Nassau

If a participant reaches his first required year for RMDs, and passes away that same year (so prior to 04/01 of the following year) without satisfying any portion of his RMD, has he died pre or post RBD? We need to clarify the answer to this question to understand whether or not the beneficiary needs to satisfy the participant's RMD prior to starting their own. We also need to clarify the answer to this question to understand whether or not we should apply pre RBD or post RBD rules to the bene. Here are 2 scenarios that may help drill down to the information we are looking for. In both scenarios, the plan follows "new rules" for RMDs. Our question is at the end of Scenario #2. Scenario #1: A 72 year old participant has a termination date of 5/28/2010. So the first required year is 2010. The RMD for the year is $10,000. The participant decides not to defer his first required year until no later than April 1 of the following year and takes one withdrawal in the amount of $5,000 to count toward the RMD in September 2010. The participant passes away in November 2010. In this scenario, the bene does have to satisfy the remaining RMD for the participant ($5,000). Scenario #2 A 72 year old participant has a termination date of 5/28/2010. So the first required year is 2010. The RMD for the year is $10,000. The participant does not take any payments that can be applied to the RMD, and he passes away in November of 2010. Technically his required begin date is April 1, 2011. Does the beneficiary have to satisfy the 2010 payment for the participant, or is there no requirement because he did not take any payments and died prior to the April 1, 2011 deadline?

Client has acquired two physcian groups and former company will be dissolving, prior to that the pension plan will be liquidated. The former company has asked the participants to take action by April 15th or their pension assets will be automatically rolled into a IRA at the current recordkeeper. One of the new physicans in the plan would like to transfer his assets directly into the plan but is age 74. Will this participant be required to take an RMD before he can roll the assets into the XYZ plan at the recordkeeper? I would assume since its considered a distributable event and he is over 70.5 he would need to take an RMD if he rolled it over to the plan or IRA? He will continue to be active and working with the main company. If this is a merger of plans is the RMD still required? If the RMD payment is not required, then why? Please provide the Code/Regulations where it states if this is a merger of plans and RMD payment is not required.

Does a participant who is not an owner have to take an RMD if their spouse is a 5% owner? Please provide the Code and/or Regulation where this information can be found.

If their is a 5% owner who turns 70 ½ on Sept 29, 2011, who does not need to make a distribution until 4/1/2012. What if by 12/31/2011 the 5% owner will no longer be a 5% owner (shares are being sold). Would they still need to make the distribution in 2012 (assuming no distribution was made in 2011). For clarification, at what point does the sale need to take place during the year so that the participant is no longer considered a 5% owner? Is it affected by the participant's spouse who is also a participant, 5% owner, and younger then the RMD age?

Client wants to know if they are allowed to leverage the quarterly statements by having their SAR placed on the financial statement as a message. Please not that this is a non-qualified plan. Is this permissible?

Client wants to know if they are allowed to leverage the quarterly statements by having their SAR placed on the financial statement as a message. Please not that this is a non-qualified plan. Is this permissible?

One of my clients has a participant requesting to make source specific beneficiary designations. They would like thier pre-tax to go to one beneficiary and Roth to another. They have an advisor who recommended this as a strategy with a charity beneficiary. My Company (i.e. financial institution) does not accept source specific beneficiary designations. Is there legal or regulatory backing for requiring percentages on the whole account? Please advice as to the specific Code or Regulations. Thanks.

Can someone point me to the Code or Regulations where it would say that a Recordkeeper/Trustee is required to provide a participant with the special tax notice prior to processing a participants distribution. Thanks.

Can someone provide me with the Code or Regulations that state the Safe Harbor information. Thanks.

Two-fold question: 1) Is it possible for a 401(k)/Profit Sharing Plan to adopt either the Traditional Safe Harbor or the PPA Safe Harbor plan design at any time during the plan, or are they limited to the beginning of the plan year? 2) If a plan elects the PPA Safe Harbor design and implements a default percentage of 6%, are they required to have any automatic increases of 1% in subsequent years? Can someone provide me with the Code or Regulations that state the Safe Harbor information.

Please look at the IRS website - Retirement Plans FAQs Regarding Hardship Distributions. See the IRS commentary below (2nd paragraph under #1). I would interpret this as allowing plans to specify which of the safe harbor hardship reasons are being used. 1. Under what circumstances can a participant get a hardship distribution from a retirement plan? A retirement plan may, but is not required to, provide for hardship distributions. Many plans that provide for elective deferrals provide for hardship distributions. Thus, 401(k) plans, 403(b) plans, and 457(b) plans may permit hardship distributions. If a 401(k) plan provides for hardship distributions, it must provide the specific criteria used to make the determination of hardship. Thus, for example, a plan may provide that a distribution can be made only for medical or funeral expenses, but not for the purchase of a principal residence or for payment of tuition and education expenses. In determining the existence of a need and of the amount necessary to meet the need, the plan must specify and apply nondiscriminatory and objective standards. (Reg. §1.401(k)-1(d)(3)(i)) The rules for hardship distributions from 403(b) plans are similar to those for hardship distributions from 401(k) plans. If a 457(b) plan provides for hardship distributions, it must contain specific language defining what constitutes a distribution on account of an "unforeseeable emergency." (Reg. § 1.457-6©(2))

If a plan states in the plan document that it intends to follow the safe harbor rules with respect to withdrawals, does the plan document have to include all of the six safe harbor reasons in the document? .

If medical expenses for a participant are paid by an employer Health Reimbursement Arrangement or Flexible Spending Account would this be considered a medical expenses for hardship purposes (i.e., the plan following the safe harbor reasons)?

