Normally for plan sponsors who want to provide for in-service distributions, I recommend restricting them to accounts that are fully vested only, just to eliminate a potential error in later determining vesting.

What are people doing/seeing WRT CRDs?  Suppose an employee has $50K in deferrals and $25K in match, 60% vested.  Total vested benefits are $65,000. Limiting CRD to $50K from deferrals only or also allowing up to $15K from match?

I've got a plan that wants to be nice and add loans until 9/23/20 as part of the CARES options.  Loans were never offered in the plan before.  The plan sponsor would like to pass the costs of the loans on to the participants.  Functionally, do we add the loan provision dated 30 days from now, giving out the notice today that starts the fee disclosure clock?  That feels wrong, if not from a legal standpoint, then certainly from a "doing the right thing" standpoint (and I fully realize that sometimes the rules are written such that "doing the right thing" is not as easy as it could be).

A participant terminated employment due to COVID at the end of March. She has a loan outstanding and wants to take a full distribution. Once the full distribution is processed, should the loan be offset? I realize that for regular distributions, the loan would be offset once a full distribution is taken. However, can she freeze the loan until 12/31/2020 because she was affected by COVID?

Thanks,

Our company is transitioning from a SIMPLE to a 401K plan.  Through a series of events by Fidelity, we were not able to start the plan on January 1 but instead have a live plan starting April 1.  For a variety of reasons, we would like to keep the SIMPLE for the balance of 2020 and delay the start of the 401K until January 1, 2021.  Fidelity seems to indicate this is not doable.  Can a delay in starting a "live" plan be done reasonably?  

Hi All,

Employee will "retire" from employer soon but will still do part time work of less than 20hrs/week.  Is she eligible to make a rollover to an IRA?  Her 401k is expensive.

Thank you 

Charlie

Hello, 

I need some counsel from the group - 

I was employed for all of 2019 with my current company. 

On Feb 2019:  I received a lump sum bonus - 50K from my employer. I was NOT enrolled in my employers 401K and therefore no 401K contribution was made from my bonus.

On March 2019: I joined 401K plan.  

Does the bonus of 50K in Feb count towards the "income eligible for 401K" for 2019 - given I enrolled in March?

Hear this! I don't expect that contribution will be backdated to the bonus check.  But when I contribute 5% of my annual compensation to 401K in my fidelity401K system, it is 5% of "what"? ---  is it the "total annual compensation including the bonus" or the "compensation received after the enrollment date"?

Please advise, and if there is a IRS bulletin where this is clearly articulated?

Greetings - Health plan was amended effective 1/2019 to provide for  a change in the plan sponsor. New plan sponsor is an affiliate of the previous plan sponsor. Plan name was also changed accordingly. 

Is there a form that needs to be filed with the IRS notifying of the change in plan sponsor? I have come across Form 8822-B (Change of Address or Responsible Party) but this does not seem to be exactly on point. 

This came up as a result of the new plan sponsor filing for an extension to file Form 5500. 

Your thoughts are greatly appreciated!

J

I guess I'm asking a question of other TPAs that primarily partner with recordkeepers.

And maybe I'm being overly paranoid, which is very likely.

It seems that the majority of the recordkeepers we work with have special forms for processing CRDs and CRLs, and if the plan sponsor does not "opt in" to using these forms they will process distributions in the "normal" manner regardless of the participant's status as a qualified individual.

We have some clients that feel their plans offer sufficient distribution options already and do not want a new special inservice distribution option, so they don't want to "opt-in".

Now a participant who terminated 5 years ago wants to take a distribution as a qualified individual under the CARES Act because they were laid off from their current employer.  Being savvy enough to know that they should be permitted to waive out of the withholding are told by the recordkeeper that because the plan sponsor did not opt in to allow CRDs, they will be subject to 20% mandatory withholding. 

At this point it should not be the plan sponsors decision, should it? 

