austin3515

You do not have to have a substantial risk of forfeiture to qualify for 409A. It's just that if you don't comply with 409A, you're subject to taxes and a 20% penalty on anything that is not subject to a substantial risk of forfeiture. I'm reading through the regs now. I assume everyone agrees that if 100% vested with no substantial risk of forfeiture that FICA taxes apply?

But in what scenario do you have to run the calculations you describe? I don't think my plan has any vesting schedule at all, but someone above is saying there must be a substantial risk of forfeiture to qualify under 409A and to avoid to avoid depositing payroll taxes. Thoughts?

You and me both...

My understanding is that because they can't take the money it is not FEDERAL taxable income ("constructive receipt"). But because it is vested, it is subject to Medicare and SS.

Employer contributions made to the Plan to make up for qualified plan limits. Contributions are 100% vested. If the contribution is $10,000 is it necessary to run $10,000 through payroll in order to pay the necessary FICA (but not Federal/State) income taxes?

I agree 100%. They did not provide a cite, but I will ask for one, now that you mention it.

TAG wrote me back and informed me that DFVC is not even available if the form was already filed. I swear I have used DFVC in these situations after the form was filed, upon receipt of an IRS late notice (i.e., if no extension was filed). It seems like others have used this as well. Andy, this is another option that is being considered as well, thank you for the suggestion!

Malpractice seems a bit dramatic. We have our reasons, including completely data entering the entire form all over again (audited plan) because it was done by a prior recordkeeper who has proved uncooperative. Anyone asked this question of the DOL or at a Q&A? It just seems to me that this should just not be necessary. But I'm asking, so I should credit for that!

Form 5500 filed a year late but did NOT do DFVC. IRS sends letter with penalty notice for late filing. So we're suggesting DFVC program. The question is, do you have to amend the 5500 to check the DFVC box in this situation? I say no, because it seems to me the point of the box is to avoid getting the letter we already got. Appreciate any thoughts.

Asked and answered: 26 C.F.R. § 1.402©-2 Q-7: When is a distribution from a plan a required minimum distribution under section 401(a)(9) ? A-7: (a) General rule. Except as provided in paragraphs (b) and © of this Q&A, if a minimum distribution is required for a calendar year, the amounts distributed during that calendar year are treated as required minimum distributions under section 401(a)(9), to the extent that the total required minimum distribution under section 401(a)(9) for the calendar year has not been satisfied. Accordingly, these amounts are not eligible rollover distributions. For example, if an employee is required under section 401(a)(9) to receive a required minimum distribution for a calendar year of $5,000 and the employee receives a total of $7,200 in that year, the first $5,000 distributed will be treated as the required minimum distribution and will not be an eligible rollover distribution and the remaining $2,200 will be an eligible rollover distribution if it otherwise qualifies. If the total section 401(a)(9) required minimum distribution for a calendar year is not distributed in that calendar year (e.g., when the distribution for the calendar year in which the employee reaches age 70 1/2 is made on the following April 1), the amount that was required but not distributed is added to the amount required to be distributed for the next calendar year in determining the portion of any distribution in the next calendar year that is a required minimum distribution. (b) Distribution before age 70 Any amount that is paid before January 1 of the year in which the employee attains (or would have attained) age 70 1/2 will not be treated as required under section 401(a)(9) and, thus, is an eligible rollover distribution if it otherwise qualifies. http://www.law.cornell.edu/cfr/text/26/1.402©-2

Can someone point me to the reg where it makes it clear that a participant who terminates in the year in which they attain 70.5 or later, must take their RMD before a rollover? I'm looking for that golden nugget that makes it crystal clear that the RMD is not eligible for rollover. I was looking in the RMD rules, but perhaps it is in the definition of eligible rollover distribution? We have a situation where the participant terminates before they turned 70.5 and of course they are questioning our conclusion that it is required.

