Bird

So wait, the guy doesn't even want you to file for him? That's just nutty. I thought from your first message that maybe you didn't offer that service but...wow.

I believe the answer is yes. 408(b)(2) is about income received as opposed to fees charged (to participants, a la 404(c)), and it applies to all plans.

Yada yada yada. No need to be so thoughtful about this; if the receiving plan won't accept the assets because of their own ignorance, so be it. I'd be happy to explain to the disgruntled participant that they have created their own barrier that need not exist.

Another possibility is that this could be an annuity and not a life insurance policy. People sometimes get them mixed up. Still doesn't make sense that the plan is two years old and has that amount of money in it, unless as suggested it is a rollover. Somehow I doubt that as well.

Yes it must be distributed to participants, or used for expenses. Who gets it is another matter. If the plan was valued as of a certain date, and a participant(s) were paid immediately thereafter, then I'd argue that they don't share in the gains. If the money was invested and people were getting paid in dribs and drabs, then you have a mess because it wasn't handled properly. We* always quarterback the whole thing - tell clients to move to cash, do an interim val, and pay everyone asap thereafter to avoid this situation. *Well, when I was in charge that's what we did. It's a bit more willy-nilly now.

They're not forfeitures

I don't get it, there is no error in the filing itself; what is to be corrected? Are you all saying that an amended, but exact same EZ should be filed, to somehow correct the fact that the SB wasn't on hand at the time? There are red flags and questions to be answered here, like who prepared the EZ but didn't know or care enough to provide a full val report and SB? I would ask and have those questions answered before jumping to conclusions and talking about corrections. Some things can't be corrected and then you have a business decision to make about whether to take on the client, with a full and clear explanation of the problems inherent with the 2021 val that may come back to bite later.

Do you and your spouse have two different businesses for your self-employed activities or is it one business? [edit] I see that you opened an LLC for a new project; is that taxed as a partnership? Do you still have other separate businesses?

I was confused because the rest (first part) of your post seemed to directly contradict CuseFan's, but yeah, this was a good recap and confirmed what I thought. I doubt that many participants will meet the higher bar of a court order. Thanks.

I agree

Thanks for this also. You've pretty much described our situation and I just needed a reality check.

Thanks to you both; this was very helpful.

We have a plan that we took over as part of a business acquisition some years ago; it is profit sharing only with pooled/trustee directed investment accounts. They went from SF reporting to full 5500 with Schedule H and an audit in the year we took over. They have 4 different investment accounts, 3 are with mutual funds and ETFs with 15 to 20 positions, and 1 with 100+ individual securities (fortunately not a lot of trading in that account). We never really charged enough for the more detailed trust accounting required to prepare the Schedule H, but then in 2022 they moved money (not just cash but fund transfers in kind) and it became a full blown nightmare. We're charging them extra, and are bumping the fees going forward, and getting static. I explained the nuances (if you can call it that) of plan trust accounting, and it didn't really sink in. Then I made the (big) mistake of saying "well why don't you ask your investment people if they can provide reports specific to plan trust accounting" and now I'm spending more time explaining to them what we need (gains and losses from the beginning of the year) and basically having to prove that what they can provide doesn't work. Setting aside the business decision-making issues, if you are still with me... ...how common would you say it is to have a 100+ life plan that is not on a platform? Any anecdotal comments like "we have a bunch of these" or "we wouldn't touch this with a 10 foot pole" are appreciated. This is mostly to satisfy my curiosity. We run a small shop and don't know how others approach things. I know if we had 100 plans like this we wouldn't make any money.

C. B. Zeller, thanks for posting. I had heard that filing on time invalidates the extension several times but always wondered if it was an old wive's tale or whatever you want to call it. I am curious if anyone has a cite for the opposing view.

It's this, for a non-spouse, non-minor non-disabled. For some reason I didn't pick up that the idea was the RMDs would continue at the same rate for the remainder of the 10 years (2021 and 2022 essentially being waived), with the balance due in year 10. So I agree with your last paragraph.

I guess I didn't read that guidance closely enough - I thought it just said "no problem" for 2021 and 2022 but didn't specify how to take it. So, just to make sure I get it, if an account owner died in 2020 with a life expectancy of 20 years, then the RMD for 2021 would be 1/19, for 2022 1/18 (but they were "waived" for lack of a better word), etc. etc. but all had to be taken within 10 years, so the final year would likely be much larger.

Did I miss any IRA guidance on exactly how beneficiaries must take distributions over 10 years? They initially said, or at least everyone thought, that any time was ok - all in the tenth year if that is what was desired. Then last year they said no, it had to be taken each year, but 2021 and 2022 were ok if RMDs weren't taken. But they didn't say if 2021 and 2022 had to be taken in 2023, or if it would be ok to do it ratably over the remaining years - seems kind of important to be left hanging this long.

Exactly this. In theory you can just distribute some of the assets and not file an EZ, but in practice it will trigger an inquiry from the IRS. The savings from not just terminating (or leaving it alone and continuing to file) will not exceed the hassle of dealing with the inevitable inquiry arising from not filing.

I suppose it sorts out in the end, if the loan is in fact paid off, and the sources get repaid in full. But in the interim, there are vesting issues, also possible issues with availability of funds at different times for different sources. I can't see how this is "ok" but I also doubt anyone (else) would pay enough attention to cause a scene; not that I wouldn't love to see a major payroll/benefits company learn a lesson in how things need to be done correctly. I seriously doubt this is covered in any SPD, BPD or other documentation. It should be implicit that money from a source goes back to that source.

My understanding, and I admit to not being 100% confident, is that it is not deductible in the prior year - essentially you are adding contributions via a new formula, after the end of the year. (The new rules about retroactive plan adoption might impact this but I don't think so.)

I think this is an aspect of 11-g amendments that is often overlooked or simply ignored - my understanding is that the additional allocations are deductible in the current year (of the actual deposit) and not in the year allocated. It may be one of those things that is stuck in my head improperly but that's what I remember.

Thanks so much? I was hung up on how the loss is accounted for and didn't realize it could be claimed.

Exactly! A journey of one thousand miles starts with a single step...

I thought it was an April Fool's joke. Two cents?!!!!!!!!!!

A participant has excess deferrals of $2000. There were losses during the year. My recollection, which might be wrong, is that the excess is taxed in the year of the contribution (2022) and the gains are taxed in the year distributed (2023) but how does this work with losses, or am I mistaken?