I have read several commentaries saying that the increased loan maximum for "qualified individuals" is an optional change, but that the loan repayment provision is mandatory. Any thoughts? Thanks.

I have seen some discrepancy in summaries of the RMD rules for 2020 under the CARES Act. Section 2203 (a)(I)(ii) says that the RMD rules are suspended for 2020. Section 2203(a)(I)(ii) adds what I thought was a special rule/clarification that required beginning dates in 2020 are effectively suspended. 

But, I have seen summaries that imply that the RMD suspension ONLY applies for distributions for those participants with required beginning dates in 2020. 

So, which is it: are all RMDs suspended in 2020 or only those for required beginning dates in 2020?

Believe it or not, I am working on valuing a DB plan that is only now moving to using individual data.  Back in the 80s/90s, when this change was happening how was the change defined in the FSA? (it's before my time) Any feedback in this would be helpful.

For Qualifiying Indviduals under CARES, the 25% excise tax does not apply correct.  CARES says 72(t) does not apply and the 25% penalty tax is in 72(t).

How would venting work for an employee who left after 3 years of service (40% vested) and received a cash payout with the rest being forfeited-but then returns two years later and is allocated new shares for another year and a half of service but then once again leaves the plan

Plan's loan program allows a participant to refinance their existing loan.  Currently allows for only one outstanding loan.

Under the "normal" rules, the participant has a small amount of cash available in a refinance transaction.

If the Plan adopts the Covid loan rules, and assuming the participant is a qualified individual, can they refinance the existing loan using Covid expanded loan limits and payment suspension?

As a follow up, I've seen it indicated elsewhere that a plan that does not normally allow for loans can adopt the Covid loan rules and allow Covid related loans only.

Is it a stretch then in a situation like this, that the Plan could allow for a new Covid loan by adopting the Covid rules and maintain the one "normal" loan restriction? 

So in the example, the participant would be permitted to have one normal loan and one Covid loan, without having to change the "normal" loan policy and would then not need to refinance the existing loan?

Thanks very much.

is spousal consent still required?  can't find it anywhere. 

Hi all-

Has anyone heard if IRS is going to provide guidance regarding RMD notices that were sent for 2020?  I know that IRS provided guidance for the SECURE Act saying that if we had already sent RMD Notices to those who had not obtained age 70.5 by 12.31.19 that we could send a corrected notice by 4.15.2020.  But with the CARES Act and no RMD required for 2020, are we required to send a notice to RMD age clients stating they are not required to RMD for 2020 but must restart for 2021?  Anyone know?

With everything going on have a client that would like to switch from safe harbor non elective to safe harbor match.  Can this be done mid year?   None of the safe harbor non elective have been contributed yet.

In light of the COVID-19 effects on a lot of small businesses, I have been asked today about what kind of notice (30 day) or what does the Employer have to give to participants if they want to stop the match for the rest of the year.  Can they even do that with the safe harbor match?  I think so, but then the plan would have to submit to ADP testing, correct?  Did the CARES Act give any guidance in this area?    Thanks

I have a client (under age 59.5) that wants to buy life insurance with his 401k/Profit Sharing account. 

He has been a participant for 15 years so I don't think there is any issue with "seasoned money" since the plan document also states that after 5 years this is a non issue.

Could I be missing something?

Can he use any source to buy life insurance or does it have to be employer sourced since he is under age 59.5?

Section 2203 of the CARES Act seems clear to me that 401(a)(9) does not apply to RMDs paid in 2020 or for 2020 - they are "waived", which I would interpret as meaning that they are not to be taken (I'm not a lawyer, though, and I don't claim to understand Congress).  But I'm seeing some recordkeepers including it in the list of optional provisions that plan sponsors can choose to elect.  Are they being overgenerous, or am I mis-reading?

