Lou S.

Is it a controlled group? That is what is the ownership structure of the two companies?

You can olny get out of the withholding if the Plan implements the CARES Act provisions and treats the distribution as COVID related. The participant can by pass the withholding by rolling to an IRA and then closing the IRA if it is really important to them.

If the plan document is silent on the issue it sounds like an administrative procedure policy that should be documented and implemented on a consistent basis.

Amend your 2018 tax return reducing your employer contribution deduction by $687 (that was over contributed in April 2019) Treat the $687 as an employer contribution in 2019.

If they have already met the terms for an allocation I believe that would be a prohibited cutback.

Can part of the 401(k) be refunded as excess annual addition to make the correction? I realize you can't make the correction because funds have been distributed but I would think you could use similar to procedures like what happens when a Plan fails the ADP test after an HCE takes a total distribution. Something like send a letter to the affected participants that you received a distribution of $Y but that $X portion of their distribution is an excess annual addition and not eligible for rollover. If $X has been rolled over they must withdrawal it form their IRA along with earnings as an excess IRA contribution. Failure to do so will result in 6% excise tax each year they remain in the IRA. Issue two 1099-Rs one for ($Y - $X) with the normal code for distribution chose, and one for $X with Code E for the excess annual addition. Assuming the Plan has language to refund employee contributions first on excess annual additions. Or am I missing something?

If you want to dot the i and cross the t have the participant first elect to defer loan payments under COVID provisions and then do an offset of the loan as a COVID distribution. But I see no reason why what you want to accomplish. Just remember if the plan is adopting some or all of the CARES Act provisions which are optional for the plan, document it in your Plan Termination Amendment since you say the Plan itself is terminating.

Plan adopting the CARES provisions allows the following wrt distributions if the participant self certifies eleigibility- 1 - allow distributions that might not otherwise be available under the plan until 12/31/20 2 - no required withholding at the source of distribution. 3 - I'm not 100% certain on this but you can report Code 2 - exception to the early withdrawal penalty on the 1099-R Here is a pretty good overview from the IRS https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers You can also see IRS Notice 2020-50 https://www.irs.gov/pub/irs-drop/n-20-50.pdf

The waiver of the 10% penalty is to anyone who takes a taxable distribution from a covered account, up to first $100,000 if they have been affected by a Corona Virus related event. The scope of those events and who qualifies was greatly expanded last week by the 2 IRS Notice providing additional guidance on CARES ACT loans and distributions. The taxpayer can claim the exemption on their tax return (I forget which Form is attached to the 1040) if the Plan has not adopted CARES Act provisions.

If you talking about going into pay status and taking annuity payments from the plan then no those payments can not be rolled over.

You'd still need to satisfy 415 and multiple annuity starting date rules.

1 - you're allowed to test the over/under group seperately 2 - anyone who is a participant is entitled to the TH minimum if they are employed on the last day of the year. DB eligibility is usual per some schedule attached to the document granting prevailing wage contributions to some people. If if is drafted right in the document only those under 21/1 who actually get a prevailing wage contribution will enter the plan before 21/1 and will not bring in everyone. If you don't have short service HCEs getting prevailing wage contributions that should be fine. 3 - The Davis Bacon can't do both as I understand it. That is if you use it ADP you can't also use it to offset TH and vice versa. You get one or the other. But in practice we don't currently administer any davis-bacon plans so someone who works on them regularly might have more insight.

Absent clarification I'm assuming you file with a funding deficiency on the 2019 SB since the funding was not made by 9/15/2020. Then you would apply the November payment first to the deficiency when filing the 2020 SB.

Why? Participants who died on "enter date of death of over paid participant" shall be 100% vested on death. That should probably work, I'm sure there are other ways to word it that would only apply to this participant. As long as he's a NHCE shouldn't have to worry about discrimination.

excellent point

Did the company declare bankruptcy? Was the Plan top-heavy for 2019 without SH exemption? Would the plan pass ADP if not SH? Is the owner unable to make the contribution or just doesn't want to make the contribution? How much of the $32,000 is owed to the owner and or their spouse? How much to rank and file? They should probably consult an ERISA attorney on their exposure. Worst case you could be looking at plan disqualification which would taint any rollovers to IRAs and disallow deductions on open years and you could be looking at DOL trying to recover contributions on behalf of the participants.

Because it's an excise tax on the PLAN SPONSOR and not considered a reasonable expense of the PLAN.

I agree with Kevin and the math in his post. You get 1 catch-up limit per calendar year but in off-calander year plays you might be deemed to use some of it before you hit the 402(g) limit. Which will usually mean having to count more of the deferral in the 2nd potion of the calendar year in the next year's ADP test just like you're doing now.

Is there some reason the new company doesn't adopt the existing plan(s) and then later drop the old company from the Plan?

Are they unrelated companies? Are they a controlled group? Is it the same company with a new name? These seem to be new facts you're introducing.

1 The successor plan rule relates to 401(k) Plans specifically. 2. Don't listen to all rumors you hear.

What does the plan say about frequency of changing deferral election? Like Weddell most of our plans allow employee to change their election on any pay period. When was the employee hired? If the fact pattern is like Larry is asking then I agree with him 100% the Participant enters 7/1.

Those participants prior to the amendment are 100%. I don't see how you can reduce any of them below 100% without a prohibited cutback.

A CB plan is a type of defined benefit plan. You can't have the annuity decrease whether it is active or frozen. The participant can always elect the annuity benefit and Plan has to either pay it or purchase an annuity to pay him. Unless there is some reason the plan can't like it's termination and underfunded or something like that. Assuming it's not a PBGC plan which will have it's own additional rules when terminating.

The RMD is his annuity benefit in the form that he elects. That won't decrease once started but could increase if there are future accruals, which in this case sounds unlikely. Yes you reduce the hypothetical account for the withdrawal paid. Yes you have to preserve the annuity benefit to avoid anti-cut back provisions.