Hello everyone,

I hope you and your loved ones are well. For a sole proprietor who sponsors a defined benefit plan, how does one determine how much of the contribution gets deducted on Schedule C for the employees and how much gets deducted on Form 1040 for the sole proprietor?

Treasury Regulation 1.402A-1, Q&A-5(a) states that distributions attributable to designated Roth contributions that include amounts that would not be taxable if they were distributed to the participant must be made via direct rollover if rolled to a designated Roth account of qualified Plan. Essentially, this Treasury Regulation requires that designated Roth rollovers between qualified plans be facilitated via direct trustee-to-trustee rollover, not via the indirect 60-day rollover process. IRS Notice 2020-51, Q&A-8 states that RMD distributions from a plan may be rolled back into the same plan, provided the plan permits rollovers and the rollover satisfies the requirements of IRC 402(c).

If a participant receives an RMD from a qualified plan in January, 2020, and such RMD includes designated Roth contributions that would not be taxable, can this individual make an indirect rollover back into the qualified plan from which it was distributed, notwithstanding Treasury Regulation 1.402A-1, Q&A-5 which generally requires Roth accounts to be rolled over via direct rollover?

 IRS Notice 2020-51 did not address this Roth rollover issue - - in fact, the word Roth never appears in Notice 2020-51.

Any reason why the SMM can't function as the Notice, as long as it is given at least 30 days in advance, and the procedures for changing a deferral election are included?

The SECURE Act requires full distribution of a 401(k) account balance within 10 years for a designed beneficiary (i.e. a beneficiary that is not an eligible designated beneficiary). However, it doesn’t appear that SECURE Act amends Section 1.401(a)(9)-5 regarding RMDs from DC plans. Under A-1(e) of 1.401(a)(9)-5, with respect to annuity contracts, specifically refers to 1.401(a)(9)-6 relating to 401(a)(9) being satisfied through an annuity contract purchased through an insurance company.

The question is regarding a joint and survivor annuity, such as a 20 year period certain, under which the beneficiary is not an eligible designed beneficiary as defined under SECURE. If the participant dies with 14 years remaining in the period certain, can payments continue for the full 14 years remaining or must the full death benefit be paid to the beneficiary within 10 years as required under the SECURE Act? It appears the full 14 years would still apply since the SECURE Act does not appear to have amended the provisions relating to an annuity purchased within a DC plan.

Good morning to all,

Is it your understanding that the 10% early withdrawal on distributions made from a 401(k) plan has been waived for all withdrawals across the board for anyone making a withdrawal in 2020, or is it your understanding that this break on the 10% penalty is only available for CARES Act related distributions (CRDs), which in turn is only available if the employer has chosen to adopt the CARES Act distribution provisions for the plan?

Your advice is always greatly appreciated.

n-20-52.pdf

Hot off the IRS press....

Small plan is filing a delinquent 5500 for years 2002-2008, delinquent 5500-EZ's for 2009-2012 and 2018, delinquent 5500-SF's for 2013-2017, and will file a timely 5500-SF for 2019. Essentially, this company downscaled after 2008 but continued operating with a few part-time employees each year since then. There were some years where only the business owner & spouse were eligible & covered under the plan. 

I think this plan will need to file under both the DFVCP and the 5500-EZ late filer programs and pay the maximum fees under both programs. Is there any way around this?

Also, is there a good way to indicate on the 5500-EZ and/or the 5500 & 5500-SF's to explain the gap in filings when it is switching back and forth between ERISA and non-ERISA filings?

How would you report a distribution from a church plan that was made associated with housing allowance and the minister was under the age of 59.5 on a 1099R.  Would use code 1 or 2?  Also, does anyone have the guidance on why that code would be used?

Hi

Plan document excludes non-resident aliens - standard language.

Employee is residing and working in the US, working under h-1 visa and paid a salary thru payroll from his employee in the US.

As far as I remember, he is included in all pension related matters like all non-discrimination testing (he is excluded under a job category but part of all testing).

Also, if he was not excluded, he would get what contributions due to him including option to defer.

Please let me know if I missed anything.

Thank you

Small plan, 20 ee's.

Just discovered that expected accrued deposit of 401(k) (for owners only) at beginning of prior yr do not match their 5500 as well as personal and company taxes.

contemplating 2 options:

• Amend all taxes and 5500 to match actual deposit
• Deposit the 401(k) amount (~5000 in total), over a year later

Looking for some expert opinions on a strange case (at least for me). A 401(k) plan has enhanced Safe Harbor Match (100% - 4%) that only satisfies ADP. There is a discretionary match of 25% up to 20% for a small group of NHCE so ACP testing is required (don't ask why - a previous TPA let them put it in without explaining the ACP issue). There is a large population of Service Contract Act employees who receive prevailing wage contributions in the plan. The plan document specifies that prevailing wage contributions are QNEC's that offset Safe Harbor Match.

When running the ACP test, should all of the prevailing wage contributions be included for all of the SCA employees - with the 10% limit taken into account? I am having difficulty finding an answer and our software doesn't want to do it. I can usually rely on our software to do the right thing, but I think the prevailing wage contributions should be included in ACP based upon the Safe Harbor Match offset.

Looking into a new plan. The first plan year will be from 7/1/19 to 6/30/20, same as corporate fiscal year.