Take a look at this article in connection with TIAA's letter. I think it's pretty relevant. http://reaction.dbr.com/rs/vm.ashx?ct=24F76A1BD3AE4EE0CDD889ADD625941891907ABFDA9818CF5AE175767CEAC80BDF418

OMG. You've got to read this. I'm not even a plan sponsor and I'm offended by this! http://opssupport.tiaa-cref.org/EC/GetFile.aspx?&ECID=RJc3IF5nf

Are there any investment restrictions regarding how a 457b for a tax exempt organization can be invested? This plan covers just the CEO. For example, can they invest in stocks, bonds, ETF's etc, or does it have to be exclusively mutual funds or insurance products, etc. Any sites you can provide regarding restrictions would be very helpful.

Anyone have a checklist they run through when processing plan amendments? For example, cut-back issues, BR&F issues, audit concenrs (if liberalizing eligibility)

I was just told by GW that they insist on a trustee regardless. I wouldn't be surprised if many of the others have the same policy.

Who is your document provider? We use Corbel, and it's right in the "trustee" section. "Isn't the person/entity choosing the investment platform every bit as responsible as the trustee would be?" The fiduciary is responsible, and I suppose you could let the courts sort all that out if it ever came to it. If it were me, I would prefer to not be a "trustee" anyway. Especially in a larger organization where it might not be so easy to pick that special someone

Any other takers on this? I'm considering making it standard policy in our office to indicate that the plan is exempt from the trust requirement because it is funded exclusively w/ insurance contracts (Great West, John Hancock, etc). For whatever reason we have always insisted on trustees (not that it was ever questioned!)

Cool, so we are on the same page. Thanks everyone!

So in other words, you don't think the plan administrator of a 403b plan has to do anything at all with respect to RMD's other than process them upon the request of the participant? This rule is suggesting that an IRA custodoian must actually calculate the amount of the RMD required and report that to the participant, but even this is not required of a 403b plan. Is that what you are suggesting?

I think I'm convinced (the web page is a bit more clear than the instructions), but it is still annoying as all heck that they just don't put down in simple straight forward terms, if your SS# ends in a 4, you need to renew between 4/1/14 and 6/30/14. It's almost as though they intentionally set out to make it sound more complicated than it really is. It's bazaar, really, when you think about it.

If your social ends in a 4, when the heck is my reporting due? I think it's 4/1/2014, but whoever wrote the instructions for the 8554-EP should really buy into the KISS principle. Why can't they just say "if you're social ends in a 4, your filing is due between 4/1/14 and 6/30/14"?

(7) Application to multiple contracts for an employee . The required minimum distribution must be separately determined for each section 403(b) contract of an employee. However, because, as provided in paragraph (e)(2) of this section, the distribution rules in section 401(a)(9) apply to section 403(b) contracts in accordance with the provisions in § 1.408-8, the required minimum distribution from one section 403(b) contract of an employee is permitted to be distributed from another section 403(b) contract in order to satisfy section 401(a)(9). Thus, as provided in § 1.408-8, A-9, with respect to IRAs, the required minimum distribution amount from each contract is then totaled and the total minimum distribution taken from any one or more of the individual section 403(b) contracts. However, consistent with the rules in § 1.408-8, A-9, only amounts in section 403(b) contracts that an individual holds as an employee may be aggregated. Amounts in section 403(b) contracts that an individual holds as a beneficiary of the same decedent may be aggregated, but such amounts may not be aggregated with amounts held in section 403(b) contracts that the individual holds as the employee or as the beneficiary of another decedent. Distributions from section 403(b) contracts do not satisfy the minimum distribution requirements for IRAs, nor do distributions from IRAs satisfy the minimum distribution requirements for section 403(b) contracts. To me, the reference to 408 makes it clear that this is an individual requirement? It sounds like you disagree but it isn't that at least a reasonable interpretation?

Best practice is a lot different than a requirement. I have a client with 30 people over the age of 70.5 - to obtain that level of assurance is something I would need to bill for, or they would need allocate resources towards, both of which are not easy to come by. Is there a reg site you can present that conveys an obligation of the sponsor to take action with respect to RMD's? I'm not saying I don't think there is one, I'm just looking to understand what I need to be doing.

You are responding as though the participant aggregating accounts of the same employer. My understanding is that the participant can aggregate the accounts of multiple past/present employers and take the total RMD's from any one of those accounts.