austin3515

We were all on the same page based on the law. But there have been "developments" in the form of published IRS guidance.

OK I give up. For those clients who say they know I'll tell them Larry Starr and Mike Preston say you're mistaken ?.

Well golly gee willikers that's my whole darn point. They know they;re lying! They know the person and they know none of these things has happened to them. Remember I am talking small business here. We know when someone has a cold for crying out loud. We would know if their wife had COVID.

Larry (and others I guess) your position baiscally boils down to it is impossible to have actual knowledge to the contrary even though the IRS bothered to clarify that actual knowledge to the contrary would be a basis for denail. Do I have that right?

I have a client where 75% of the staff was laid off/furloughed. Butt hen again 25% were not. So its not irrelevant in any event.

I can only say it appears that the IRS disagrees with you all. Why add the qualifier if there was no possibility of actual knowledge to the contrary? Here is another thing. A lot of providers decided not to go through any sponsor approval. It seems to me that must now be revised to require a sign off so that the sponsor now has to sign off. And I think it's not unrealistic to presume that plan sponsors will be uncomfortable saying that they don't have "actual knowledge to the contrary" when they do. How do you advise a client who says "What should I do? I know this guy doesn;t qualify?" Do you say "I know you think you know, but you don;t know." The client comes back and says "No seriously, I know this person. I work with them every day. Closely. I know this is not true. Are you advising to sign this anyway even though I do have knowledge to the contrary?" Do you respond and say "Yes that's what I am suggesting."? I doubt that... This is a very realistic conversation in the context of a small business. I have already had this exact conversation. I have to answer that question differently after this Q&A then I did before.

I just went back into the statute to look up something for my last post and took another gander at this language. I seriously think the IRS blew this one. The intent of Congress was clear. Leave the plan administrator out of this; they have bigger things to worry about than this. It's just 9 months of opening the gates. If someone lies that's on them. It also reminds me of the old dilemma of "We wish the IRS would provide clarification on this!" People who have been around long enough know that often times when guidance comes up we would have greatly preferred working in the realm of good faith interpretation. This is definitely one of those times.

Nope, and the IRS Q&A makes that pretty clear as well I think. They added the word "You" to the beginning of everything I think to make it clear what their interpretation is (I think its consistent with the plain reading of the statute but it does go a step further reminding us that it is just "YOU". I've tried to find some strained interpretation that might say that my spouse being laid off is my adverse consequence but it just isn't there in my opinion. The only way I once got there was when I said "well hey, it's the employee making the certification, so it is their interpretation that matters even though I think its wrong" I don;t think that's the case anymore.

According the IRS's own Q&A thats not a true statement. They published on their website that it would not be enough if they had actual knowledge to the cotnrary. I also agree that the statute doesn't say so, but unless I'm mistaken (I looked) the "actual knowledge to the contrary" rule is not found in the statute for hardships either. It is true that it is in a regulation but a regulation is just a formalized administrative policy. This is an informal administrative policy. Microsoft has some cover here on this. Small business owners -- not so much. the smaller the business the more implausible. I won't speak for you, but I know I would know.

Take a small manufacturing company, 20 people, essential business. Business is booming because they make cleaning supplies. Everyone is working overtime and making good money. The plan administrator therefore has actual knowledge that they don't qualify for any of the "adverse financial consequences." I guess part 1 is, do you agree with that? Assume the person never missed any work, perfect attendance. Then the next thing on the list you, your spouse or dependent was diagnosed with COVID. The plan administrator better damn well know if that applies because you're coming into the office every day and working alongside all of my employees. So under which of these circumstances would the plan administrator not have actual knowledge? And this is not some hypothetical. This quesiton has already come up more than once for me. Think of your own businesses and how well you know your own employees. I know that I or one of my partners would have actual knowledge to the contrary if someone was lying about qualifying for the precise reasons listed above.

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?

While I was very grateful for the rest of your post I am puzzled by this statement, since it is a safe harbor exclusion? I would not run the CRT if the only exclusion was taxable fringe benefits.

