There is no maximum auto escalate number on an EACA like there is on a QACA, is that right?  So I could auto escalate to 20% if I wanted to?

all of our plans with pooled trustee directed accounts allow for distribution in the first plan year following termination of employment.  Client has a termed participant they want to get paid out immediately and is considering amending to allow immediate distributions.  How many allow for immediate distribution from a pooled plan?  Are there any drawbacks to be considered?  I know that if they did amend to allow immediate that we couldn't then amend back due to anti-cutback.  This plan is PS only with EOY requirement.

This is a first for me. A plan participant executed their distribution election forms but passed away before the distribution was made (within a week of completing the forms). The distribution is in connection with a plan termination, the participant had not reached retirement age, and the election was for a lump sum distribution greater than $5,000. The death benefit is PVAB. I do not see that the plan document addresses this exact situation. My initial thought is that the participants elections prior to death are now not applicable since the distribution was not made, and the spouse should receive distribution election forms for a death benefit distribution. Any input would be appreciated. Thanks.

ESOP has a rebalancing provision that requires year-end reallocation so that each participant's account is made up of the same ratio of company stock to other investments.

For the first time, there is an ESOP participant who wishes to sell company stock he/she owns outside the ESOP.  The ESOP Trustees believe it would be in the best interest of participants and beneficiaries for the ESOP to purchase the stock.

IRC Section 409(n) provides in part that:

"no portion of the assets of the plan . . . attributable to (or allocable in lieu of) employer securities acquired by the plan . . . in a sale to which section 1042 applies may accrue (or be allocated directly or indirectly . . . ) . . . for the benefit of . . . any taxpayer who makes an election under section 1042(a) with respect to employer securities."

Assume that the ESOP's acquisition of the stock is completed in May of 2020.  When the "regular" calendar year 2020 allocation is done (in the spring of 2021), certainly the selling shareholder cannot receive an allocation of any portion of the stock the ESOP acquired from him/her.  So, such participant receives a smaller allocation than that received by a similarly situated participant who had not sold company stock to the ESOP in a sale to which section 1042 applied.

Immediately after completing the "regular" allocation for 2020, the rebalancing provision is addressed.  May the selling shareholder's account receive the allocation of additional company stock needed to bring his/her account into balance (ratio of company stock to other investments) assuming the reallocation calculations would so require?  Inasmuch as the rebalancing would likely affect virtually all participants in one way or another, it would seem that the prorata portion of the stock initially acquired by the ESOP in the 1042 transaction that might find its way to the selling shareholder's account would be minimal. 

Is the answer any different for the rebalancing that would be completed for 2021 (in the spring of 2022) - assuming no additional 1042 transactions?

I am an employee of a small law firm. I am "of counsel". 4 years ago, my employer complained that he had to make a Safe Harbor payment into the Profit Sharing Plan for me in the amount of 3% of my compensation. Since it was not addressed in my employment agreement, he pressured me to reimburse the 3% payment. Each year since I have done so, with $500 deducted from my pre-tax compensation calculation ever two weeks. To my knowledge, no one else at the firm has been required to do so but nearly all others are salaried employees. I am starting to think this practice violates the Safe Harbor rule and is not legal. That is, it seems this does qualify as a Safe Harbor contribution if the employer is reimbursed for the entire payment. Am I right? If so, what is the proper way to address it?

I have been told if I take my retirement, earned over 40 years, that I cannot work in my craft in areas under Local 12 jurisdiction or I could lose my pension.

Is this true?

We were presented with a plan to takeover that was effective in 2016 and only employed the 2 owners.  The owners set up a Fidelity prototype and opened accounts and each owner made employee deferral contributions.  Eligibility is age 21 and 1 year entering the plan on 01/01 or 07/01 following.  Employee is hired in 09/2017 and enters the plan on his date of employment and starts making employee deferral contributions.  The employee should have entered 01/01/19 but made employee deferrals for 2017 and 2018 and then terminated  in Dec 2018.   It is a bit late for an 11g amendment so should an application be filed via VCP?  Can the employee's deferrals be refunded to him since he was not eligible?  Would be able to exclude employee as otherwise ineligible in ADP testing for 2017 and 2018 but there would be a TH issue, this is a deferral only plan.  They also never filed a 5500 for the years that the employee was in the plan.

Would the best course of action be to submit via VCP for the early entry, determine the TH amount for each year and prepare and submit the 5500 filing for 2017 and 2018 via the DFVCP?

For a health and welfare Form 5500, I  have a group that was under a collectively-bargained agreement at the beginning of the year. However by the end of the Plan year, they were not. Is the collectively-bargained box on the 5500 still to be checked?

My usual apology is this has been asked and answered.

The CARES Act allows special tax relief for 2020 distributions up to $100,000 by a "qualified individual" from a defined benefit plan, as long as the distribution is not made earlier than an otherwise-permitted distribution event. But the special tax relief implies that a lump sum will be taken. How would the $100,000 limit and special tax relief apply to an in-service annuity payment from a DB plan (or even a money purchase pension plan)?

Question came up, if an employer wishes to adopt a profit sharing plan in 2021 effective 12/31/2020, can they apply a last day rule to the 2020 profit sharing allocation?  

Several writers in BenefitsLink discussions have mentioned an idea that a plan provision for a coronavirus-related distribution might be unnecessary if the participant who would take it is severed from employment or otherwise entitled to a distribution.  But here’s one further reason why a classification might matter.

