Peter Gulia

And the IRC § 404(a)(6) time for a deductible contribution: A20. Yes, because these employers are Affected Taxpayers under Notice 2020-18 for whom the due date for filing Federal income tax returns and making Federal income tax payments that would be due April 15, 2020, is now July 15, 2020, the end of the grace period for these employers is also July 15, 2020 under this relief. So, for example, if an employer is a corporation with an April 15, 2020 due date for filing the Form 1120, then the grace period under section 404(a)(6) for the employer to make contributions to its workplace-based retirement plan that are treated as made on account of 2019 ends on July 15, 2020.

There also might be a related ambiguity about the meaning of a half-month or two and a half months. If a relevant year ends with November, which day in February would mark the end of two and a half months from the end of November? Does it matter whether that February has 28 or 29 days? For the point inquired about, is there a Treasury rule or subregulatory guidance that pegs the 15th of a month as the convention without regard to the number of days in a particular month?

For one version of the several proposals, see in this attachment page 1166. Pelosi_bill_COVIDSUPP3_xml.pdf

The pending legislation includes a defined term for a coronavirus distribution, and for it includes a recontribution/rollover provision similar to other disasters' provisions in recent years.

For questions about whether an employer gets a 2019 deduction for a contribution made after April 15, 2020: I.R.C. § 404(a)(6) Time When Contributions Deemed Made — For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof).

Some lobbying groups presented ideas of this kind to Congress. From what I read in the news, one doubts Congress will act in this business week.

Yes, elective deferrals count. But many business owners have not yet made any for 2020. Some do no elective deferral until December 31. Some defer on a quarter-yearly draw, which might be determined or declared to be zero. If an elective deferral was made regarding an advance payment (grounded on a then reasonable estimate of an owner’s earned income for the year), one might consider how such a payment might be adjusted if the owner gets negative income for the year and has compensation of zero.

Some business owners might not fear an obligation for a top-heavy minimum contribution. Along with other reasons, they anticipate every owner (and every other key employee, if any) will have no contribution for 2020. I.R.C. § 416(c)(2)(B)(i): The percentage referred to in subparagraph (A) for any year shall not exceed the percentage at which contributions are made (or required to be made) under the plan for the year for the key employee for whom such percentage is the highest for the year.

If my client asks for my advice, I can explain everything. That might include warning an administrator that its interests, fiduciary and personal, might conflict with the employer’s interests. And it might include inviting my client to evaluate soberly whether it has the resources and the appetite to fight a government agency. Everything is fact-sensitive. Some clients are comfortable with decision-making, including risk decisions. Others ask “what would you decide?” Even with them, I’m mindful that the client enjoys and suffers the consequences.

The idea that 20% turnover in a period sets up a rebuttable presumption that a partial termination happened is not a rule or regulation. https://www.irs.gov/retirement-plans/partial-termination-of-plan Without joining the debate about the IRS’s interpretation, I’ll observe this: While a careful practitioner might consider reasoning explained in subregulatory guidance and in court decisions, one may render advice that interprets the statute and the rule using different reasoning.

Even in good times, some practitioners suggest providing a both-and: the seven deemed needs and an eighth category for a need explained to the claims administrator.

The hardship rule recognizes “[e]xpenses and losses (including loss of income) incurred by the [participant] on account of a disaster declared by the Federal Emergency Management Agency (FEMA) under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, Public Law 100-707, provided that the [participant’s] principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance with respect to the disaster.” [emphasis added] https://www.ecfr.gov/cgi-bin/text-idx?SID=4c951939412ec008447457c67ea011e8&mc=true&node=se26.6.1_1401_2k_3_61&rgn=div8 The President decided “an emergency determination under section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. [§§] 5121-5207 (the “Stafford Act”).” https://www.whitehouse.gov/wp-content/uploads/2020/03/LetterFromThePresident.pdf Stafford Act § 501 / 42 U.S.C. § 5191 https://www.govinfo.gov/content/pkg/USCODE-2018-title42/html/USCODE-2018-title42-chap68-subchapIV-A-sec5191.htm Stafford Act § 502 / 42 U.S.C. § 5192 https://www.govinfo.gov/content/pkg/USCODE-2018-title42/html/USCODE-2018-title42-chap68-subchapIV-A-sec5192.htm The President’s next-to-last paragraph: “In addition, after careful consideration, I believe that the disaster is of such severity and magnitude nationwide that requests for a declaration of a major disaster as set forth in section 401(a) of the Stafford Act may be appropriate.” [emphasis added] Today, FEMA’s website shows only two places with disasters declared for individual assistance (neither about coronavirus): https://www.fema.gov/disaster/4476 https://www.fema.gov/disaster/4473. In FEMA’s website, entering “New York, New York” calls up “No disasters declared for Individual Assistance were found for this address.” https://www.disasterassistance.gov/get-assistance/address-lookup?isMap=false&address=New+York%2C+New+York

Thanks.

Thanks.

Just curious, if one suggests an extra valuation when the plan trust's investment values are down, does one also suggest an extra valuation when the plan trust's investment values are up? Or is there a different reasoning about the way down?

