Bird

What is being protected by starting the clock?

PPA ('06) says* that participants have to get, essentially, a list of assets in those types of plans. We prepare that for our clients, and it is fairly easy given the way we reconcile assets. She doesn't have to have a breakdown per se (i.e. her share), but the list, which would show amounts for each investment, would tell her what she needs to know, or thinks she needs to know. I guess you could just copy year-end statements and say "knock yourself out." The provision is a (typical) well-meaning effort, probably introduced by some staffer, but really does nothing for anyone. What is she going to do about/with the info? *It also says that the DOL must provide regs on how to do this, within either 6 months or 1 year, I don't remember. Still waiting.

If it's an S corp, and it sounds like it is, then the answer is no.

RMDs are not eligible for rollover...but as you note, it isn't, even though it was processed as one. So I'd say yes it could be rolled over, including the tax if the participant can come up with that money elsewhere. The participant has 60 days but I'd try to get it done by 12/31 so the receiving IRA can issue a 5498 telling the IRS it was received, otherwise it will almost certainly result in correspondence since they won't match the distribution and the rollover. (There's nothing wrong with doing it in 2020, within 60 days, but I'm just suggesting this to avoid a hassle.)

Your answer is right there (my bold). It was a transition rule.

I guess in that scenario every payment has interest and principal credited to the directed account and then the whole payment transferred to pooled?

I'd say generally it is just another plan asset, but sometimes documents allow for loans to be carved out and treated as self-directed. Handling repayments in that scenario gets ugly and I wouldn't go there. No. As you note, everyone has to be given the same opportunity so you might be opening Pandora's box. At the very least consider restricting the source to deferrals, if that is enough for the owner.

I think it is ok but now you are effectively letting everyone do whatever they want and it can prove to be a hassle for the sponsor. If it's past 2 years you might consider a rollover to a regular IRA for the existing money (and new money periodically) and leave the rest of the SIMPLE alone.

Well, 25 bps and using A shares sounds high but we still don't know the whole story. There could be credits that are reallocated to participants. Also if there are no external/direct fees then maybe the whole package is reasonable. You need to strip everything apart, looking at direct and indirect fees and who gets what, and put it back together again to look at the whole picture.

I'd think there is language, catchall or otherwise, somewhere in the plan that says that particular section does not apply to money subject to J&S rules. I agree you can't cash them out, at least for those types of money...whether they can't be cashed out at all or can be for non-MP money depends on plan language, or maybe interpretation of plan language. In an ideal world whoever checked that box would have thought this through and clarified things (or not checked the box).

exactly

What is the size of the plan (assets)? I don't think this is that unusual. Let's forget about the re-branded fund and look at the A shares. It's losing favor but there are still plans that use A shares (where the minimums have been "bought out" by the platform so there are no up-front fees). Let's say total expenses are 85 bps. 25 bps probably goes to the investment advisor, directly or indirectly, and a few (10-15?) bps may go to the platform and/or the TPA. The rest is management expenses. As long as the participant disclosure contains the 85 bps, that end is satisfied. They don't need to know who gets what. (But the fiduciaries do - that is the 408(b)(2) disclosure). Again, this may or may not be reasonable. If it's a $250K plan, I'd say it's very reasonable (if there are no other fees tacked on). If it's a $50M plan, then it's on the high end.

I was being a bit snarky with my response but at the same time somewhat serious. In my (small plan) world, 25 bps isn't necessarily a lot and in fact might be a very good and reasonable amount, if compared to the same scenario with the same fund (without the extra fees) but with a 50 bps servicing fee. John Hancock (nee Manulife) used to collect their revenue this way, and while I never liked it because I thought it was deceptive, it might result in, well, "non-excessive" fees. It's not that much different from having 3, 4 or 5 different R share classes where you can pick from generating revenue within the fund expense structure or strip it all out and charge a separate "wrap" fee (to use old but I think short and sweet terminology). I'm not sure that it can be said that most or all of the 25 bps are "unreasonable" unless/until you look at what you are getting, although I don't mind confessing that there might be a definitional reason for that position that I'm not aware of. Bottom line, there's not enough info to say whether it the arrangement is good, bad or indifferent (although I personally find it deceptive and suspect that is the ultimate reason).

I don't have the foggiest idea. Other Qs come to mind - why would this be studied at all, other than to prove that someone screwed up and it's time to move on? I don't think that genie can be put back in the bottle.