I understand that the Plan would need to be amended to permit a qualified individual who would not otherwise have a distributable event under the current plan provisions to take a distribution if say for example they are still employed with reduced hours and are 30 years old. 

But does the Plan have to be amended to permit a qualified individual who has a distributable event to be able to waive out of the withholding?  Isn't that expressly permitted in the Act?

Are other TPAs telling their clients just to opt in so that qualified individuals are treated correctly under the Act?  Could a qualified individual who does not have their withholding applied correctly make an issue for the plan and require a penalty to be paid for not being able to waive out of the withholding?

Thanks.

The CARES Act specifically states that a Coronavirus Related Distribution is any distribution taken between January 1, 2020 - December 31, 2020. Therefore, if an individual received his/her 2020 RMD in January & has missed the 60-day rollover deadline, can the RMD be reclassified as a CRD if the individual becomes an affected individual for CRD purposes even though not an affected individual at the time the RMD was received. I've seen interpretations of this rule that a CRD has to be received from March 27, 2020 - December 31, 2020.

Retirement contributions are a permissible payroll cost for purposes of Paycheck Protection Program loan forgiveness under the CARES Act.  However, in order to be forgiven, the expense must be "incurred" during the 8-week covered period following the loan origination.  In order to be "incurred," does the contribution actually have to be made to the plan, or is it sufficient that a tentative liability is accruing during the covered period?  (I suspect the former...  i.e., that this is handled on cash, not accrual, basis.)

Has anyone considered how this will affect plans with an "employment on the last day of the plan year" allocation condition, which would normally not be made until early in the next plan year?  Except for those with very unusual plan years, these plans will have no way of knowing who is entitled to contributions by the end of the covered period.  If it will be necessary for PPP employers who have plans with allocation conditions to pre-fund contributions in order for those amounts to be eligible for forgiveness, how are people seeing the mechanics of that handled?  Are these amounts just being stuck in a forfeiture account or some other unallocated account?

Are FFCRA wages subject to 401(k) withholding?  And the subsequent match responsibility?

QDRO entered and submitted in 2003, and contains the following relevant provisions:

1. The Alternate Payee shall receive payments from the Plan of the benefits assigned to the Alternate Payee under this Order commencing as soon as is practicable after this Order has been determined to be a QDRO or, if later, on the date the Participant commences receiving benefit payments from the Plan.  Payment to the Alternate Payee pursuant to this Paragraph shall cease on the date that payments from the Plan with respect to the Participant cease.  Survivor benefits, to the extent provided in this Order, are not affected by the provisions of this Paragraph.

2. The Alternate Payee is assigned for her lifetime 50% of the net payments after mandatory deductions and survivors benefits to be paid to Participant and Participant covenants and agrees that he shall make all proper provisions to ensure such payment of benefits to Alternate Payee and keep her as the beneficiary of any available survivor benefits.

3. The Alternate Payee shall be treated as the Participant's "surviving spouse" for purposes of the Order, the Plan or Internal Revenue Code Sections 401(a)(11) and 417.

In 2014, Participant, now re-married, submitted a retirement benefit application naming his new spouse as beneficiary and electing a 10 year certain annuity (with remainder of payments after Participant's death going to a named beneficiary) in lieu of a joint and survivor annuity.  The application was signed/consented to by his current spouse, but not the former.  Participant retired and commenced receiving annuity payments, with 50% going to former spouse/AP pursuant to the QDRO.  Participant died in 2019, with about 5 years left of the 10 year annuity.

The plan has refused to make any payments to the current spouse, even the 50% retained by participant pursuant to the QDRO, and is instead making the payments entirely to AP.

Is there an argument to be made that the phrase "The Alternate Payee is assigned for her lifetime 50% of the net payments after mandatory deductions and survivors benefits to be paid to Participant and Participant covenants and agrees that he shall make all proper provisions to ensure such payment of benefits to Alternate Payee and keep her as the beneficiary of any available survivor benefits" means that the AP is only entitled to 50% of the future annuity payments, with the other 50% going to Participant's current spouse?  Or, does the phrase "The Alternate Payee shall be treated as the Participant's "surviving spouse" for purposes of the Order, the Plan or Internal Revenue Code Sections 401(a)(11) and 417" mean that AP gets everything?