Some recordkeepers are waiving a processing fee for a coronavirus-related distribution, but not for a normal distribution.

A Plan currently permits loans for hardship necessity only (safe harbor standards). If they are going to permit loans under the CARES Act, will they have to amend their loan program to permit loans for any reason (possibly for the CARES Act duration)?

I am aware of the conversation surrounding the issue of mid-year changes to DCFSA elections with changing costs of care related to COVID-19 stay-at-home orders. However, is anyone aware of any thinking about employees in the following situation: employee pre-paid childcare costs at beginning of school year, as many care providers require, making a DCFSA election to cover the costs. In the typical case, employee would be eligible for reimbursements as expenses are incurred, that is, when services are rendered as the children go to the care provider. Now, the care provider is closed and the children are at home. No services are being rendered. However, some care providers are not giving refunds, so the childcare costs remain for the employee even though the children are not going to the care provider. Is there any sort of relief for this situation, or is the answer that the employee is stuck with a cost which is now ineligible for DCFSA reimbursements because care is never actually provided? Thanks for any insight!

I am trying to track down a copy of the Basic Plan Document for the Corporate Benefit Administrators Inc. PPA Non-standardized 401(k) Plan that goes with an opinion letter issued on 3/31/2014 with Letter Serial No:  J396139a.  Corporate Benefits Administrators Inc. is located in St. Cloud, MN.  I keep a repository of basic plan documents for this purpose, but we came up empty looking for this one.  Is there anyone out there that might have access to this Basic Plan Document and would be willing to share it?

An IRS interpretation states:  “If the Eligible Employer lays off or furloughs its employees and continues the employees’ health care coverage, but does not pay the employees any wages for the time they are not working, the employer may not treat any portion of the health plan expenses as qualified wages for purposes of the Employee Retention Credit because no portion of the health plan expenses would be allocable to wages paid to the employees.”  That website display includes: “This FAQ is not included in the Internal Revenue Bulletin, and therefore may not be relied upon as legal authority.  This means that the information cannot be used to support a legal argument in a court case.”

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-amount-of-allocable-qualified-health-plan-expenses-faqs

A letter from three members of Congress asks the IRS to interpret differently CARES Act § 2301.

https://www.finance.senate.gov/imo/media/doc/050420%20Letter%20to%20Treasury%20on%20ERTC%20health%20benefits.pdf

I attach the statute’s § 2301.  And the Joint Committee on Taxation explanation.

Imagine your client wants to file its tax return with the position the Congressmen suggest, that the credit applies for health plan expenses even if no other wages is paid.

Your client tells you it wants your written opinion to help protect against penalties.  Your client doesn’t ask for a more-likely-than-not opinion; a substantial-authority opinion would meet the purpose.  26 C.F.R. § 1.6662‐4(d)(3) https://www.ecfr.gov/cgi-bin/text-idx?SID=2498c4ede6da62c6daa26b3f833d07b7&mc=true&node=se26.15.1_16662_64&rgn=div8

Could you, acting within your profession’s conduct rules, render the requested opinion?

Would you?

My queries are not about anything for my law practice.  Rather, I’m tooling-up to teach my summer-semester course on Professional Conduct in Tax Practice.  (My students include people in law, accounting, and actuarial firms, and some who render tax advice for other businesses.)  The New York Times reported on the letter mentioned above, and I hope the story—and your ideas—might illustrate some points about how practitioners manage uncertainty in tax law.  I'll be grateful for any ideas you're willing to share.

If a plan suspends their QACA Safe Harbor contribution mid-year, do they also suspend auto enrollment?

Participant is furloughed due to the coronavirus.  Not terminated, but no pay.  Participant requests suspension of loan payments.

Two weeks later the plan sponsor receives PPP loan proceeds and the participant is back to working, for argument sake let's say at full hours and pay for at least the eight weeks of the loan.

Must the participant begin payments again, or can the suspension continue?

Thanks very much.

Quote

 

Q11. May an administrator rely on an individual's certification that the individual is eligible to receive a coronavirus-related distribution?   

A11. The administrator of an eligible retirement plan may rely on an individual's certification that the individual satisfies the conditions to be a qualified individual in determining whether a distribution is a coronavirus-related distribution, unless the administrator has actual knowledge to the contrary. Although an administrator may rely on an individual's certification in making and reporting a distribution, the individual is entitled to treat the distribution as a coronavirus-related distribution for purposes of the individual's federal income tax return only if the individual actually meets the eligibility requirements.

 

From the IRS Q&A released today.

I actually think the standard has now been shifted to the plan administrator “must know for sure they qualify.”  The person either has a personal financial hardship that the Employer would 100% have first-hand knowledge of, or they or their spouse had COVID which an employer presumably would need to know for purposes of notifying co-workers about the need to quarantine, etc.  The Employer would presumably at least be obligated to ask WHEN they had COVID for that reason (was it long enough ago that others are at risk? Are you back to work and you should be at home?). 

Does anyone agree with me?

Under the current circumstances, is it acceptable to file a scanned EA-S with e-signature (if we can get signature on the form), rather than original?  Thanks.

Hi

Looking at a takeover PS plan. The formula is cross-tested and has 3 groupings (no everyone in their own group option), each identified for a specific job category. Sponsor adopts a resolution each year on how to allocate the contribution.

Sponsor hired a 4th category employee, became eligible for 2019 but does not fit in any of the categories. It is not an excluded class job category.

How to allocate for this new job category, may be 11-g?? 

Thank you