Kevin C

The IRS has a page on their website about this. https://www.irs.gov/retirement-plans/401k-plans-deferrals-and-matching-when-compensation-exceeds-the-annual-limit But, note that match can not be allocated based on compensation in excess of the 401(a)(17) limit. If you don't want the HCE's match to be smaller because of the timing of their deferrals, amend to provide for a true-up or to allocate the match using plan year compensation.

Our VS document has an option that provides for an involuntary distribution to a terminated participant regardless of the value of the participant's account balance, upon attainment of Normal Retirement Age (or age 62, if later). It's an ASC document.

With an integrated allocation, the excess percentage can't exceed the lesser of the base percentage or the maximum percentage. 1.401(l)-2(b)(2). You will need to do slightly under 4.1% + 4.1% of the excess to get the owner to $18,600.

Do you have access to the 2012 IRS DC Q&A handout from the ASPPA annual conference? Question 41 was about voiding a mid-year amendment to eliminate the SH contribution. Your timing may not be the same, but you may find it interesting.

I think this counter-productive argument is more a matter of context. Our VS document and every other document I've seen calls it an RMD. The CARES Act added a provision that 401(a)(9) doesn't apply for 2020. That eliminates the Code requirement for 2020 RMDs, but it doesn't automatically change the provisions in our plans. If a plan doesn't implement the law change, the plan document requires the distribution to be paid in 2020 and calls it an RMD, then, under the terms of the plan, it's an RMD in 2020.

It depends on the language in the amendment, which will have to match the actual operation of the plan during 2020. The plan could waive all RMDs. The Act includes an exception to 411(d)(6) for the amendment, so removing the all RMDs for 2020 shouldn't be an issue. But, why would you want to do that? Or, it could require payment of the amounts that would have been RMDs. Again, why would you want to do that? Or, it can give the participant the choice. Our document provider is planning to use the same options they did for 2009. One will be that the RMD isn't paid unless the participant requests it. The other is that the RMD is paid unless the participant specifically elects to not take it. We used the option of not paid unless requested for all our plans for 2009 and will use the same for 2020 when that amendment is done.

As Mike pointed out, the amendments reflecting how the plan operates in 2020 for this will be done some time in 2022. All or our plans will be amended to waive the 2020 RMDs unless the participant requests it, just like we did for 2009. The amendment that is eventually done will need to match the plan's operation, or there will be an operational failure. Which is why I think 3. in the OP is a good reason to have the amendment waive all 2020 RMDs. The question was whether or not the plan is required to waive RMDs for 2020. Bird, I think you are agreeing that the plan can still force that amount to be paid. The way the distribution is treated under the Code isn't affected by what the plan does. Since 402(c)(4) now says amounts received in 2020 that would have been RMDs are eligible for rollover, a participant that doesn't want the 2020 RMD has a way to avoid taxation of it even if the plan forces it to be taken. I'll also note that our current VS document has an option to have the "required beginning date" for non-5% owners be determined by when they reach 70.5, even if they are still employed.

1. Based on the webcasts I've heard so far, DC plans are not required to waive the 2020 RMD requirements. I don't know why anyone would want to force RMDs to be paid when they don't have to be, but it appears to be optional. 3. The CARES ACT waiver includes 2019 RMDs for those with a RBD of 4/1/20 that were not paid by 12/31/19. If her 2019 RMD wasn't paid by 4/1/20, that would be a good reason for the plan to waive the 2020 RMDs.

Does this help?

If you are going to take the position that the contribution going to the HCE's is not a safe harbor contribution, keep in mind that your position also means the top heavy exception for safe harbor plans does not apply, because an employer contribution other than the SH contribution was allocated for the year. Austin, You may get "guidance of general applicability published in the Internal Revenue Bulletin" [1.401(k)-3(e)(1)] providing the relief you seek. It wouldn't hurt to send the IRS a letter asking for it.

I wouldn't want to bet on how well your creative interpretation will work on the IRS with a plan document that calls it a SH contribution, applies all of the requirements of a SH contribution to it and includes it in the SH provision section, like our VS document does. Also, from Derrin Watson's COVID-19 Q&As: http://www.erisapedia.com/static/Covid19Webcast2020_04Questions.pdf (page 18)

I think you have a problem in the language in 1.401(k)-3(e)(1). I see the choice about who receives the SH as part of the provisions that satisfy 1.401(k)-3. The regs clearly say except as provided in (g) those provisions must remain in effect for the entire plan year or the plan doesn't satisfy 1.401(k)-1(b). Satisfying 1.401(k)-1(b) is a qualification requirement. Unless the IRS comes out with guidance saying you can eliminate the safe harbor contribution for HCEs mid-year, I see it as falling under paragraph (g) which means the safe harbor is gone. If it's that important, change the plan year. Have a short plan year from 1/1/2020 to 4/30/2020 and then have a 5/1/20 - 4/30/21 plan year with just the NHCEs getting the SH. 1.401(k)-3(e)(3) says you have to be SH for the year before and after the short year to be SH for the short year. It doesn't say the SH provisions have to be the same for those years. Why risk disqualifying the plan when there is another option that accomplishes the desired goal without the risk?

If the PS allocation formula is a 401(a)(4) safe harbor, you may not need to general test. There is an exception in the reqs that may apply.

