XTitan

I'm hoping that when the plans were set-up that there was at least common control at the 20% threshold. That's the only way this would make sense. 1.409A-1(h)(1)(i) begins with An employee separates from service with the employer if the employee dies, retires, or otherwise has a termination of employment with the employer. How can a participant be employed by two unrelated employers if only working for one at a time? If it's one at a time, there is no transfer; it's a separation and a hire. I've definitely seen related employers adopt the same plans and transfers are not treated as separations, but not unrelated employers. In the words of the sadly mortal Warren Zevon, "Ain't that pretty at all."

Not sure I agree here. Change of control is optional, true. But the definition of separation from service is tied to termination from an employer, where the threshold for a controlled group is lowered from 80% to 50% and common control is lowered to 20%. So, if the two businesses involved don't even get to a 20% common control, how is a transfer not a separation?

So was the whole IRS web site fiasco your fault just to get an extra day to post this??

This is from a preliminary ruling in the case and shows the plaintiff's original position. The decedent died on September 14, 2014. At the time of the decedent's death, a divorce action between the plaintiff and the decedent was pending in state court. As part of the divorce action, the state court issued an injunction preventing the plaintiff or decedent from transferring or disposing of any property, including the decedent's interest in the Majors Plastics' 401(k). The plaintiff alleges the decedent transferred $371,449.25 from the Majors Plastics' 401(k) to Rajendran in her capacity as personal representative or trustee on May 29, 2014, in violation of the injunction. Additionally, the plaintiff alleges two days prior to the decedent's death, on September 12, 2014, the decedent "took steps" to transfer the full value of the ESOP, $2,721,739.37, into an account held by the Trust. The plaintiff alleges the ESOP Committee improperly transferred the ESOP funds to Rajendran on September 15, 2014, subsequent to the decedent's death. The plaintiff alleges she was the proper beneficiary of the ESOP as the decedent's surviving spouse and made a demand for payment on the ESOP Committee pursuant to the terms of the ESOP. The plaintiff alleges her claim was denied and she has exhausted her administrative remedies.

I've always looked at it as the 409A regulations permit NQ deferrals to be cancelled due to a 401(k) hardship distribution, but the 401(k) regs, but the 401(k) regulations require NQ deferral cancellation, so it's mandatory. It's not an issue next year since the Bipartisan Budget Act of 2018 (sec 41113) deleted the 6 month prohibition on contributions due to hardship.

Unlike the example from the pre-amble which substituted CIC for separation, this is adding a distribution event. Sadly, the distribution change rules would be payable at the later of separation or 5 years after CIC. That's effectively useless. I'm still trying to wrap my head around the design. A stock option that vests at CIC? What's really happening? I don't normally think "stock option" and "409A" at the same time.

"Could" = "Wishy-washy"