My concern is that we've got most plans written such that terminated participants can't take partial distributions (though I suppose coronavirus-related distributions would get around that), so if there is no legitimate RMD for 2020 per regulations, then can the plan really elect to let a 2020 RMD happen?  This also applies for those few plans without an in-service withdrawal provision where the 5% owners would be affected, but we can amend to fix that if we had to.

Thanks, and stay safe.

Does anyone know of a sample good faith CARES amendment?

It sure would be much easier if we could document something. Then the plan sponsor could choose the language that would apply to the CARES provisions they wish to offer. 

So I have been playing with amortization schedules to try and figure out what it would look like taking into account the suspension.  After playing with it a little bit it became clear (to me anyway) that essentially what you would do is:

1) Accumulate interest until the 1/1/2021.

2) Figure out the payment to pay it off to zero by the end of the 6 year term. If the participant, pre-suspension, had a larger payment then just start that larger payment.  If its a new loan and they want to pick a higher dollar amount then let them.

I know the statute talks about suspending the payments and resuming them after a 1 year delay and then amortizing, etc.  I tried to play around with all of it and the differential in the payments each way I tried it was minimal.  Payments are essentially only being delayed for 9 months, but we get an extra year to pay it off.

I attahed my amortization schedule.  If someone has a different take on how this works let me know. 

Am Sched.pdf

Is the following possible?

401(k) plan allows for safe harbor hardship reasons, all sources, includes deferral earnings.

Business owner in the state of California has a reduction in business due to coronavirus related restrictions. 

Needs funds to keep the business going short-term and also owes bills on the building of his primary residence currently under construction.

Has $300,000 in 401(k) plan account, split between deferrals, and safe harbor contributions.

Is it possible for the business owner to take a covid19 related loan of $100,000, a covid19 related distribution of $100,000, and the remaining $100,000 in a regular hardship as the result of being in a FEMA declared disaster area?

Thank you.

Am I correct in assuming if a Plan uses the "W2" definition of compensation that the compensation earned as COVID-19 Sick or Leave Pay would be considered as compensation for plan purposes?

Thanks.

1) If an employee already has an outstanding loan, can they get another loan during this crisis?

               Our current plan documents only allow 1 loan, do we need to do an amendment?

2) If this same employee takes out a loan, can they stop their loan paycheck deductions on one or both loans for loans for 1 year as per the new CARES ACT?

3) If an employee wants a hardship withdrawal to cover expenses incurred as a result of this corona virus, what back up documentation do we need from them to prove this?  

4)Is an employee eligible for a hardship withdrawal (to cover expenses incurred as a result of this corona virus) if they are still working full time hours at the same rate of pay?

5) Can an employee request a covid hardship based on a spouse being terminated/laid off and it impacts the monthly income for the household? 

Facts:

Company A - LLC taxed as a partnership (SE income).  Bob owns 8%; Corp B owns 75%; remaining % owned by 2 others.  Bob owns 100% of Corp B

Question:

Plan defines compensation as W-2 (not 415).  Lets assume that there is a loss on his Schedule K-1 of ($10,000).  Bob receives a w-2 from his Corp B of $40,000.  For non-discrimination testing, I only need to consider's Bob's compensation of$40,000. I don't need to net the loss with his W-2.  Correct?

Would a person who was required to take a 2019 MRD by April 1, 2020 (today) still have to take the distribution today? Can't see if the CARES act affects this.

Does anyone have thoughts on whether distributions that would otherwise be required before December 31, 2020, could qualify as coronavirus-related distributions?

For example, a plan has a mandatory distribution for terminated participants who reach normal retirement age. If the participant reaches NRA next week, can they certify they have been impacted and receive the first $100,000 as a coronavirus-related distribution? 

Or existing ESOP installment payouts? Say a participant was scheduled for an installment payment to be made this summer. If they certify they have been affected, is the first $100,000 treated as such?

Assume each plan is willing to accommodate by operating and subsequently amending the plan in accordance with the new provisions.