One employee is in question with the following salaries

7/1/18 to 7/1/19 109k

Calendar 2018 105k

Calendar 2019 126k

7/1/19 to 6/30/20 125k+ or 130k+

Using lookback, looks like non-HCE for plan year beginning 7/1/19, agree? Is there anyway I can make the employee HCE for plan year beginning 7/1/19.

Also, to determine the HCE status for plan year beginning 7/1/2020, his salary has to be at least 125k+ as of 6/30/2020, agree? Or had to be as 12/31/19?

Thank you

The plan document specifies that the $1,000 limit for mandatory cash outs and $5,000 limit for mandatory rollovers. What if the participant has about $1,020 in the account and the distribution processing fee is $50 (so the amount after the fee is $970). Would a direct distribution or a rollover be processed?

A university maintains an ERISA-governed § 403(b) plan, and is the plan’s administrator.

The plan allows a choice of three investment vendors—TIAA-CREF, Fidelity, and Vanguard.  The plan has no common recordkeeper; each vendor keeps records to the extent a participant uses the vendor’s annuity contract or custodial account.

The plan provides hardship distributions, using only the Treasury rule’s deemed needs.

The university asked me to write a form on which a participant would specify which of the deemed needs is the claimant’s reason for the requested hardship distribution.  The university knows a vendor has its forms, yet asks for this form besides the vendors’ forms.  Completing this form would not relieve a participant from completing her vendor’s form.

Is a plan-level hardship form a good idea or a bad idea?

Employer has two plans.  HCEs are supposed to participate in the 403(b) plan.  NHCEs are supposed to participate in the 401(k) plan.  Each year, HCE or NHCE status is determined for the following year, and the person is supposed to be put into the correct plan accordingly.

However, errors have been made in some instances, in both directions.  Thus, for example, HCEs have contributed to the 401(k) plan, and NHCEs have contributed to the 403(b) plan.  Obviously, this violates the terms of both plans.

Does anyone have any experience as to the corrections IRS might be willing to accept in these circumstances?  What we'd like to do is to treat this as a mistake of fact, withdraw the incorrectly contributed amounts from each plan and contribute it to the other plan.

However, by the literal terms of the IRS Fix It Guides, the HCEs have been impermissibly denied the right to make contributions to the 403(b), and the NHCEs have been impermissibly denied the right to make contributions to the 401(k), which would require QNECs in both cases.  And then the HCEs have made impermissible contributions to the 401(k) and the NHCEs have made impermissible contributions to the 403(b), all of which would have to be disgorged.  

All of that just seems to be excessive, given that no one has been denied the right to make contributions.  And the investments of the two plans are the same, so no one has lost out in that area, either.

What has been your experience?  Will the IRS allow for a reasonable correction, or does it insist on following the technical terms of the Fix It Guides in this situation?

I want to make sure I'm understanding the Prohibited transaction/disqualified person plan rules correctly. If I have a client where the ownership is as follows:

A - 40%

B - 40%

C - 20%

A & B are siblings and not related to C.  A & B own interest in property (the same property) in their individual 401(k) SDB accounts.  They want to sell the property. Since they aren't related and neither own more than 50% of the company, are they disqualified persons? Assuming not, can they personally buy the property from the plan to remove the investment?

Now it time to receive my retirement  starting in April 2020 I have not received any payment yet due to  divorce settlement decree with no QDRO on file with the courts. How long can the pension broad hold my retirement since the ex did not do the QDRO?

Hello.  I am working on a PSP that uses W2 compensation with no exclusions.

I have the payroll report and W2s for all employees.  There is an employee who had child support payments deducted from payroll.  The payroll report shows his gross compensation of $5,000 and child support payments of $1,000.

His W2 reports $4,000 taxable income in Box 1. I thought it should be $5,000, since the garnishment is post tax, not pre-tax.

Does anyone out there agree with my thinking?

Thank you!

I've looked everywhere with no luck, and while I've placed an incident request, I was hoping maybe someone here can tell me what I'm missing.  I want to email pp statements for a small plan.  I've checked boxes allowing electronic statements in plan specs and census data.  I've entered the correct (I think) smtp info in the email under system admin.  I've got a valid email for the pp.  When I print the statement to email the pp, I get a timeout notice.  (When I used another SMTP, I'd get a server can't be found error, which is what makes me think I've got that portion set up correctly.)  It's like I'm missing an execute step, or need to authorize my mail client to send the email on Relius' behalf?  Any ideas what might I be missing?  thank you!

Wow, suffering from terminal brain cramp. Suppose an employer has a Money Purchase plan with standard last day/1,000 hour requirement. Employer is terminating a group of employees, many of who are  HCE's. Employer wants to amend the plan to waive the 1,000 hour/last day requirement for THIS GROUP OF EMPLOYEES ONLY. Contribution level will be the same as for everyone else.

This shouldn't inherently cause a coverage testing problem, right? They will just all be included in the coverage test, and the plan will pass or fail as usual. But it'll have to be tested for nondiscrimination? Something is bothering me here, but I can't put my finger on the correct citation.

Maybe what's bothering me is 1.401(a)(4)-2(b)(4)(iii). This amendment would take you out of design-based safe harbor status, and then you'd have to general test?