Brenda Wren

Belgarath, I think you're right....I'm finding more on it....looks like it was clarified that distributions from the Roth portion do not satisfy the RMD after 12/31/23. Thanks for responding.

I understand that new rules starting in 2024 disregard Roth balances when calculating RMDs. I also understand that an RMD is not required from a 401(k) if all you have in the account is Roth money. However, I am not aware of any rule prohibiting you from taking your RMD from the Roth portion of your 401(k) if you have pre-tax and Roth funds. Two recordkeepers (so far) will not allow you to take an RMD from Roth. Am I wrong or are the recordkeepers wrong? This excerpt from the IRS FAQs seems to agree with me. Q11. How are RMDs taxed? The account owner is taxed at their income tax rate on the amount of the withdrawn RMD. However, to the extent the RMD is a return of basis or is a qualified distribution from a Roth IRA, it is tax free.

My client has a 2-person 401(k) with non-qualifying assets. The plan covers the business owner and his girlfriend. We have been filing Form 5500SF. They are not legally married but are "legally domestic partners". Not sure what that means. For years now we've been advising him to obtain the very expensive bonding needed to qualify for the audit waiver. It's time again to pay the premium again and he is questioning the need for the bonding based on his domestic partnership status. Any comments, experience or thoughts to share?

Can anyone explain why IRA custodians request the "first year of Roth" when a Roth 401(k) is rolled over to a Roth IRA? The 5-year clock starts over when Roth funds are rolled over from a 401(k) to a Roth IRA. Besides the fact that I also don't understand WHY the clock starts over, why is this data collected?

David, many thanks for this great publication. I read it every day although sometimes I only have time for the headlines. Remember you fondly from your Orlando days. Thanks a bunch! Love the comment "ERISA and an eraser"! Too funny!

You could have established a separate plan and accomplished that.

Thanks for the input, CuseFan.....no concern with that issue at all in this case.

I have a small dental practice plan. Sole owner is married with a minor child to spouse who has a sole-proprietorship business earning about $100k annually with no employees. Both spouses participate in the plan, make employee deferrals and receive a SH match. With the change in the rules for 2024, since the spouses no longer have to aggregate for testing purposes, I guess I now have a multiple-employer plan going forward. Sole-proprietorship will be desirous of funding a PSP contribution on top of the match. Other than changing the employer type on the 2024 Form 5500 and adding the MEP addendum, is there anything else required on the government reporting side or the plan document side?

Not opining, but I can tell you that Datair does exactly that. If you are processing payroll in Datair and calculating the match every pay period, it will not calculate the match if a participant's compensation has gone over the limit. Fortunately, I only have one plan like that and it has a true-up provision in it. So all is well in the end.

Thanks, Lou. Appreciate your input. When I pushed back with the auditor, she did admit that an independent appraisal was not required, but that the Trustee has an obligation to determine FMV annually. So we usually advise our clients to get comparable sales or SOMETHING to justify the value they place on the alternative assets each year. We don't need to see it, but we tell them to keep it in their records.

Quite a few years ago I sat audit for an EZ filer. Although we had always advised him to value his real estate investments at Fair Market Value each year, it did not take our advice. Consequently, the very eager IRS agent sanctioned him $15,000 (after negotiating from $25,000) for failure to do so and for carrying the real estate at cost year after year. No harm to anyone, no issue with RMD's, but she wanted to get him for something, or so it seemed at that time. I remember her coming into the office on September 30, picking up the check for $15,000 before she went on furlough the next day. Obviously, a very unpleasant situation and I posted on this Forum about it at the time. Fast forward to today. I have a new EZ client who has real estate in the plan and has never been told by his prior TPA about this requirement. So I went looking for it in the IRS 5500 instructions. And what do you know? The blurb about "fair market value" is included in the 5500SF instructions with a reference to ERISA section 3(26). But it is NOT in the instructions for the EZ form! Is it possible that EZ filers are not subject to this rule since those plans are not subject to ERISA??????

I was taught that, too! Thought I was losing my mind! American Funds Recordkeeper Direct will not accommodate.....at least not without doing 2 loans! Thanks for responding.

Technically, it's an employer contribution. Move it to the forfeiture account, if recordkeeper will let you. If entitled to other employer contributions, move to another source.

Participant has a vested balance of $75,000 including an outstanding loan balance of $15,000. The highest outstanding loan balance in the last 12 months is $35,000. If the loan limit is 50% of the vested balance not to exceed $50,000 reduced by the highest outstanding loan balance, what is the maximum amount available for loan? Fifty percent of the vested balance is $37,500; $15,000 is outstanding leaving $22,500 available for a loan. But $50,000 less $35,000 is $15,000; $15,000 is less than $22,500, thus $15,000 is the maximum amount available for loan. Good so far? So the Participant takes a loan for $15,000 and now has total outstanding loans of $30,000. Does it not stand to reason that since loans were maxed out that the Participant now has $0 available to take another loan? Let's do the math again. Participant has a vested balance of $75,000 including outstanding loans of $30,000. The highest outstanding loan balance in the last 12 months remains at $35,000. Fifty percent of the vested balance is $37,500; $30,000 is outstanding leaving $7,500 available for a loan. The $50,000 limit less $35,000 is $15,000. Now $7,500 is less than $15,000, thus, what do you know, now we have $7,500 available for a new loan! So Participant is told that he is maxing out his loans on one day, only to find more available for a loan after taking the "maximum" loan the day before. I've been doing this a long time (perhaps too long!) and never came across this before. Do I have it right? Missing anything?

Thanks for the replies! Good ideas!