the case of an option not immediately exercisable in full, to accelerate the time at which the option may be exercised." So far so good.

But the accounting rules say that acceleration of vesting is a modification that leads to a new grant. Are both things true in that one refers to status as an ISO and the other refers to accounting treatment? 

Any thoughts appreciated. TIA. 

Hello! I happen to be familiar with IRS Notice 2020-61, which came out today, covering the deferral of 2020 contributions to 1/1/2021 under the CARES Act. I found the Notice to be very confusing, so I thought I would start this thread as a PSA, to give pension actuaries a leg up on understanding this. This post will explain how & what interest rates are to be used in connection with DB contributions originally due during calendar 2020 under Notice 2020-61.

Under 2020-61, the CARES Act EIR rule (i.e., contributions are adjusted at the EIR of the plan year containing payment date) applies for payments actually made from January 1, 2020 through midnight on January 1, 2021 (or January 4, 2021 if the provision in the current Senate stimulus bill passes). For contributions that were originally due during calendar 2020 not yet paid by midnight, January 1, 2021, the CARES Act EIR rule expires. What replaces the CARES Act EIR rule (for unpaid amounts from 2020) is a modified version of 430(j); the modifications are that the quarterly & catch-up due dates are moved from calendar 2020 to 1/1/2021, and the quarterly contribution amounts are increased (with the EIR from the plan year they pertain to) to 1/1/2021.

So, for example (which is unfortunately not included as a Notice 2020-61 example), say you have a calendar year plan, with a 1/1 valuation date, not subject to quarterly contributions in 2019. Say the 2019 contribution is made on 1/1/2021. To determine whether the 2019 MRC has been met, you must discount the contribution back to 1/1/2019 at the 2021 EIR. If instead, the contribution was made on 12/31/2020, you must discount the contribution back to 1/1/2019 at the 2020 EIR.

The following chart is intended to help you walk through examples provided in Q&A 2 through 6:

Small plan (less than 100 participants) client filed the 2018 5500-SF this year when filing the 2019 5500-SF when it was discovered that 2018 had not been filed.   All previous filings since plan inception (1992) have been timely.  Client received a letter from the IRS with regard to the 2018 late filing and a penalty assessment of $87,000!  The IRS letter references the new penalty amount of $250 per day "effective for forms required to be filed after December 31, 2019".

The size of the assessed penalty aside (!) any idea why they would use the new penalty amount for the 2018 filing? 

As referenced in other posts, the client has filed under DFVC with the DOL and paid the $750.  Copies of same will be forwarded to the IRS and hopefully penalty will be abated.  Needelss to say $87,000 would be a great financial hardship for this small client. 

I hope that you can help me with this question. I have spent part of today trying to figure this out, and am getting nowhere.

I seem to recall that there is an issue to address when a plan wants to change the timing a forfeiture occurs.

Currently, the profit sharing plan provides that forfeitures occur after 5 consecutive breaks-in-service. The client wants to change that provision to the earlier of distribution of the vested interest or 5 consecutive breaks -in-service. Forfeitures have always been used to reduce the profit sharing contribution. There will be a large amount of forfeiture to be used this year as a result of the change because most of the unvested amounts are attributable to terminated participants who have already taken distribution of their entire vested interests.

Is there is something I should be looking at before telling the client that it can be done?  Thanks!