Bird

Thanks for taking the time...I will agree to disagree.

At this point in the year, and assuming it is a 12/31 plan, I'd strongly suggest moving the approximate amount of money needed into cash before the end of the year, and then simply process the payout after the end of the year. It's probably going to take that long anyway for forms processing and whatnot.

I'm not sure I want to drag this out, because it's not something that concerns me on a practical level, but where did this come from? Are you explaining the tie-ins, or is this in a loan program/procedure? I've never seen anything so rigid/handcuffing. In our (FTW) procedures, the method of loan payment is just a checkbox (another alternative being the participant writes a personal check). IMO it's not even a compliance issue, it's just something you show the participant, that that's how it's going to be done as an administrative convenience.

Urk. Thanks...so, in a theoretical world, does that mean the loan should retroactively default? Or it is just broken and unfixable?

Proverbial takeover case - loan should have defaulted in 2006 at around $46,000. Some payments have been made since but not many, and sporadically. At 8.25%, John Hancock is carrying this at $75,000 now. I'm referring this to an attorney, but just curious what BL mavens have to say as likely outcomes under VCP, or other thoughts.

Wow, pulling up a thread from 2002?! Just FYI, there are many later discussions on this, and some/many, myself included, do not think you can force someone to continue payroll withholding for a loan if they don't want it. It might depend on state law but I have yet to see someone prove that you can continue to force such payments in XYZ state. Loans default, all the time. Sure, a Plan Administrator who regularly (or perhaps even once) permitted loans and then collected no payments could indeed jeopardize the plan's status, as this would certainly look like a work-around for an otherwise impermissible distribution(s). But I don't think setting up a loan, collecting payments for some period of time, and then stopping payments at the participant's request, puts the plan in any danger at all. Payments by payroll deduction is an administrative policy that does not, in my opinion, give rise to a higher level of duty to collect.

My first reaction to a sponsor in this scenario is to explain that the new rules are optional and they do not have to expand hardships to SHNE money if they don't want to (and I would strongly recommend against it). I don't anticipate bringing it up at all as a meaningful option; most of my clients wouldn't want participants taking "their" contributions early and personally I think it is a horrible idea...these are, after all "retirement" plans we are working on. But I digress. If they insisted, then I suppose we'd operationally run the plan that way and catch up on the amendment later, as will be allowed. As for the SMM, I guess we'd try to get it out asap...I have to be honest and say I'm not quite sure what the requirements are in this particular scenario but it's not at the top of my worry list as far as non-compliance consequences.

Nothing, for sure, until we know what the provisions will be. Seems there are some decisions to be made; not all automatic stuff.

Could he get that rate from a bank, even as a preferred customer? No. So the answer is no. Prime might be ok but it's not a debate I'd want to have every time someone decided to take a loan...the time to make that decision is when loan provisions are added to the plan, as part of the loan policy. If you're just doing that now, well fine then, but I don't think there is any debate that 0% interest is not reasonable.

I (still) vote for A but don't think it matters too much. The important thing is to let the government know the benefit exists (again), so that when the participant collects SS they can ask for money that probably won't exist again by that time, and keep us busy with questions about how to prove a benefit was paid... (I suspect that reporting them as "D" wasn't proper when they started getting installment benefits if the payments were not irrevocable, but the instructions aren't crystal-clear on that. e.g. I don't think we would report a prior "A" as a "D" just because they started getting RMDs. The codes probably have a leftover DB bias from when things first started and it might help to think about how you would report things as if the plan were a DB plan.)

I'll give that a tentative "yes." Looks like line 9 of the 1040. And, FWIW, it appears they have done a major revamp of the 1040 and schedules, with self-employeds taking their pension deductions on Schedule 1, line 28, instead of the 1040, line 28.

Not that I would adopt that policy, but I think I'd take the position that we are doing a 1099-R unless someone specifically confirms in writing that they will do it. (And not the client saying "the CPA will do it.")

If the plan is terminating, and participants are making these elections to roll into the 401(k), then the in-service rule in the DB is irrelevant, and further, none of the DB distribution restrictions or characteristics follow through to the 401(k). If the 401(k) permits in-service at 59 1/2 then that is what applies (and some plans allow rollover money to be withdrawn at any time; that would apply as well).