My client would like to know whether short-term disability compensation paid by the state of California should be considered compensation for the purpose of a 401(k) plan and to calculate company contributions? Short-term disability compensation paid directly by Company is considered compensation by the client, but they don’t know if the disability paid by the state of California, which is the only state with such provision, should count.

The answer to the question is - an employee accrues a benefit in a defined contribution plan by accumulating an account balance. IRC §414(i) defines a defined contribution plan as a plan which provides for an individual account for each participant and which pays benefits based solely on the value of that account. The account balance will reflect contributions, forfeitures, and investment earnings and losses allocated to the account during the employee's period of participation.

My client would like some help and asked if I know where exactly it says that 401(k) accounts are established under an individual's name and not as a joint account. They are looking for the specific IRC and/or Treas. Reg Section. Can someone tell me where I can find guidance on this matter (i.e., the actual Code or Regulations)

An attorney for a ABC Company participant called on behalf of the account for a deceased ptp stating that the listed beneficiary is the mother of the ptp, and suffers from dementia; he also remarked that the brother of the ptp (son of the bene) has power of attorney. Please advise as to what the Recordkeeper/Trustee needs to have on file and/or do in order to be able to work with the ptp's brother/bene's POA so as to distribute assets in the most efficient manner possible.

In order for the Recordkeeper/trustee to correctly report the distribution due to death to the IRS, an ITIN and tax forms may be required, such as a IRS Form W-8BEN. Please look to the plan's administrative procedures concerning whether the ITIN can be deferred until the time of death transfer. Generally a beneficiary designation may be completed with the beneficiary's address in lieu of their SSN. Please note that a dummy SSN is only a work around and distributions should never occur under a dummy SSN. This process could be used when the beneficiary does not have a SSN or ITIN (Individual Tax Identification Number). However, no distributions should occur until Recordkeeper/Trustee receives either the ITIN on IRS Form W-8BEN (nonresident aliens) or SSN on IRS Form W-9 (resident aliens). The nonresident alien beneficiary would be responsible for U.S. federal income tax at the U.S. rates on distributions from a U.S.qualified plan and trust unless they are eligible for reduced withholding at a tax treaty rate which they would claim on IRS Form W-8 BEN (submitted with the distribution paperwork). More information on this issue is contained in IRS Publication 519. If the beneficiary is not in a country that has a tax treaty with the U.S., then full back-up withholding applies at a rate of 30%. The Tax Department could verify the treaty status of the beneficiary's country of residence at the time of payout. To determine if the employee is a nonresident alien for federal tax purposes and the impact of tax treaties, the beneficiary should review this publication in detail and should consider contacting a tax professional. The beneficiary can apply for an ITIN using IRS Form W-7------> http://www.irs.gov/pub/irs-access/fw7_accessible.pdf

Participant has recently passed away and has an outstanding loan balance. The last payment was received on 01/28/2011, so the next payment is not due until 02/28 since they are on a monthly repayment frequency. The loan is still within the cure period (before the loan would be considered to be defaulted) the quarter following the quarter after the first missed repayment. If the distribution due to death form is not received by the beneficiary before the cure period ends, will we have to default the loan under the deceased participant's account, or should the loan remain in the deceased account until the distribution due to death is processed, no matter the date we receive the instructions from the beneficiary?

If a spouse of a recently deceased participant receives a check related to an RMD payment is the spouse able to deposit that check into a joint account she had with the participant, or would the trustee need to put a stop on it and adjust the acct. Is she able to cash the payment as long as she understands that it will be taxable to him?

A participant is requesting a Medical Hardship for his daughter who is blind. The hardship request is for electronic equipment which he plans to buy to aid in his daughter's mobility; braille readers, scanning devices, a GPS navigation unit, and related software totalling $11,000. The participant has provided printouts from an online catalogue outlining the function and price of each unit, but has not yet purchased any of it. The participant states that these items are not covered by insurance, but no explanation of benefits is present. My questions are as follows: 1.) Do "mobility aids" for blindness qualify for Hardship expenses. 2.) If so, are the online catalogue printouts sufficient documentation to justify the withdrawal? 3.) If so, do we also need an explanation of benefits in addition to the other docs showing that these items do not fall within coverage?

Failing to commence distributions (or not taking the required amount) by the required beginning date (RBD) results in a plan operational failure and a missed required minimum distribution (RMD) for the participant. In order to correct the operational failure under EPCRS, the plan should distribute the required minimum distribution plus earmings, the employer should document the corrective procedures it followed, the resolution, and the steps taken to ensure this issue does not recur in the future. The participant must file Form 5329 to report the missed RMD amounts and pay the excise tax for the missed RMDs (50% of the missed RMD or shortfall). However, the IRS may waive the penalty for reasonable cause. The process to request a waiver is to attach a letter to the Form 5329 explaining the reason for the error. Alternatively, the plan sponsor can file a VCP application with the IRS reporting the missed RMD and requesting a waiver of the excise tax on behalf of the affected beneficiary. Fortunately, Revenue Procedure 2008-50, the latest guidance from the IRS regarding the EPCRS correction program, provides for a reduced filing fee of $500.00 when this is the only issue being corrected.

Are Qualified Reservist Distributions and HEART Withdrawals eligible for rollover to another qualified plan or IRA?

Are Qualified Reservist Distributions and HEART Withdrawals eligible for rollover to another qualified plan or IRA?

If my client's plan provides for a Qualified Reservist Withdrawal are Roth 401(k) assets permitted to be withdrawn? Can you provide me with the Regulation and/Code that permits such withdraw?