rocknrolls2

There is nothing that would compel an employer sponsoring an individually designed ESOP or any other type of qualified plan to adopt a preapproved plan. Since determination letters are no longer being issued for IDP's, the employer might want to switch to a preapproved plan to get the ability to rely upon the advisory or opinion letter resulting from the IRS' review of the volume submitter or prototype plan document. This gives the employer the assurance that the form of the plan satisfies the plan qualification requirements applicable to that type of plan. In light of the IRS' cessation of determination letters for IDPs, some law firms have taken to offering to issue opinion letters that the form of the plan satisfies applicable plan qualification requirements. However, the price for that type of letter is likely going to be very steep, possibly requiring the payment of several thousand dollars. The reason for the steep price is that the law firm is effectively guaranteeing the qualification of the form of the plan.

In case my previous post was too confusing, please allow me to replace it with the following: I represent a multiemployer defined benefit plan. Employer X previously maintained a single employer defined benefit plan for its collectively bargained employees. X negotiated the merger of its plan into the multiemployer plan in 2005. Under the merger agreement between the union covering X's employees and X, X agreed to make contributions for the underfunded portion of its single employer plan to the multiemployer plan over a 10-year period with interest. Instead, X paid the entire underfunded portion plus interest to the multiemployer plan in a lump sum in 2006. X withdrew from the plan in 2019. In assessing X for withdrawal liability, the actuary treated the lump sum contribution to the plan as an employer contribution in determining the amount of X's withdrawal liability. X has filed a request for review of the fund's assessment challenging the treatment of the lump sum contribution as an employer contribution. Did the actuary correctly characterize the payment as an employer contribution?

I represent a multiemployer defined benefit plan. Employer X previously maintained a single employer defined benefit plan for its collectively bargained employees. X negotiated the merger of its plan into the multiemployer plan in 2005. However, because there were certain underfunded portions of benefits under its plan, under a merger agreemenet between the union covering X's employees and X, X agreed to make contributions for the underfunded portion to the multiemployer plan over a 10-year period with interest. Instead, X made a lump sum contribution of the underfunded portion plus interest to the multiemployer plan in 2006. X withdraws from the plan in 2019. In assessing X for withdrawal liability, the actuary treated the lump sum contribution to the plan as an employer contribution in determining the amount of X's withdrawal liability. X has filed a request for review of the fund's assessment challenging the treatment of the lump sum contribution as an employer contribution. Does the multiemployer plan have a reasonable argument for its treatment of such amount as en employer contribution for purposes of X's withdrawal liability calculation?

I have encountered this in the past. If the reason RMDs were not made was because the recordkeeper failed to implement them, mention that and the IRS should accept it. If the real reason that the RMDs were not taken was because the owner did not want to receive them, then they are unlikely to waive the excise tax. It has to be something under the control of a third party vendor such as a recordkeeper or trustee and not because the owner did not want them or an HR employee was told not to make them for fear of having the owner cut their budget.

Overall, I agree with what MoJo has had to say. If there is a living beneficiary (whether as a result of a designation or by default), the entitlement to the account goes directly to that participant. If, however, the participant's estate is the beneficiary, then the account would be treated as a probate asset.

The IRS position is that a qualified plan is not considered terminated until all of its assets are distributed to plan participants. One of the ways of doing this is to have the plan purchase annuity contracts for all participants whose account balance exceeds $5,000. At that point, the plan assets are considered distributed to the participant (but are not yet taxable until the participant receives them) because the participant's account balance is replaced by the annuity contract, which is outside of the plan and is guaranteed by the insurance company. The purchase of the contract for the group of all participants whose account exceeds $5,000 is one of the more expeditious methods of completing the termination process.

Here are my thoughts on the matter. At the outset, BG150, I am inclined to agree with Pmacduff that the amount may have qualified as a Coronavirus-related distribution, in which case there is not improper distribution. If so, such an amount can be rolled over and there would be no problem. As a Coronavirus-related distribution, it could either be repaid or not within the three-year period. The fact that the plan was not yet amended should be of no moment since there is a remedial amendment period for the plan to adopt such amendment retroactively. Alternatively, the facts you provided did not indicate the sourcing of the amounts withdrawn (i.e., whether the withdrawal was paid from elective deferrals, safe harbor match or nonelective contributions or from profit-sharing contributions). I know that you said that the plan allows profit-sharing contributions to be withdrawn at normal retirement age. Profit-sharing contributions can also be paid at the earlier of two years (but only with respect to such contributions made more than two years before they were withdrawn) after they were made or after the participant has participated in the plan for at least five years. Another option might be to do a retroactive amendment to allow such a withdrawal. However, on balance, I think the Coronavirus-related distribution is the safer path to follow.