Check out https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-elective-deferrals-exceeded-code-402g-limits-for-the-calendar-year-and-excesses-were-not-distributed If the total of a plan participant’s elective deferrals exceeds the limit under IRC Section 402(g), to avoid failing IRC Section 401(a)(30), the excess amount plus allocable earnings must be distributed to the participant by April 15 of the year following the year of deferral. Excess deferrals not timely returned to the participant are subject to additional tax. Timely withdrawal of excess contributions by April 15 Excess deferrals withdrawn by April 15 of the year following the year of deferral are taxable in the calendar year deferred. Earnings are taxable in the year they're distributed. There is no 10% early distribution tax, no 20% withholding and no spousal consent requirement on amounts timely distributed. Consequences of a late distribution Under IRC Section 401(a)(30), if the excess deferrals aren't withdrawn by April 15, each affected plan of the employer is subject to disqualification and would need to go through EPCRS. Under EPCRS, these excess deferrals are still subject to double taxation; that is, they're taxed both in the year contributed to and in the year distributed from the plan. For any distributions, attributable to elective deferrals designated as Roth Contributions, all distributions will be reported as taxable in the year distributed. Designated Roth contributions will have already been included in income in the year of deferral. These late distributions could also be subject to the 10% early distribution tax, 20% withholding and spousal consent requirements. Excess deferrals distributed to highly compensated employees are included in the Actual Deferral Percentage (ADP) test in the year the amounts were deferred. Excess deferrals distributed to nonhighly compensated employees aren't included in the ADP test if all deferrals were made with one employer. Excess deferrals distributed after April 15 are included in annual additions for the year deferred. How to find the mistake: Ensure that no one's elective deferrals exceed the 402(g) limit for a year by comparing the amount deferred to the 402(g) limit. If anyone exceeds the 402(g) limit and this isn't corrected, the plan could be disqualified. How to fix the mistake: IRC Section 72(t) imposes a 10% additional tax for distributions that don't meet an exception, such as death, disability or attainment of age 59 ½, among others. To avoid this additional tax, correct excess deferrals no later than April 15 of the following year. If you don't correct by April 15, you may still correct this mistake under EPCRS; however, it won’t relieve any Section 72(t) tax resulting from the mistake. Under Revenue Procedure 2016-51, Appendix A, section .04, the permitted correction method is to distribute the excess deferral to the employee and to report the amount as taxable both in the year of deferral and in the year distributed. These amounts are reported on Forms 1099-R. These amounts are reported on Forms 1099-R. In the case of amounts designated as Roth contributions, the excess deferral will already have been reported in income in the year of deferral. However, the amount will be reported as taxable in the year distributed.

From the 1099-R instructions 　 Excess deferrals. Excess deferrals under section 402(g) can occur in section 401(k) plans, section 403(b) plans, or SARSEPs. If distributed by April 15 of the year following the year of deferral, the excess is taxable to the participant in the year of deferral (other than designated Roth contributions), but the earnings are taxable in the year distributed. Except for a SARSEP, if the distribution occurs after April 15, the excess is taxable in the year of deferral and the year distributed. The earnings are taxable in the year distributed. For a SARSEP, excess deferrals not withdrawn by April 15 are considered regular IRA contributions subject to the IRA contribution limits. Corrective distributions of excess deferrals are not subject to federal income tax withholding or social security and Medicare taxes.

Agreed, unless the 401(k) plan explicitly carves the NQ distribution out as a deferral source.

Agreed.

I don't agree that this is what is being discussed here. The cited provision is the voluntary termination and liquidation of a plan. I have seen plans that specify a mandatory lump sum upon change in control but, absent termination of the plan under 1.409A-3(j)(4)(ix)(B), I would say any elected deferrals must continue; cancellation of deferrals upon change in control would be an impermissible acceleration.

I suppose an automated withdrawal before the amounts accrue interest would be wrong. Yeah, there's an additional 10% tax but it's additional compensation and even after all taxes it's still appositive amount.

It couldn't hurt?

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Found a pie shop around the corner who said they were open 22/7.

457(f) plans have a host of other rules to comply with, but, as a nonqualified plan, taking into account qualified plan limits aren't among them.

Can I get an Amen?

And whether that can be done via a change in the regulations or whether it requires a legislative act is best answered by someone much ore conversant in NJ law. Not sure whether the legislators/regulators would be willing to give up future tax revenue on the earnings. Heck, NJ doesn't conform with federal tax treatment for certain 457 plans.

Assuming 409A applies, and with bonuses payable upon a specific date you may be living in short-term deferral land, the substitution rules wouldn't apply, so I can't see any issues either.

I had a hot dog last night that was ketchup eligible...

Bright side - You are still a long way from a trip to RMD-Land.

You may have a misplaced parenthesis. I get Deferral Percentage Match Percentage 0.01 0.01 0.02 0.02 0.03 0.03 0.04 0.04 0.05 0.043334 0.06 0.046668 0.07 0.05 0.08 0.05 0.09 0.05 0.1 0.05

If Cell A1 has the EE contribution, try =MIN(MIN(A1,0.04)+0.3334*MIN(MAX(0,A1-0.04),0.03),0.05)

For next year though.