rocknrolls2

Building on Peter's excellent point, a plan document can include a provision dealing with a particular aspect of plan administration, including paying the money to a guardian, trustee, parent, grandparent or an UTMA custodian, to name a few. To the extent the plan document contains a provision which is not contrary to ERISA and is meant to facilitate plan administration, it can be accorded status similar to that of ERISA in the sense that it could preempt state law. While the typical plan document allows a responsible person to act for the minor beneficiary, an atypical plan provision can do more to facilitate the administration of a benefit in such case.

Regarding the prohibition of rolling over a Roth IRA into a Roth 401(k), I think that rule existed because under the Roth 401(k) rules, lifetime RMDs were required. Now that the requirement for lifetime RMDs for Roth 401(k) balances has been repealed, that prohibition has outlived its initial usefulness. This is something that should be included in SECURE 3.0. (House Way & Means Committee Members: take note!) If you go through VCP, based on the current state of the law, I stongly doubt that the IRS would let you keep the money in the plan.

Thank you, Peter, for the lead. Thanks Bill for providing the answer that I would have given to Effen's question.

I have learned that most insurers will not quote, let alone issue, annuity contracts to ongoing defined benefit plans covering individual participants. Does anyone have at least a few names of any insurers that will quote and issue annuity contracts in this context? Thanks in advance.

Thank you, everyone, for your thoughtful insights and suggestions. To answer everyone's questions: (1) the RBD for all types of qualified plans, other than church or governmental plans, is the later of attainment of the applicable age or retirement (except for 5% owners). (2) the plan has a separate missing participant and beneficiary procedure and it requires verification that the recipient remains alive, and requires that such items as benefit enrollment, beneficiary designation and other documents be checked to attempt to ascertain the recipient's marital status and date of birth. The problem, for any intended recipient, is whether such marital status has changed as well as whether beneficiary designations have changed in the interim. Since the terms of the policy apply only to terminated employees, attainment of the applicable age is what will likely trigger the RBD for that individual.

I think that the order you found was probably a draft which was never finalized and was therefore never submitted to the court for entry as an order, followed by a plan administrator determination that it was qualified, because some of the terms changed, or negotiations broke down on the fine points of the order, or any other possibility under the sun that you can think up. Perhaps you could contact the attorney or law firm that was involved in drafting the order to find out what happened. At the end of the day, the best result may simply be to let sleeping (and dead) dogs lie.

Jakyasar, This is a non-owner participant who attained the applicable RMD age. It would be limited to deferred vesteds since the RBD for actives is delayed until after actual retirement.

A client maintains a defined benefit plan and has requested help in complying with RMD rules. If a plan participant cannot be located or fails to cooperate in completing and returning a distribution form, can the plan's administrator commence paying distributions in a default form based on file information as to marital status and date of birth? What can be done to correct the default RMD form if the date of birth and/or marital status turn out to be inaccurate after distributions commence? If the plan does not have marital status information about a participant to whom RMDs are payable, can the plan presume that the participant is married or single and commence RMDs based on a presumed marital status?

In addition to the excellent points raised above, how has the plan administrator previously interpreted the term "particiant" with respct to eligibility to take loans? If employees who have not yet satisified the year osf service and have rolled over balances fro other plans have been permitted to take loans fom their rollover accounts, that is the administrator's interpretation and would set a precedent for considering such an employee eligible to take a loan as to that amount.

when I started work in this area, the rule was that if no contribution was made by the due date of the corporate tax return plus extensions, there was no valid trust and therefore no plan byoperation of law. The IRS approved of that position. In spite of all the legislative and regulatory changes made since then, I am not aware of anything that would have changed this principle. Since there is no plan ortrust in existence, there is nothing to correct. That employer should simply adopt the 401(k) plan of one of its affiliates.

I am reviewing a health plan SPD. Has there been any official model NSA/TiC summary published by the Departments of Health and Human Services, Labor and Treasury of an approved summary notice that is suggested for this purpose? Alternatively, is there any summary language that anyone would be willing to share?

I share Gina's concern on this situation for the same reasons. You can correct the situation for the amounts that were not contributed in the past by filing under the Voluntary Fiduciary Correction Program and contributing the amount owed plus interest using the DOL's calculator. As far as the IRS is concerned, I am not aware that they have any program in place to address voluntary correction of tax exemption issues. Because of this, you should retain highly competent ERISA counsel to assist you in rectifying this problem. The DOL program would likely resolve any prohibited transactions and other fiduciary issues. The danger is, that you do not want the IRS to know about this and hit your client with a 100% excise tax on a reversion. Perhaps there is a closing agreement you could pursue to address any IRS issues. Regarding the overfunded status of the VEBA, you could, prospectively, collect lower premium amounts from employees or amend the VEBA going forward to add additional benefits to help soak up some of that excess amount. I hope these suggestions prove helpful to you.

If you want to save some trees, wait until tomorrow to print them out. At that time, they will be published in the Feferal Register in three-cplumn format.

Did the EOBs deny due to lack of coverage? If so, appeal the denial and call the former employer. Either the employer or insurer screwed up. if you don't get a satisfactory answer, sue the employer and the insurer.

Code section 402(g( prohibits an individual participant from making elective deferrals exceeding the annual dollar limit, except to the extent that the participant is eligible to make catch-up contributions. 402(g) applies determines compliance with the annual limit across all plans to which elective deferrals are made, regardless of whether the employers are related. 401(a)(30) is a qualification requirement prohibiting a plan from accepting elective deferrals in excess of the annual dollar limit except to the extent that the participant is eligible to make catch-up contributions and the total of such contributions do not exceed the sum of the regular limit on elective deferrals plus the annual limit on catch-up contributions. Reg. Section 1.402(g)-1(e)(8)(iii) provides: "If excess deferrals (and income) for aw taxable year are not distributes [by April 15th of the taxable year following the taxable year in which the excess deferrals were made] they may only be distributed when permitted under section 401(k)(2)(B)[except to the extent distributed in accordance with correction under EPCRS]."

