Lou S.

If it really was a mistake and you do owe the Plan the funds, ask them to assist you with coordinating with your IRA company in reversing the $6,400 back to the plan as a non-taxable trustee to trustee transfer. As for ignoring the letter, that's legal advice above my pay grade but it is possible they may determine it's not worth trying to get the $6,400 back from you if they have to go to court.

Write them a letter asking them to indemnify you for any services you require with respect to this transaction and reimbursing you for any fines or excise taxes the IRS may impose due to their error in over paying you. Also ask for a full accounting of how they arrived at the figure in question.

There is nothing that I aware of that limits the number of COVID distributions you can take in 2020 if you are a qualified individual though your plan may impose tighter restrictions. The only thing that is limited this the amount which is capped at $100,000 from all COVID distributions that you take. So I agree with Luke, you should probably be able to take another one if you need the funds.

Joe is an HCE for 2020 because the highest ownership at any point in the current year was more than 5% If Joe is employed at any point in 2021 he is also an HCE because his highest ownership percentage in the prior year was more than 5%. Joe is also a Key Employee for those years as well.

How often have you seen a terminated participant request a full distribution of his account and not seen any outstanding loan balance concurrently offset? Honestly this the first time I've ever heard it being done and it's probably due to the limitation of the CARES act distribution form that was used.

RTD the answer should be there on rehires, service spanning rules and/or deferral election change timing. #1 on our documemt the participant would be immediately eligible on rehire on 8/1/2020. Your document may be worded differently. #2 what does the plan say about changing deferral election? In our plans we typically allow deferral percentage changes on any payroll and an eligible participant could change their deferral election from 0% to something else as quick as the payroll system can accomadate the change. Now if you're plan document says something like "deferral elections can only be changed quarterly" than the participant could not change from 0% to something until 10/1.

You could ask the participant if the intention was to offset the full account including loan when he took his distribution, that would clear up any confusion. My guess is the participant has no thought about the loan balance anymore and is probably not expecting to start repaying it next January but that's just a hunch.

Why wouldn't you treat the offset on June 1 when he terminated and took the rest of his balance? Would that have put him over the $100K CARES limit if you add in the loan balance? If it doesn't put him over the limit than treating it as an offset for CARES would seem like the best possible outcome for the participant as they would have up until 12/31/2022 to roll the CARES distribution back to an IRA. If you offset or worse default the loan in 2021 at some point as non-CARES the date will be earlier and might also be subject to the 10% penalty on early distribution. If the loan plus distribution puts him over the $100K limit my analysis might be different.

Ask the client to run the payroll on 9/30 instead of 10/1?

If I use 1.83% for the interest rate and the 2019 applicable mortality table if get Life only 67 APR = 193.6753 and J&S 100% 67/67 APR = 234.5624 So $125K balance rounded to the dollar gives $645 and $533 which matches DOL fact sheet

We send a resolution for adopting the contribution "according to the attached schedule" but we tell the client it is their responsibility to maintain the signed resolution in their minutes should the IRS request it in the future.

Oh yeah and as M Weddell points out your plan already has to allow for the after tax contributions, you can just do it only for failed ADP test, though as a practical matter in a small plan those might wind up being the only ones actually made. But like I said then you probably have the same problems on the ACP side.

I'm not sure I understand? Are you talking about recharatcerizing failed ADP amounts as voluntary after contributions? I think that is in an option if the plan allows for it and it may require a participant election. However, I believe that just changes one problem for another as you would then need to test those amounts in ACP... I believe you would still need to issue a 1099-r so the taxation is picked up.

I think you can disclaim. You might want to look at code 2518 and reg thereunder for the how someone goes about disclaiming a benefit because I think there are some written hoops and timing requirements that need to be satisfied for the disclaimer to be legally effective and the one disclaiming can't direct where the benefit goes, there are some rules about that as well. I think there is also a lengthy examples section that may or may not have one on point with your situation.

The devil is in the details but you can absolutely do it as a match and easily pass ACP since you are doing the match only for NHCEs. The trick would be coming up with a formula than gives $500 on the dollar that puts you over 1/2 the 402(g) limit and another $500 when you max out 402(g) limit and not match any other dollars.

I agree with $100,000 - $50,000 = $50,000.

Oh, yeah maybe my response wasn't clear. We would "switch" the box from "Single Employer Plan" to "One-participant Plan" on the 2019 Form 5500-SF in this situation (since 2018 was last year it covered non-owner participant). Then complete only the fields applicable to "One-participant Plan" for 2019.

We do SF as 1 participant plan in such cases, gives you the electronic acknowledgement of filing.

There was a work around yesterday, but that's redirected too...

Qualified retirement plans need to comply with complex nondiscrimination rules that don't often apply to payments outside the Plan. If you're trying to do it for on Highly Compensation employee and no one else, it will not work with in the Plan as it would discriminate in favor of highly compensated employees. It has to do with the tax advantage nature of qualified retirement plans.

Assuming your Plan allows for Hardship, the answer is - it depends. The Plan Administrator under ERISA, named in the Plan documents and listed in your SPD will need to review and approve your hardship withdrawal, including any supporting documentation they require to substantiate the withdrawal. In most smaller plans, the Plan Administrator is often your Employer. If the Hardship is for medical reasons, HIPPA rules will generally limit the amount you need to disclose. You want to start with your benefits department to ask the right questions. This also being 2020, if your request in anyway remotely related to COVID-19 you might want to ask them if the Plan is allowing "CARES Act distributions for COVID-19" and if so what is their self certification process which would eliminate the need for much of the documentation that might be required for an ordinary hardship withdrawal request.

Yes the amount being deducted in 2019 goes against the overall 25% limit for 2019.

You say he needs 1,000 hours for accrual but only worked 800 hours so no, he does not accrue a benefit. If there is some other rule in the plan that would cause him to be credited with an accrual, or partial accrual year, then he might qualify but you'd have to RTD.

It's possible, but unlikely, that what he is doing is fine. Does he (or his spouse) have earned income or W-2 compensation other than his pension? Have the deposits to the IRA been less than the annual IRA limit and less than or equal to his earned income? Are the deposits to his wife's IRA - spousal IRA contributions? Were they both under age 70 1/2 in the year's this was done? Did he treat the pension payments as taxable income in the year received and the deposits as ROTH-IRA contributions? Is their income below then amount for making eligible ROTH-IRA contributions? If the answer to all of the above question are "yes" then he's probably fine. Otherwise, it sounds like he has Excess IRA Contributions for each year he has done this for himself and his wife. Excess IRA contributions are subject to a 6% excess tax each year they remain in the IRA.

Are they on the enrollment/election forms? If not I'd send a supplemental notices that says something like "While the information on ABC and XYZ mutual fund on the prior notice is correct, please note that the Plan has not made either of these investments available to Plan participants. Please disregard information on these two funds. We apologize for any inconvenience" and call it a day. If the funds are included on enrollment materials, then I think you start a new clock.