1. Maybe (see #3), but doing it mid-year would be a reduction in the safe harbor contribution, which puts you under the rules in 1.401(k)-3(g). 2. If the plan meets the requirements in 1.401(k)-3(g), the safe harbor contribution can be reduced mid-year, but the plan would not be safe harbor for that year. If they want to change during 2020 bad enough, it can be done along with a change in the plan year. 3. The definition of safe harbor compensation used must satisfy the requirements of 414(s). [1.401(k)-3)(b)(2)]. It does not have to be a 414(s) safe harbor definition. Some plan documents have a provision that if the safe harbor compensation definition used doesn't satisfy 414(s), it automatically changes to a specific definition that meets one of the 414(s) safe harbors. Without such a provision, you would need a corrective amendment if the safe harbor compensation definition used doesn't satisfy 414(s). I would expect most of the tips to be for NHCEs, which would make it very difficult to pass 414(s). I would look at prior years to see if the definition they want would have passed 414(s) if it had been used before doing the amendment. Otherwise, there may be an unpleasant surprise waiting down the road.

I disagree with your first sentence here, although I'm inclined to agree with your last sentence. Is there something you see that indicates a plan that doesn't allow for the new distributable event is prevented from applying voluntary withholding to a CRD? One of the questions in Derrin's Q&A follow-up to the recent COVID-19 session is: It's on page 5. http://www.erisapedia.com/static/Covid19Webcast2020_04Questions.pdf Section 2202(a)(6)(A) says "For purposes of sections 401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 1986, coronavirus-related distributions shall not be treated as eligible rollover distributions." That could be read as requiring voluntary withholding for a CRD, since the definition of CRD in 2202(a)(4)(A) is not limited to just distributions made under the new distributable event. The article I linked above points out that with similar provisions in the hurricane relief laws, IRS guidance said the decision of voluntary withholding vs 20% was up to the Plan Administrator.

Are the references saying CRD's start March 27 referring to the new distributable event rather than the tax changes? I don't see an effective date for the section that added the new distributable event. It makes sense to me that the new distributable event would not be available until the law was signed. Until guidance is issued, all we have to go by is a reasonable good faith interpretation of the new law. The Act is clear that the tax treatment applies retroactively to 1/1/2020.

A recent article from Ferenczy Benefits Law Center discusses withholding for distributions if the plan sponsor doesn't elect to make any CARES Act changes. It was in the news section a few days back. https://ferenczylaw.com/flashpoint-the-cares-act-do-we-have-to/

It looks like everyone is reading the OP as saying the plan included the SH match at 1/1/20 and the only thing to be amended is the eligibility requirements. If that's not the case, it's a different answer. I can only think of two situations where it makes any sense to retroactively make someone eligible to defer. One is if you are doing a corrective amendment because someone was improperly allowed to defer too early. The other is to correct a failing 410(b) test. I agree with the suggestion to make them eligible when the amendment is done, not retroactively. If they want compensation for the entire year to be used to calculate the match, amend the plan to use compensation for the plan year including amounts prior to participation. As for missed deferral opportunity, if the plan document says someone is eligible to defer 1/1/20 and they were not offered the opportunity to defer starting 1/1/20, there is a missed deferral opportunity.

Peter, thank you.

In a DC Plan subject to J&S requirements, a participant with a large balance is eligible for a distribution. His spouse is incarcerated. He sent the distribution paperwork to his spouse to get her consent to a lump sum distribution and her waiver of the J&S benefit notarized. She signed both places, but the prison turned down the request to have the paperwork notarized. Instead, they provided a notice that includes the language for an unsworn declaration under penalty of perjury under USC 1746 (and an identical state law), which she completed, that they told her means she doesn't need to have the paperwork notarized. Has anyone come across this before? I couldn't find anything even mentioning an unsworn declaration in the context of a qualified plan. I'm not seeing this as overriding the requirement that the spouse's signature be witnessed by either a plan representative or a notary. But, I wanted to ask here before responding to the participant.

I haven't had any situations where we thought the DOL asked for something that was inappropriate. I have had a situation where we didn't have some of the items on the list because we needed to get them from a prior service provider who was uncooperative. The investigator's response was no problem, I'll send them a subpoena. Based on my conversations with several DOL investigators, if they don't get something they feel they need, it's fairly easy for them to get a subpoena issued. I organize the requested information they request like Alan suggests. The investigators have always said they appreciate it. Several of them also said it isn't uncommon for them to show up at the appointment time and the plan sponsor has made no effort to gather any of the requested information.

Our daily software won't trade any amount that would cause someone to exceed the 402(g) limit. So, the $.04 would be sitting in cash. I would use the $.04 towards the employer contribution and tell the client they owe him $.04, which is the same as Larry's suggestion.

I don't work with cash balance plans, so please forgive me if this is a simple question. 1.411(a)(13)-1(d)(4)(I)(C) says "If a variable annuity benefit formula adjusts benefits by reference to the difference between a rate of return on plan assets (or specified market indices) and a specified assumed interest rate of 5 percent or higher, then the variable annuity benefit formula is not treated as being reasonably expected to provide a smaller total dollar amount of future adjustments for the participant than for any similarly situated, younger individual who is or could be a participant in the plan, and thus such a variable annuity benefit formula does not have an effect similar to a lump sum-based benefit formula." What is the significance of this exception, other than that a plan with this type of formula wouldn't be a statutory hybrid plan? The 2010 preamble mentions that people wanted this exception widened to apply to more plans, so it seems there must be some advantage to fitting within the exception.

Ask Millennium Trust for help finding the beneficiaries. They've found a couple of beneficiaries for us under similar circumstances.

I agree it's a bad idea. Have they looked at automatic enrollment?