Lou S.

Why wouldn't the exception apply? A loan offset is simply part of his distribution, a loan default I think is different. Did you use code "2" on the 1099-R or "2L" If you used "2L" I think that might be causing the issue as I don't think code 2 is allowable with code L so it might be an auto kick but I'd have to go back and check the instructions of Form 1099-R.

It should totally be billable but it doesn't violate any terms of the plan and doesn't give a benefit not owed to the participant so I don't see how you can say it's not qualified. Move the vested and non-vested part to the alternate payee account. Only pay the vested portion each year. It's not rocket science.

Yes and no. You can't DEFER more than 100% of comp but you can be allocated 100% of comp plus the $6,000 catch-up and not exceed the 415(c) limit. You could in theory have an employee over 50 who makes $10,000K wages, makes a $6,000 401(k) deferral and receives a $10,000 profit sharing contribution. The $6,000 would be recharaterized as catch-up due to the 415 limit being reached but the $10,000 profit sharing contribution. Obviously you need the right demographics and additional eligible salary somewhere else to make the testing and deductions work out. And it won't ever in a 1 man shop.

The 415(c) limit is 54,000 (for anyone earning at least $54,000) but the $6,000 catch-up is not part of the 415(c) limit. So if you have employee over age 50 who deferred the maximum $24,000 (including catch-up) then the remaining allocation to reach the 415(c) limit is technically $54,000 - $18,000 = $36,000. Now if the employer allocation is less than or equal to $36,000 you are fine for 415(c), if the allocation is greater than $36,000 you are going to have a 415 excess that you need to deal with.

Yes. After tax contributions are tested under ACP, being a Safe-Harbor Plan does not get you a free pass on voluntary after-tax contributions. You may also run a foul of the free pass on Safe-Harbor exemption, if that is a potential concern, but I'm not sure about that one.

LOL. Are you talking a qualified distribution after 5 years and 59.5? I'd think the code would simply be B. Gross amount would be the check Taxable amount would be 0 Cumulative contributions and 1st year of distribution would be whatever they are. But it seems like they could make it clear by having a similar code Q for retirement plans like they do for Roth-IRA. In that case you don't use any other code so I'm assuming B with no other code is what you'd report but hell if I know for sure. I see what you mean.

What does the Plan say about breaks in service and rehires?

It's in English alright. Whether or not it is easy to follow is up for debate.

I think your question is covered on page 10 of the instructions "Designated Roth account"

Isn't that covered in the 1099-R instructions under the section "Guide to Distribution Codes"? https://www.irs.gov/pub/irs-pdf/i1099r.pdf Chart begins on P15 of the instructions.

File an amended return with the updated audit opinion and call it a day.

Yeah, just TPA getting angry call from participant after 1099-Rs went out. Had I looked at this thread I'd have had my answer right away. As for "solving the problem" the Plan will be telling the participant to talk to their tax advisor and IRA custodian to discuss options but informally suggesting without giving tax advice that they should be able to recharacterized their ROTH IRA as a traditional IRA if they act quickly and if that is their intention but that is a matter for them, their IRA custodian, their tax advisor, and their financial advisor. Fore some read the link is embedding but it is the recharaterization thread in the IRA sub forum.

Well it looks like I found the answer to my own question while researching this so I'll put what I found in case others find themselves in a similar situation or if there are differing opinions. I will also note this only applicable to tax years before 1/1/2018 because it appears the rules have changed and this won't be applicable beyond the due date of tax return with extension for the tax payer after the 2017 year. Under Treasury Reg 1.408A-5 the ROTH-IRA rollover from the qualified Plan can be recharacterized by making a trustee-to-trustee transfer from the ROTH IRA to a traditional IRA. There are additional caveats about earnings but it appears this is perfectly possible and allowable for any reason, including "damn I owe what in taxes?!?!?!" which does not need to be disclosed to the IRA. At least for conversions done in 2017.

So in 2017 (more than a little more than 60 days ago, I checked) a participant elected to roll over a fairly substantial pre-tax 401(k) directly to a ROTH-IRA. Despite making this election and agreeing they had read the Special Tax Notice that indicates if you elect to rollover to a ROTH IRA this will be tax able (but not subject to the 10% penalty) participant now claims they had no idea it would be taxable and wanted it to go to pre-tax IRA. Is there any "re-charaterization" option available to the participant to convert the ROTH-IRA back to a traditional IRA for 2017 that I am unaware of? I'm also 99.9% sure the transaction can't be unwound by returning the funds to the Plan and re-issuing as rollover to traditional IRA but on the 1 in a 1000 chance I'm missing something I thought I'd ask here. Nothing appears wrong with any paperwork and the funds did get to her ROTH-IRA and were cashed.

If I understand this correctly Employer 1 owns 100% of Company A so you have a parent subsidiary controlled group. Employer 1 owns 100% of Company 2 so you have a parent subsidiary controlled group.

I would think you would have to do 12 months with 3% SHNE in this situation where you are adding a SHNE to an existing PS plan because you don't have short plan year.

The lengths some folks will go to just to get a retirement plan contribution.

Consider a more appropriate default investment. But I agree with Madison on the correction of the individual in question.

He's retired under terms of the Plan document. Whether or not they threw him a party and gave him a watch.

Make hiring him for contract work contingent on him repaying the funds to the plan.

How does the participant taking the RMD from the IRA satisfy the Plan's RMD? The correct way to fix the problem would have been for the participant to direct the IRA to return the RMD amount back to the Plan and then have the Plan immediately issue the RMD. Obviously as Larry points out the best way to do it would have been to issue the RMD before processing the rollover but if that happened we wouldn't have this thread. I think processing the RMD from the Plan in December for 2017 is still a better solution than the Plan never processing an RMD which is the situation you have where the only distribution is a rollover from the Plan to the IRA.

Plan has to independently satisfy the RMD separate from any IRA or other qualified Plan. Personally I'd have taken the position that while the RMD was supposed to be processed at the time of the rollover in July there was an administrative glitch that cause it to not be processed. The glitch was self corrected by the Plan with the December RMD that was discovered when doing a review of the Plan's RMDs for 2017. Update the administrative policy to not do it in the future. Also if you do reverse the RMD you'll still need to send 2 1099-Rs, one for the that part that was supposed to be RMD from the July distribution since it wasn't eligible for rollover and one for the balance that was rolled over. Then he'll need to argue with his IRA custodian to reverse the 1099-R for the RMD he took or explain to the IRS why he has 2 1099-Rs but only claimed the income one. edited for clarity (though I may have just made it more confusing)

I think if they meet the definition of disability under the Plan and are taking a taxable distribution then you would code it 3 as a disability distribution.

Would you expect anything else from this administration?

Targeted QNEC can be allowed in the plan document. But the situation you are describing, 5+ years of failures does not appear to be a situation you can correct with a targeted QNEC. You can suggest it to the IRS in a VCP filing to correct but I do not think it is a method the IRS will approve. Though perhaps someone with more VCP experience can comment.