Two questions:

1. Does the 100k limit increase come with any provisions for extended loan repayments, or do they have to abide by the 5 year rule?

2. Can a qualified individual take a new loan and suspend payments immediately until 1/1/2021, or do the suspension rules only apply to outstanding loans as of 3/27/2020. Just a question of whether these rules only apply to already existing loans or new loans too...

If a plan needs to make a corrective distribution due to a 415 violation in a prior year, but the participant has since died, to whom is the distribution payable? The participant's estate? And is it reported on a 1099-R as Code 4?

EDIT: Code 4 in addition to Code E. Or just E? Still not clear to whom it is payable.

An employer has already gone out of business due to the business impact of coronavirus. All employees have been terminated. They had over 200 participants at the end of 2019. Are they able to submit their final 5500 without an audit? The business is shuttered and there is presumably no one still employed to even have the auditors in. How is this to be handled?

Hello - A client has a 401k plan with an enhanced safe-harbor match formula.  They have asked to reduce the safe-harbor enchanted match to the basic safe-harbor match for the remainder of the plan year.  (Eliminating SH provisions is a top-heavy issue). With the proper 30 day notice and plan amendment, would this be allowed?

Has anyone heard of an automatic extension of 5500s for deadlines falling between Apirl 1 - July 15, 2020?  This article from ASPPA states that there is https://www.asppa.org/news/browse-topics/irs-5500-extension-comes-short , but when our office called the IRS for guidance, they denied any knowledge of such automatic extension.

We have a situation wherein the Plan Sponsor is in the process of selling the assets of the company, the employees will all terminated from seller payroll and hired by the purchaser. The seller made the SHNE contribution for all those employees through the date of their termination of employment.  The name of the plan has remained in the name of the sellers.

The sellers will be changing the name of the company and I assume will file corporate registration under the name of the new corp with respective EINs. 

The sellers will be the only employees in the new corp and will have W-2 income.  

Q- I assume termination resolution would be effective as of the date of sale, and would be in the name of the seller's corp?            In order to avoid any IRS communication (which, on prior experience is unavoidable), I assume Form 5500-SF for 2020 would be in the name of the new corp and Item 4 would show the name of the old corp with the old EIN?  We have had a lot of headaches in the past with IRS not looking at Item 4 on the 5500s and clients have received numerous LTRs and Notices asking for 5500s.

Anyone figure out what the new relief for plan loans means under IRS Notice 2020-23? Are loan repayments automatically suspended until July 15? 

From the Notice:

The Secretary of the Treasury has also determined that any person performing a time-sensitive action listed in either § 301.7508A-1(c)(1)(iv) – (vi) of the Procedure and Administration Regulations or Revenue Procedure 2018-58, 2018-50 IRB 990 (December 10, 2018), which is due to be performed on or after April 1, 2020, and before July 15, 2020 (Specified Time-Sensitive Action), is an Affected Taxpayer.

From Rev Proc. 2018-58:

Statute or Regulation Act Postponed -. Sec. 72(p)(2)(B) and (C), and Sec. 1.72(p)-1, Q&A10 A loan from a qualified employer plan to a participant in, or a beneficiary of, such plan must be repaid in accordance with the timing requirements of section 72(p)(2)(B) and the level amortization requirement of section 72(p)(2)(C) (taking into account, if applicable, any cure period granted pursuant to § 1.72(p)-1, Q&A-10(a)).

Hello,

Do you know if the April 15th deadline for Distribution for Excess Deferrals (participant worked at 2 companies during the year and exceeded the Deferral Limit when we look at the total Deferrals) is now July 15th for 2020 due to COVID? It seems like it should be because that's the new tax deadline, but just wanted to make sure.

Thanks.