Madison71

Plan participant was at RBD in his year of death presumably since 2023 RMD was issued. If surviving spouse is at RMD age, then beginning in 2024, the ULT would be applied using her age, recalculated for each distribution year thereafter.

I agree with EBP's comments (and others). That's why I was asking the year the contributions were missed. At least they can stop the bleeding, but still on the hook for 2023 and partial 2024. They should have set-up a maybe safe harbor. The side note from EBP is key re: ADP/ACP testing....and speaking of keys - top-heavy as well?

Is it for partial withdrawal liability or a complete withdrawal? Employer can absolutely negotiate a lower amount and they will postpone enforcement pending review (although I recall the liability continues to accrue interest during the review). They will request all financial records in determination of what the employer can afford....it is not easy to reduce the amount owed, but it can happen. Let the negotiations begin.

Someone probably asked, but assuming this is the previous plan year contribution and not a current plan year contribution - i.e., making it (or not) as they go.

My thought is the same as yours regarding the amendment - if you include one in the class, you must include all (although in this particular situation, I am not 100% sure). If the retroactive amendment for the one participant is out (which otherwise would likely the best option), I'm struggling with whether to be done since the account has already been reduced to zero or "rebuild" and distribute the ineligible deferral contributions (adjusted for earnings). If I was the plan sponsor/administrator making this decision, I would vote to rebuild (removing the monthly fees) and distribute the account (adjusted for earnings). The error is at least partially the responsibility of the plan sponsor (and third-party provider) and think this is the most reasonable correction method.

I believe CuseFan is correct as long as plan is not significantly changed by amendment prior to the end of the transition rule (12/31 of the year following)

Thank you! This helps a lot! I appreciate everyone’s time on this

That is helpful! Thank you! I thought I saw mention on this board of there being actually two loans…if even for a very short period of time when you extend the replacement loan beyond the original terms of the replaced loans. I’m sure I misinterpreted the point. That’s why I would rather have a plan allow for two loans or allow only one loan without refinancing to avoid the confusion. Thanks again!

Thank you all, but still confused. I will need to revisit Treas. Reg. 1.72(p)-1, Q&A-20(a). I thought if the original loan was already a 5 year loan that if the loan was being refinanced, then it had to remain within that 5 year period UNLESS the plan allowed for two loans. There would essentially be two loans for a short period of time while the replacement loan was repaid. I will revisit. Thanks again - I appreciate it.

Thanks Luke. What about the timing? Any concern with the refinanced loan essentially exceeding 5 years when looking at the origination date (due to the additional time granted due to the suspension under CARES)?

Good Morning - A participant took out a loan from his 401(k) plan on January 1, 2018 with repayments over a 5 year period ending on December 31, 2022. Participant was a qualified individual under the CARES Act and requested a suspension of the loan back in June 2020. The loan was reamortized in January 2021 which extended the original repayment end date out one year to December 31, 2023. Participant is wanting to take out another loan, but the plan only allows one outstanding loan at a time. However, the plan does permit loan refinancing and the participant is now requesting to refinance the loan. The participant is looking to take out an additional amount and refinance to December 31, 2023. Is there an issue since the replacement loan is technically more than 5 years from the existing loan's origination date of January 1, 2018?

Good Morning - 40 year old participant requested a hardship withdrawal from his 401(k) account to purchase a principal residence. The purchase of a principal residence is listed as one of the safe harbors for hardships in the plan document and there are no maximums or restrictions listed. Participant submitted the purchase agreement and is requesting the entire purchase price of $500,000 as a hardship withdrawal. Participant certified they do not have other assets to satisfy the financial need and the employer does not have any information to the contrary. Any issue outside of the financial hit to the participant as a taxable distribution subject to a 10% early withdrawal penalty? It certainly goes against the spirit of a hardship, but the purchase of a principal residence (without limitation) is deemed an immediate and heavy financial need. I appreciate your thoughts.

I believe rollovers from related employer plans count in the Top Heavy calculation and as you know you will be using the account balance as the end of the first plan year since it is a new plan.

I agree with you. I think if they are eligible for a part of the plan on 1/1/2020, then I think they are in and you are at 129.

Just received a closing agreement back - took 10 months. I think it was 8 months before it was assigned to an agent. Once assigned, it got moving.

Upon direction, pay out in equal amounts to participants who were paid out upon termination of the plan. Charge a distribution fee to process distributions. Since it is under 1,000 per participant can issue direct and is under $200, then no withholding although will need to report on Form 1099-R if in excess of $10??

Great - thanks for your insights!

Thank you C.B. Zeller - I think this makes sense. I am hoping you can confirm my understanding based on the following (numbers rounded to make easier). Participant with over $100,000 vested account balance takes an original 5 year loan for $31,000 which is suspended under CARES Act. When re-amortized (now over 72 months with 69 payments left), the total repayment is $500 per month. Participant wants to borrow additional money totaling $20,000 which can only be done in the plan through refinancing the loan as 2nd loans are not permitted. The $20,000 new loan amount over 60 months is $400 per month. Participant's new repayment amount would be $900 per month over the next 60 months and $500 the final 9 months? HOLB would not a factor (only balance at refinance) because the replacement loan is a shorter term than the original. Any issue with levelized payment? Am I understanding this correctly? Thank you!

Good Morning! I received question about a loan that was suspended under the CARES Act by a qualified individual. The loan was reamortized in January 2021 and one year was tacked on to their original final repayment date. Lets say it was suspended upon initiation of the new loan with a 60 month term and once reamortized it was to be repaid over 72 months. Participant made three monthly payments since January 2021 and has 69 months left. He is looking to refinance the loan which is permitted under the plan. The new replacement loan will be within the 50%/50,000 loan limit and HOLB. Question - do you think they can refinance the loan (replacement loan with a new loan amount) over the 69 remaining months or are they subject to no more than 60 months on a non-principal residence loan because it is technically a new loan. I keep going back and forth on it. I would greatly appreciate any thoughts.

Thank you. I am factoring in something incorrectly, because I am not close.

Good Morning - Could someone please provide me with the actuarial formula (possibly by way of example with the answer) for calculating lifetime income out of the new DOL Interim Final Rule? I understand generally the assumptions used (age, balance, interest rate and mortality), but my numbers seem way off. Thanks!

According to the facts, the participant is no longer an employee. To the extent the plan provides for an immediate distribution upon termination, then the plan should act upon the distribution request. If the participant is later re-employed, then they will be subject to the re-hire rules.

I agree with Bird (and Larry which I caught after my initial response). It may be overly conservative, but I have always went through formally terminating it even on solos as a belt and suspenders approach. The signed Service Agreement with the client should speak to the plan termination services provided. I think the minimal time spent is worth it in my opinion.

I heard the Facebook PEP coming next year is outstanding ?

I agree with Bird - it should be fine unless I am missing something as well