Nothing specific. I agree that it would be not only fairer but consistent with the principal that you should not be taxed on amounts you contributed with after-tax dollars. Since the restored amount is an employer contribution that was previously distributied to the participant, then it might be argued that it should be treated and taxed as an employer contribution upon ultimate distribution.

CuseFan, I agree with your answer to (1). If we are dealing with a plain vanilla profit sharing plan with no deferrals or after-tax contributions, I believe that the amount is treated as if it were an employer contribution and subject to tax at distribution. Unfair? Definitely, but I believe it is one area where the recovery of tax basis rule falls apart. By contrast with qualified disaster distributions and qualified birth and adoption distributions, timely repayments effective wipe out the earlier taxation of the initial distribution. Not that restoration repayments may be made up to five years from the date that the employee is rehired. This might be one area for correction via a SECURE 3.0 or SECURE 2.5.

Following up on david rigby's response, your nonqualified deferred compensation plan payments are considered wages from your former employer, subject to wage withholding (Form W-4) and reported to you for tax purposes on Form W-2.

Participant X is a participant in A's profit-sharing plan. After completing a few years of service, X quits when he is 40% vested and takes a distribution of his vested account balance. For simplicity's sake, let's say that the X's account balance is $10,000 and that his vested portion is $4,000. A's profit-sharing plan provides for the immediate forfeiture of the non-vested account balance upon distribution of the vested portion, subject to a repayment provision. Two years later, A rehires X. Let's say that X repays his $4,000 distribution and has the previously forfeited $6,000 portion restored. A few years later, X terminates his employment with A and receives a distribution of his fully vested account balance, which was then $20,000. A couple of questions: (1) in the year when X repaid the $4,000 to A's profit sharing plan, was the repayment made with after-tax money or was it made with pre-tax money? Was the repayment amount treated as a rollover? (2) when X took a distribution of his then fully vested account balance, was the taxable portion limited to $16,000 or was it the full $20,000?

jRegarding Paul I's pint on NUA, I recall seeing IRS Revenue Rulings from the 1970s in which te IRS concluded that an in-kind distribution of the former employer's stock allowed rthe participant to be taxed on thd NUA. However, I am not sure whether that remains the current state of the law. You should consult IRS Pub 590-B to find out if thst remains true today.

Were the checks made pYable to Mom or were they made payable to the Mom IRA?

Bringing this back to the present reality, LTPTEs are not the best example because they were enacted as part of SECURE 1.0. SECURE 2.0 merely reduced the number of consecutive years needed to become LTPTEs from 3 to 2 and extended their application to 403(b) plans. Better examples would be PLESAs or the mandatory auto enrollment rule.

If I may chime in: for the sales associates, there is a statutory contractor provision in the Internal Revenue Code that treats them as independent contractors. In all likelihood, Jane and Mary are common law employees of Joe's business and would have to participate in any qualified plans the business establishes.

Building on Paul I's comment, even if the owner is not self-employed, please note that there is one other limit your example seems to disregard: this is the limit on the employer's tax deduction for its contribution to the plan. For a defined contribution plan, the limit is 25% of the compensation of the participants, disregarding elective deferrals. The deduction limit is also subject to the 415 limit. While you could allocate an employer contribition of 33% to the non-owner, the total contribution as a percentage of the participants' compensation would be limited to 25%. Perhaps the allocation to the owner would lower the overall percentage of compensation closer to the 25% limit -- otherwise, a lower percentagevwould need to be allocatee to the owner so as to not exceed the tax deduction limit.

I agree that the IRS has the permanency requirement and that it takes it seriously, as pointed out by Paul I. Regarding whether or not the IRS still cares, there are a lot of IRS policies and positions taken regarding qualified plans that can be fairly old and seem inapplicable, but do not fool yourself into believing that they have become obsolete and that they no longer apply. For example, there is a 1956 regulation governing the times when certain types of qualified plans can make distributions, including in-service distributions. This regulation is still frequently cited as the reason why a distribution can or cannot be made from that type of plan. See 26 CFR Section 1.401-1(b)(1)(i) - (iii). Regarding permanency, the IRS does not regularly cite that as a policy and none of its rulings or other guidance have relied upon it. The reason is that primarily under defined benefit plans, there was more of a potential for abuse by the top echelon of companies to terminate their plans and obtain substantial fully funded pensions upon plan termination and, if the plan were fully funded, to recover the reversions. When this was a factor, even before ERISA, generally employees were not vested at all until they were at or substantially near normal retirement age. The numerous legislative and regulatory changes that have been put into place in the intervening years, such as 415 limits, compensation limits, stricter nondiscrimination regulations, benefit accrual rules, top-heavy rules, etc. have tended to greatly curb the potential for abuses, at least to the extent of calculating benefits and providing for more meaningful benefits for rank and file employees. In today's defined contribution plan environment, the potential for such substantial disparities in favor of owners and upper echelon management is substantially attenuated. So, while it is still on the books and considered by the IRS, its prominence as a substantial arrow in the IRS' quiver of controlling abuses is greatly diminished. Responding to your question regarding the Form 5310, an employer may but is not required to file for a determination letter from the IRS stating that the plan's termination will not adversely impact its qualification. Although it is optional, it is widely considered to be prudent to apply for such a determination letter. If the employer merely adopts a resolution stating the plan is terminated, distributes all of its assets and files a final Form 5500 for its final year of operation, there is always the risk that the IRS might conduct an audit on the plan's termination.