Let me clarify. First of all, I'm well versed in the rules here This is not a client yet. They have histroically taken the position that it is a taxable fringe benefit and have not run the CRT. I'm trying to impress them and point out a problem, but I'm thinking perhaps it is a gray area. The amount of the benefit is not significant, so I'm presuming it will pass just fine, especially since I'm betting the HCE's are disproporationately getting the bigger benefits (people making more tend stay put). So it's not a question of how to handle a non-safe harbor definition of comp. The question is, does this represent a non-safe harbor definition of comp that requires testing.

Well I don;t think it is a bonus for sure. And I suppose the argument for a fringe is that it is not compensation for services rendered, it is supplemental in nature. Like I said I would prefer to treat it as not and consider a non-safe harbor exclusion and run the 414s test. I know th eplan has not historically treated it that way, hence the question...

I personally would not consider a "length of service" bonus paid to be a taxable fringe benefit but I am encountering a plan where it was treated as a safe harbor comp exclusion taxable fringe benefit. To add a little more color, people who have been with the company 0-5 years to get nothing, between 5 and 10 get 1,000, between 10 and 15 get 2,000, etc. This is all the more important for this plan because it is a Safe Harbor Plan, and I'm tying to determine if the definition meets a 414s safe harbor definition of compensation. I guess it falls squarely within a gray area, but in such cases I would lean towards the more conservative. what do y'all think?

I will just add that a company in financial distress who makes a good faith interpretation of the rules intended to benefit its lower paid employees should be viewed especially favorably in these incredible times. IT would be bazaar to penalize a company that maintained such a generous match when the you know what is is hitting the fan. Are there any IRS Q&As coming up? Boy would this be a great question for that.

Are people using the special extension box now for this COVID 19 extension on (for example) a 6/30/19 plan year end? And are you just typing in COVID-19 or coronavirus or what? HAve they told us what to write?

I guess I can see your point. Here is what I am doing. Waiting or the IRS to tell us what they expect. It damn well better be practical. I would love to hear from anyone who works for one of the major recordkeeepers to learn what they are doing (and what their capabilities are). No way they can reusme payments on 1/1/2021 and increase payments again in April. Just not possible. That's what I think.

The delay is not between now and 12/31/2020. The delay is between the date that today's payment was schedyled, and the date 12 months from now on which the payment becomes due. The payment are "deayed for 1 year." The statute goes on to say that that 1 year period does not count towards the 5 year max.

Why wouldn't you use the whole year?

Thank you! The difference is NOTHING. Nothing compared to the sheer impossiblity of a recordkeeper doing that correctly. It's just impossible, and the difference is like 4%. Even if the recordkeeper culd do it, the client cannot be expeted to a) begin payments in January 2021, and then b) increase payments in April 2021 for Joe, May 2021 for Steve, and June 2021 for Bill. By the way, my amortization schedule just smooths out RatherBeGolfing's method.

I run my "negative am" schedule through 1/1/2021. When is the end of the 6 year period? Amortize the 1/1/2021 balance over the remainder of the 6 year period. I just think this is so critical. If the recordkeeping is a nightmare, especially for a small plan without a big fancy recordkeeper, then clients shnould be advised not to allow this. You can;t just kick the can down the road on this. You need to know what you're buying when you sign off on the deal.

"I agree that my interpretation is impractical - but show me how to interpret it otherwise." When I tried to follow the statute as closely as possible what I found was that the payments only shifted a de minimis amount. The statute says to reamortize - not to double payments in 12 months. If you take any reasonable approach at reamortizing you're going to find the payments don't change by much at all. Hence my approach is a very close approximation of what the statute says. Go ahead and try it, you'll see what I mean.

while I'm sure your interpretation is correct, can we all agree that the treatment is impractical? Also, I believe the statute calls for a reamortization of the delayed payments at some point.

Has anyone looked at my amortization schedule in the original post? If there is another way to do this I would be curious. It is so hard to follow this conversation without seeing amortization schedules. At the end of the day the question boils down to “what will the amortization schedule look like?”