Your query involves two questions: Assuming the plan allows a beneficiary to disclaim her benefit, what effect would this individual’s disclaimer have on her eligibility for whichever assistance she seeks? Under what conditions does the plan allow a beneficiary (and, if more restrictive, a surviving-spouse beneficiary) to disclaim her benefit? On the first question, the beneficiary might want her lawyer’s advice. The beneficiary might no longer consider a disclaimer if she learns it would not improve her eligibility for assistance (or that keeping the retirement plan’s annuity would not weaken her claim for assistance). You mention the participant died more than nine months ago. That might mean a disclaimer is ineffective for one or more Federal tax purposes. 26 C.F.R. § 25.2518-2(c)(1)(i). But does the plan’s governing document restrict a disclaimer to one effective for tax purposes? In my experience, many plans’ governing documents are ambiguous about what conditions a disclaimer must meet for the plan’s administrator to rely on the disclaimer.

Other due dates in the next three weeks include March 15 (?) for some corrective distributions, March 30 for an investment adviser's updates with the Securities and Exchange Commission and States' securities regulators, and March 31 for 403(b) plan restatements.

A plan’s administrator should ask its lawyer’s advice. If the plan has provisions that follow (or are construed or interpreted to follow) ERISA § 205, it is not enough that the spouse’s act be genuine; rather, the spouse's consent must “acknowledge” the effect of the participant’s election, and must be “witnessed by a plan representative or a notary public[.]” 28 U.S.C. § 1746 might in some circumstances treat a declaration under penalty of perjury as a substitute for an affidavit. But that is not the same as an acknowledgment. And it is not witnessed. Beyond whether a declaration is sufficient for a spouse’s consent, a plan’s administrator might want its lawyer’s advice about whether the administrator’s conduct would meet its ERISA § 404(a) fiduciary responsibility, and would under ERISA § 205(c)(6) protect the administrator from liability for an incorrect payment (or for denying a benefit). And if a plan’s administrator denies a participant’s claim for a distribution other than a qualified joint and survivor annuity, the administrator might be punctilious in following its ERISA § 503 claims procedure, affording opportunities for a participant to perfect his claim or argue against the administrator’s interpretation of the plan.

Bird, thank you for reminding me that often I wish we had an environment with less dependence on government agencies specifying every detail and more room for prudent judgment. Yet, about the limits and requirements of tax-qualified retirement plans, clients have become conditioned to presume there is an administrative-law answer to every question.

A participant’s salary-reduction agreement called for $961.54 per pay. The employer did this for all 26 pay periods, with no change to December’s last pay. The participant’s deferral limit for 2019 is $25,000 [$19,000 + $6,000 age 50]. Assume the employer/administrator is unwilling to use the plan’s provision for a return of a mistaken contribution. Must the plan’s administrator instruct the plan’s trustee to pay the participant a corrective distribution of $0.04? Is there any non-frivolous argument for treating this as so small that a correction is unnecessary?

If the plan is ERISA-governed, ERISA § 404 governs which steps are prudent or imprudent. But a plan’s administrator also might consider doing, if not imprudent, the steps the Internal Revenue Service has described as enough that an examiner should not challenge a plan’s tax-qualified treatment because of a failure to pay a § 401(a)(9)-required distribution. Also, a plan’s administrator or trustee might evaluate whether it wants to follow the deceased participant’s investment direction, or change the investment of the participant’s account. missing participant minimum distribution memo-for-employee-plans-10-19-17.pdf

As shERPA observes, what is or isn’t reasonable turns on the circumstances. The “reasonably short notice” idea Mike Preston describes comes from a 1970s rule: Termination of contract or arrangement. No contract or arrangement is reasonable within the meaning of section 408(b)(2) of [ERISA] and [29 C.F.R. § 2550.408b-2(a)(2)] if it does not permit termination by the plan without penalty to the plan on reasonably short notice under the circumstances to prevent the plan from becoming locked into an arrangement that has become disadvantageous. . . . . 29 C.F.R. § 2550.408b-2(c)(3) https://www.ecfr.gov/cgi-bin/text-idx?SID=87cb1ac41956dcefa2e2c6c25cde1486&mc=true&node=se29.9.2550_1408b_62&rgn=div8

Here's a widely respected practitioner's write-up about unofficial observations from IRS TE/GE people last week. https://ferenczylaw.com/flashpoint-irs-representatives-say-no-imminent-vcp-changes/?utm_source=newsletter&utm_medium=email&utm_content=READ%20THE%20ENTIRE%20ARTICLE&utm_campaign=Ferenczy%20FlashPoint%3A%20%20IRS%20Representatives%20Say%20No%20Imminent%20VCP%20Changes

Here’s a 2009 discussion: https://benefitslink.com/boards/index.php?/topic/40926-march-15th-deadline/ And 26 C.F.R. § 301.7503-1 https://www.ecfr.gov/cgi-bin/text-idx?SID=433ece255a30fe50ebca570ba8867b22&mc=true&node=se26.20.301_17503_61&rgn=div8 RatherBeGolfing’s observation isn’t idle, I once worked on a business deal in which my client obtained a national bank’s acts on a Saturday.

The Joint TE/GE Council Employee Plans and Exempt Organizations annual meeting is this Thursday and Friday, February 27-28. One imagines there might be several conversations about the news described above. Bloomberg BNA usually sends a reporter.