Thank you for your thoughts, Bird and RatherBeGolfing. While I have no doubt that the characterization of the repayment as a trustee to trustee transfer is accurate, I am not sure how that is helpful toward resolving my question. If I make any payment to a traditional IRA, does that mean that it MUST be characterized as a repayment and not a contribution, which may be deductible? Also, if there is a $6,000 total CRD, does that mean that the first $6,000 paid into the IRA MUST be a repayment and not a contribution? Or would I have the choice to limit the deemed repayment to one-third of the total CRD, depending on the method of taxation I select, with the remainder being treated as a contribution?

Participant X left his job at Company M during 2020. He received a distribution of his remaining 401(k) account balance of $6,000. If X claims the distribution as a Coronavirus-Related Distribution taxable over 3 consecutive years, $2,000 would be taxable during 2020. However, if X contributes $2,000 to an IRA, he has repaid the distribution, resulting in $0 tax for that year. Assuming that X is over 50 years old. How much may X contribute to a traditional IRA during 2020: $7,000 or $5,000 ($7,000 - $2,000 recontribution)?

Peter, I appreciate your response, especially your good faith effort in attempting to answer my question. The curious thing about this statute is that it makes a lot of minor surgical changes to several labor law statutes because it is slapped onto the end of a statute amending the CETA Act. There is a Section 5 (which is presumably a section of the Labor-Management Cooperation Act), but subsection (b) does not appear to contain anything resembling proper purposes for trust funds, let alone committees advancing labor-management cooperation.

I represent a labor-management relations fund which is intended to comply with Section 302(c)(9) of the Labor-Management Relations Act, under an amendment adopted by the Labor-Management Cooperation Act of 1978. The DOL has consistently taken the position that since such funds provide neither a pension benefit nor a welfare benefit that they are not subject to ERISA. Ironically, there are a number of court cases in which such funds sue to recover delinquent contributions under ERISA Section 515 which have been accepted by the courts (presumably because the opposing party never raised the ERISA issue as a defense). Does anyone have a sample or specimen trust agreement that can be used for such an arrangement to the extent it is funded by employer contributions?

Participant A retired from Company X nearly 10 years ago. He participated in X's defined benefit plan (from which he is currently receiving a pension under a joint and 100% survivor annuity) and 401(k) plan. The pension is equal to $36,000 per year, payable in monthly installments. During 2020, Participant A also received distributions of his remaining account under X's 401(k) plan (which had both Roth and non-Roth portions), rolled over the vast majority of it into traditional and Roth IRAs and later received distributions of the balance from both IRAs. During 2020, A was also laid off by Company G, which is unrelated to Company X. A would like to treat the portion of the 401(k) plan distribution which was not rolled over but otherwise subject to tax as well as the taxable portion of the traditional IRA distribution as a Coronavirus-related distribution and pay the resulting tax over the next 3 years. A would like the pension amount received to be subject to the regular tax rules, which would subject the entire $36,000 to tax during 2020 (otherwise, A would be subject to tax on the pension during 2020 on $12,000, but would have to pay tax on $48,000 ($36,000 + $12,000) in each of 2021 and 2022). However, "If more than one distribution was made during the year, you must treat all distributions for that year the same way." Form 8915-E Instructions, page 1; IRS Notice 2020-50, Section 1. IRS Notice 2020-50, Section 4.B. ("All coronavirus-related distributions received in a taxable year must be treated consistently (either all distributions must be included in income over a 3-year period or all distributions must be included in income in the current year)." Seemingly inconsistent with the preceding paragraph are the following: Instructions to Form 8915-E, page 2, "Types of Qualified 2020 Disaster Distributions," "Coronavirus-related Distributions," "you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a coronavirus-related distribution, regardless of why the distribution was made," provided that the aggregated distributions so designated do not exceed $100,000. Coronavirus-related distributions are permitted without regard to your need;" IRS Notice 2020-50, Section 1.C ("In general, a qualified individual is permitted to designate a distribution described in the preceding paragraph as a coronavirus-related distribution.") Reviewing the foregoing, I am inclined to conclude that the requirement of consistency referenced in the second paragraph applies solely to determination of whether all Coronavirus-related distributions (as designated by the individual) are taxed ratably over 3-years or taxed in full in the year of distribution. Therefore, A would be permitted to designate only the portion of the 401(k) account that would have been taxable but was not rolled over as well as the taxable IRA distributions as coronavirus-related distributions and not the periodic payments A was receiving from the defined benefit plan. Does anyone have a contrary position on this?

Allow me to interject here. If the doc wants to invest directly in bitcoin or gold, I am assuming that this is a participant-directed defined contribution plan, Code Section 408(m) subjects the investment in collectibles by an IRA or participant-directed defined contribution plan to treatment as a potentially taxable distribution (which is the treatment given to any prohibited transaction entered into by an IRA). The definition of collectible specifically includes an investment in metal or a coin (other than certain gold coins referenced in Section 408(m)(3)(A) or gold bullion described in Section 408(m)(3)(B)). Although bitcoin was not even contemplated at the time of the section's enactment back in 1981, the definition of collectible is sufficiently broad as to encompass bitcoin, subject to any determination made by the Treasury Department. The best alternative for the other doc is to have the self-directed brokerage account invest in a mutual fund or ETF investing in such assets.

