Bird

No

I'll clarify my own answer...no notification is required to participants for the reason noted. I think the trustee must be notified under 408(b)(2), and I think an invoice is sufficient notice.

My two cents - while the payor clearly did not make an error (although perhaps the check wasn't clearly marked FBO John Doe IRA?) I would be inclined to issue a corrected 1099-R. But first I would want to get find out from all parties involved (the participant and the financial institution) exactly what went wrong...it sounds like the money was misdirected, and perhaps the institution can retroactively put it in an IRA and tidy things up that way. (But I know how hard it can be to get financial institutions to do stuff like that.) Let's be clear - if the check was payable to "XYZ Bank FBO John Doe" then maybe the payor has some culpability here. That opens the door for a participant to get a tax-free distribution by simply putting what is intended to be a rollover check into a regular account. (But I do think the IRS would eventually catch up with this since there won't be a matching 5498 showing the rollover in.)

The target date stays the same as a person ages - if s/he has a target date of 2035 now, s/he'll still have a target date of 2035 in 2020.

I don't think any notification is required, period.

asap 18-13 talked about this...perhaps at too much length. My takeaway was "No Penalty for Failure to File."

So, I'd have to tell my accountant that the $100,000 I reserved for PS is deductible for 2013, but we had to do an 11-g that added $2,400 and is deductible only for 2014? So when he sees the check for $102,400 he'll have to remember that not all of can be deducted? That's how I understand it. I can't give a cite but it's something that has stuck with me from way back.

It's not clear if you are asking if they can do a corrective amendment to increase contributions to NHCEs that would allow the two plans to pass testing, or if you are asking if they can (effectively) re-write the allocation formula to do whatever they want (presumably giving HCEs more than a pro-rata allocation would have given them). In the first scenario - yes, I think so. In the second scenario - I'm not sure, but I'm not very comfortable with it. It's been pointed out by others that although the section is titled "corrective amendments," you don't actually have to have a failure in order to use it. There are some rules in there about benefiting a non-discriminatory group. You'd first have to allocate at some percentage - 1%, 3% or whatever - and then do the corrective amendment for the rest. I guess the idea would be to allocate some tiny percentage according to the plan terms and then to a corrective amendment that independently satisfies non-discrimination, and in combination with other contributions, satisfies non-discrimination. I'm not sure that there's anything specifically prohibiting it but it's (IMO) clearly not in the spirit of the law to be able to effectively change from a pro-rata allocation after the end of the year in order to increase contributions to HCEs. There's also the issue of deductibility - I have it in the back of my mind that -11g amendments are deductible in the year made, not the prior year. I'm not sure I can cite that but I know for sure someone who knows way more about this than I do said it, maybe a long time ago.

It sounds to me like they had to choose the lesser of two evils: terminating the SIMPLE without sufficient notice, or operating a SIMPLE even though they had more than 100 employees in the prior year. I don't see any options here other than what they did. (I just saw Jim Chad's response...I think he has provided the supporting documentation.)

That's contradictory. I think you mean the last day of the cure period was 12/31/13, so it defaulted in 2014. If so, the 1099-R would be for 2014.

I wonder if the outcome would have been different if the taxpayer had referenced Pub 590 and said he relied on it. Apparently, the Pub wasn't brought up.

Nov 30...unless I had been super-efficient and already filed using 9/30 (or 10/31), in which case I would not worry about changing anything.

The Financial Institution is the ultimate recipient of the money (typically a fund family like Vanguard or American Funds). It's not the broker-dealer firm.

I believe the full question being asked, but in a more subtle way, is: "If a participant receives an RMD, which is not eligible for rollover, but they roll it over anyway, will the IRS know?" I don't think there is a direct way that such a transaction would be flagged. Of course there are a lot of fraudulent things that can be done that can be gotten away with.

I didn't read the fact pattern that carefully, but we were watching ASPPA webcasts here in December, to catch up on CEs, and there was a remark in one that said, in effect "the BIS rules don't mean what you think - if someone was in a plan, and they return to work, they're probably back in the plan right away - especially if they had an account balance."

You don't say what kind of SIMPLE - IRA or 401(k) plan? I have to believe it's a plan, because if it was an IRA, each participant would have the option to leave the money where it was, or roll it to a plan, or to another IRA. So, if it was a plan, and the plans were in fact merged, then, to be precise, the word "rolled" is improperly used above; it should be "transferred." In which case I'm not sure anything is wrong. I'm not sure about all of the rules associated with SIMPLE 401(k)s because I would never use one, but in essence they are just 401(k)s with special provisions, and I don't see any reason why they couldn't be "un-SIMPLEd" to become a regular plan, which could be merged with another plan. If it really was a SIMPLE IRA, then if each participant elected to roll the money into another plan, then again, I'm not sure anything is wrong.

You can't amend an existing plan from pro-rata to groups after the end of the year, and you can't start a new plan after the end of the year. Period.

Again, it's the rest of the document that says what you can and can't take - in addition to the required amount, which is a minimum under the law, notwithstanding anything else in the plan. The minimum language says "you must take X even if the rest of the document says you can't take anything." It seems a stretch to me that RMD language which includes the word "minimum" effectively adds a lump sum option at age 70 1/2. That's definitely not the intent - the intent is to make sure taxes aren't deferred indefinitely. As far as the IRS Q&A, there is no doubt that they don't always think the questions through, and I think this is one of those instances. Having said all that, I don't know that they would notice or care if they looked at this on audit. I know we have in-service provisions at NRA for all or almost all of our plans, and I think that's the norm, so it's probably a rare event.

But I think that's where the language of the rest of the plan enters into the equation - e.g. it might say distributions are allowed upon termination of employment, actual retirement, death, or disability (period). The minimum language says, literally or in effect, "notwithstanding any other provisions, you have to take this (minimum) amount out." It's a caveat to the other language, and the word "minimum" is reflective of the law and compliance, and does not IMO create a new distribution opportunity beyond the required amount.

I agree that for testing, they get thrown out. As far as the 5500 participant count, if they have satisfied eligibility and entered the plan, they are participants.

Well, if it really needs to be individually designed then I would explain (or would have explained) that the FDL submission/cost is part of that decision. Otherwise, what gives him the basis for believing it is qualified? Updating in and of itself means little, if, e.g., the formula is whacked. (I don't have any $25M plans but find it hard to connect the adjective "only" with "$5k." Volume submitter documents are so flexible that it's hard to justify the expense of an individually designed plan, at least in my market. But again, it's part of the decision; if they want an individually designed plan that's simply the cost that goes with it. Not that helpful, I know.) Self-correction is generally easier when you have an FDL.

That's pretty much my attitude. I think I could create a scenario where a PD allocation doesn't satisfy the general test - yes, if you have a low-paid HCE - so you do have to run the test. But I like having the flexibility - if all of a sudden new comp works, it doesn't require a plan amendment. Yes, doing it. No quarrels with anyone not doing it; I ignore some other things that I deem silly.

But if you impute disparity in the GT then you get to the same place that you would if you did it in a formula (except for the slight difference between using 5.7% and 5.4% or whatever).

That's why. If the plan uses permitted disparity, the quarterly statements are supposed to have a description of it. We do this (silly) exercise. It's a fairly good reason not to use PD, especially since there are no practical impediments to general testing. Widely ignored, no doubt.

no comp = no opportunity to defer; not in the test.