I think EPCRS is the wrong place to look. You made QNECs to correct a testing failure. Those accounts now exist and are subject to all plan terms and conditions. If these participants are otherwise entitled to a distribution*, and the fee eats up their money, so be it - pay them out at a net $0 and move on. *Maybe I'm reading too much into it but you may not just get rid of accounts for active participants because they are small accounts.

This can be removed from a plan that does not require an annuity option (i.e. it can generally be removed from a PS or PS/401(k), as long as pension money was not merged into said plan...and even then, can be removed from sources that don't require it). I don't have a cite but I imagine someone else will...back in the day, we used to include all options with a "why not" attitude, but then they got locked in with...the passage of REA (?)...and then the IRS gave us an out, which we exercised liberally.

I don't think the issue is true "termination" with an inability to make future contributions (and presumably some kind of wind-down of the plan with distributions due to "termination"); it is all about vesting. Not that an IRA discussion on the web is definitive, but you might want to check out their page specifically on this issue; nothing at all about anything but vesting: No Contributions to your Profit Sharing/401(k) Plan for a While? Complete Discontinuance of Contributions and What You Need to Know

Just tell the participants to leave the money alone. The answer to your question is "yes, sort of." They can "terminate" it now but then it is up to participants to not take their money out, just like it is whether a SIMPLE is ongoing or not. Terminating a SIMPLE has nothing to do with distributions.

Yes, I am curious about the scenario. But given that the purpose of the form, or at least my understanding of it, is to alert SSA that a participant might have benefits coming to them from a plan, I'd think A would serve the purpose. B does seem to be intended to modify info on someone in the system with some benefits pending.

I agree with answers above. Some additional thoughts - with quarterly vals, it seems you could almost handle this within those parameters, i.e. without a special val. Maybe it's too late now, but if you knew of a $300K distribution pending before 9/30, then you "just" move $300K to cash so that you are effectively carving out that participant's distribution. I guess if the distribution request came in after 9/30 it would be a stretch to make them wait until after the end of the year, so maybe you are stuck with a special val anyway. With the way the market is gyrating now, I think I'd suggest that general approach anyway - move the $300K to cash now and then do the special val so you're not constantly chasing your tail.

No

I don't have a problem with Oct 31. In fact I think we've deliberately delayed term dates for the mathematical results you describe. Would be curious to see others' thoughts...

Agreed, I don't think you can change it.

I like to think of the "SIMPLE" part as a vehicle to get money into an "IRA." In other words, the participants really have their IRA accounts, even though they have the word "SIMPLE" on them, and can do whatever they want. (There is of course the higher early w/d penalty - 25% in the first 2 years of participation.) I can't say off the top of my head if some kind of notice to the participants is required - there certainly should be some kind of reconciliation of required employer contributions to make sure they have all been deposited. I don't think there is a requirement to notify the custodian but it makes sense to touch base just so their records are updated. As far as the new owner, he'd need to start a new plan. There might be some investment benefits to consolidating assets but that would be an individual decision by each participant.

That is the correct terminology, thanks. I got caught up in the "MEP" stuff myself.

Under the circumstances you describe, my inclination would be to keep separate plans unless and until there was a very good reason to merge them. A very good reason would be that one of the plans already needs an audit and so you might as well combine them and save on admin fees, at least in theory. I'm still skeptical that reducing recordkeeping costs is worth the cost of an audit, if it triggers an audit one or two years earlier than it would otherwise be needed. I see this as a very objective decision, especially if your client is cheap. Just figure out the total costs one way vs. the other. "The investment advisor says a MEP is better" is not an analysis. A return is filed for the plan (i.e. one return). It's just one plan covering two companies. I think there is a schedule attachment that is simply a list of the sponsoring employers. Calling this a MEP is accurate but I wouldn't use the term because I think it is currently associated with "open" MEPs which are a current hot topic...and I suspect that the advisor is trying to sound important/knowledgeable, as in "MEPs are cool and we can create our own." I don't want to be too snarky about it because I think there are legitimate times when combining two plans makes a lot of sense, and it probably does in this case, but maybe not right away.