The only comment I wanted to make was that the answer could be "It depends on how the spouse was designated." if the participant named a specific individual, such as "Mary Moss, my wife" as sole primary beneficiary and "Peter Moss, our son" as contingent beneficiary and the plan does not contain a clause that spousal beneficiary designations are automatically revoked upon divorce, then it would seem that Peter should get at least one-half and Spouse 2 the other half. If the designation merely stated that "my spouse" was the primary beneficiary and that Peter Moss was contingent beneficiary, I would tend to think Spouse 2 would be entitled to the entire account, assuming that there either was no one-year of marriage requirement or that the requirement was met at the participant's death.

Since the President went to Georgia to campaign for the Republican candidates, I feel that his desire to not adversely affect the outcome of the runoff elections may well have motivated him to sign the bill into law. For once, it appears that he followed the advice of his advisers rather than follow a gut instinct.

Another factor that might play into all of this political drama is the outcome of the Georgia Senate runoff elections. If Congress adjourns early or if Trump pocket vetoes the legislation, those Georgia residents who had hoped for relief from the legislation may well be numerous enough (assuming they vote) to result in both Democratic candidates taking the two Senate seats. Perhaps Trump does not care and considers it another one of his sore loser tactics. The Congressional Republicans would very likely care because it appears Trump holds enough power over the party in the Biden era that they fear to confront him (or attempt to influence him to sign the bill). Stay tuned, everyone. What will the next stirring chapter in this political intrigue bring us?

Under the SECURE Act's changes to post-death required minimum distributions, the legislation considers a child to be the participant's eligible designated beneficiary (and thus not subject to the 10-year payout rule) until the child attains majority (whatever that means). However, another category of eligible designated beneficiary considers an individual (regardless of relationship to the participant) to be an eligible designated participant if s/he is at least 10 years younger than the participant. Going back to the child, would the child remain the participant's eligible designated beneficiary because s/he is at least 10 years younger than the participant once the child attains majority? I know of no individual having a child (unless s/he adopted an adult) who is fewer than 10 years younger than the participant. Or is the child, at the point at which s/he attains majority forced onto a 10-year payout from that point? Let's say participant dies at the age of 60 and designates a child who is then age 15 as his/her beneficiary. Once the child attains majority, does the child remain an eligible designated beneficiary because s/he is at least 10 years younger? Or does the child lose his/her status as an eligible designated beneficiary and become merely a designated beneficiary, in which case, remaining amounts payable to such beneficiary must be paid out withint 10 years of the date the child attains majority?

I have been searching for the latest bipartisan agreement on the Coronavirus Relief bill in legislative language format. Has anyone been able to access a copy? If so, could you please attach a link to it? Thank you.

The Social Security Administration has just announced that the COLA for 2021 is 1.3%. From that, the IRS can calculate what, if any, limits are increased for the 2021 plan year.

I participate as a retiree in my former employer's retiree medical plan, which is a Medicare Advantage PPO. As such, it includes Part D for prescription drugs, including the doughnut hole. I know that the ACA had provisions designed to ameliorate the doughnut hole. I was informed that I could not enroll in any other medicare supplement plan (including for prescription drugs) or I would lose my coverage. I therefore have the following questions: (1) were the ACA provisions which were intended to lessen the impact of the doughnut hole ever implemented or put into effect? (2) if (1) is yes, are they still in effect? (3) If (1) or (2) is No, can my former employer design the prescription drug portion so as to lessen the severity of the doughnut hole provision? Thank you!

Another point worth mentioning regarding Section 125 is that, among other requirements, it is necessary for the employer in such situation to timely adopt a Section 125 plan. Otherwise, the constructive receipt exception is not there, This may mean that even those employees opting for group health coverage would have to be taxed on the $500 opt-out amount.

Another term that I have heard bandied about is "recordkeeper." That may be a bit underinclusive, especially considering the "legal" work some of you do.

No but if the fund still pushes back, initiate arbitration and cite the case to the arbitrator.

Please be very careful here not to run afoul of Section 401(k)(4)(A) which prohibits any benefit which is contingent upon an employees deciding whether or not to make elective deferrals to a 401(k) plan, other than a matching contribution.

A client maintains a self-funded group health plan for its employees. There is a proposal to amend the plan to subject reimbursement for infertility services to a lifetime maximum of $25,000 per family for in-network and out-of-network care. Are infertility services considered an essential health benefit which would make the proposed lifetime limit illegal?