To generate revenue

Also check the plan document for language about distributions to beneficiaries. Just because "Plan does not allow for partial distributions after termination" doesn't mean a beneficiary doesn't have a continuous right to withdrawals (i.e. partials). The "termination" language is irrelevant (unless there isn't any language about distributions after death, in which case you might look to the termination language).

I think it is pretty clear that it is not deductible in 2017 if not deposited by the due date of the return. But I know of a lot of accountants that would not want to be bothered amending a return and would take their chances, and I don't see it as the plan's (or TPA's) problem as far as that goes. If there was a legitimate election to defer that much, then I think you have a legit deferral and legit late deposit issue. Amending the return to remove the deferral (and not making it up) creates a train wreck of amending the 5500 too, and in theory a failure to implement a deferral election, although in the case of a sole prop that issue is somewhat blurred.

As just posted, the purchase of a single premium deferred annuity in this day and age is almost certainly going to be an Individual Retirement Annuity, which is a rollover and not taxable. Even in the highly unlikely event that it is a Qualified Plan Distributed Annuity, it is not taxable - it is effectively equivalent to an IRA rollover where subsequent withdrawals are taxable (or could be rolled over to an IRA and not taxed). Only if it were (accidentally and/or stupidly) purchased as a "regular" after-tax SPDA without the tax protection of an IRA or Qualified Plan Distributed Annuity would it be a taxable event.

Yes, thanks. I believe the OP was talking about an immediate annuity purchased by the plan for purposes of having monthly benefits paid by the insurance company. I may have gotten myself twisted up with the terminology. For anyone who cares, I think the following is true: A single premium deferred annuity can be purchased by a plan participant upon leaving a plan. This is almost invariably an IRA and properly treated and reported as an IRA rollover. A "qualified plan distributed annuity" is something that was available way back in the day, before IRA rollovers were liberalized. It was in fact almost the only way to get money out of a plan in a form other than a taxable lump sum or monthly annuity. I'm pretty sure that technically this is not reportable - it's not an IRA rollover but it acts exactly as one. I'm not sure why anyone would do this instead of an IRA except by accident. But if you want to report it as a rollover go for it. As noted, I believe the situation at hand is an immediate* annuity, where the insurance company will pay monthly benefits - no chance to surrender the contract and get a lump sum or do anything other than receive those monthly benefits under the terms of the contract (possibly with years certain or similar provisions). Not reportable. *Technically it could even be deferred but with the provisions locked in place - e.g. paying $X/month at some later date.

Yes and yes. It was something we stopped doing.

But none of those apply. The participant received nothing from the plan. The plan transferred the payment liability to an insurer. C'mon Larry, putting something in bold does not make it true...you know very well this is not a 1035 exchange. I fully expected that! Meh. Being fully convinced that this is not reportable I don't see the need. And then I go back to "how" - I suppose if you call it a rollover there is not harm, but it's not right. Likewise for a 1035 exchange.

This thread from 2009, in which I participated, concludes with another poster calling the IRS and being told it is not reportable.

I hesitate to disagree with the Great and Powerful Larry Starr but something tells me that if you purchase an immediate annuity and the insurer is effectively taking on the liability of making payments, that there is no 1099-R reporting. I can say with some certainty that it is not a rollover, so that leaves the Q of exactly how to report it if indeed you have to - the full amount but $0 taxable?

And just to offer a hint of a contrary opinion, I had a plan where my predecessor used to buy (single premium deferred) annuities for terms while everyone else was in a pooled account. I expressed some concerns about that (on PIX for those who remember that) and someone way more experienced than me provided a cite that it was in fact ok - the general idea being that you'd look at nondiscrimination within each group (actives and non). I might be able to find it if my life depended on it but it also might have been superseded by Revenue Ruling 96-47 cited above... ...but I agree with everyone else that it is, at best, a bad idea. I've learned over the years to say "no you can't do that" even if there is some possibility that they can. Explaining the pros and cons is counterproductive - it just leads to confusion when they want a straight answer. Don't let their logical but bad impulses drive you to find a way to satisfy them. (Sorry to lecture)

I generally recommend the whole plan go to cash in a termination. For one thing, you have a constantly moving target if you don't, and for another, everyone will remember the losses that might occur after the decision is made but no one will remember the gains.