mming

That's a good thought BG, but that kind of generosity doesn't exist with this employer - quite the opposite. This is a takeover and now that they need to have a restatement done, they would like to tighten up as many provisions as possible - does anyone know of a source available that lists which benefits, rights and features are protected and can't be eliminated or reduced?

If you don't file the 2020 return you'll double your problems by having two years that didn't have timely returns filed. Best to file the 2020 return now imo and minimize the issues.

A plan that currently permits profit sharing allocations to participants with 1,000 hours wants to add a last day requirement effective 1/1/22. I believe that not having a last day requirement is not a protected benefit, so the amendment would be OK? Is this correct?

Thanks Lou, but perhaps I should've been more specific - I was referring to normal inservice distributions and the BBA seems to have lessened restrictions only on hardship withdrawals.

Regarding the requirements that elective deferrals and safe harbor contributions cannot be distributed to employed participants until they attain age 59.5 (assuming the doc permits such payouts), I was recently speaking with someone who mentioned that recent legislation (he said either the SECURE or CARES Act) now permits inservice distributions from all sources including deferrals and SH money. I normally defer to him since he's a TPA, but I haven't been able to locate anything in writing that backs up this change - have the inservice rules changed in this respect?

Gotcha, Bird - an auditor would have to go deep to figure that out, and be in a bad mood to make an issue of it, especially if the trustee has followed the doc terms regarding the applicable distribution timing and missing payee provisions. Dak, I was guessing that that was probably the IRS' intent and just an oversight that they didn't formally revise the notice.

What I don't get is the reason for your snide comment. The form instructions for the 8955 say that it's required to be filed for a plan year that follows a plan year in which a participant with a vested benefit separated from service, which is the case here. The deadline for that 8955 has passed which is why penalty relief is being sought. Are you assuming I was referring to a voluntary 8955 filing for the plan year in which the participant separated? Notice 2014-35 links the 5500 and the 8955 for DFVC purposes, and I'm trying to find out whether the 12/1/14 date it mentions has been revised/eliminated.

I recall seeing a prior thread here some time ago concluding that zeroing out plan assets with the payable amount shouldn't be done. I've seen it done both ways over the decades and haven't seen it ever be an issue either way, that is, if the check is cashed close to the end of the year. I think three weeks may have been the longest I've seen anyone let it slide before mandating another year of admin. Jakyasar, you have a valid concern, since going into another plan year can require different stability and look back periods, i.e., different interest rates to be used for a calc determined as of a different date. Making all of these adjustments to a calc can be a considerable revision, and the IRS would probably expect the updated rates to be used, especially if the check is cashed much later that the determination date. A couple of weeks afterwards can be argued as acceptable, but a large part of this seems to come down to one's risk tolerance. Six weeks later? Much closer to unacceptable, but how close is OK?

Happy New Year everyone! We are doing a DFVC filing for a return that requires an 8955-SSA. We've done DFVC filings before but they've never involved an 8955. The DFVC page of the IRS website refers to Notice 2014-35 with a link to the Notice, which states that the 8955 must be filed no later than December 1, 2014. I haven't been able to find any evidence, on the IRS website or anywhere else, that this deadline has been extended. I would have guessed that this would've become a permanent relief program for the 8955, much like how the pilot DFVC program for the 5500-EZ became permanent. Can anyone verify that this deadline has been eliminated and that one can currently get penalty relief for a delinquent 8955 if a paper copy is filed after a DVFC filing is made for the accompanying 5500-SF? If a cite can be provided, that would be great!

Although a CG situation does not currently exist, the wife is actively seeking to acquire a significant ownership stake in another business within the next 12 months. As the acquired business would employ NHCEs, a CG issue would arise if she were participating in the husband's 401(k) plan. Both H & W have made it clear that they have no interest in covering the NHCEs in the new plan, even if it were a SH plan, or if a DB/DC combo was set up. Very likely marital harmony plays a part in this, spiritrider, ha ha. However, we were just told that it's the family trust, and not the husband himself, that owns the husband's company. Wouldn't this cause a CG to exist at this time since both the H & W are the beneficiaries of the family trust?

Thank you all for your input. C. B., neither spouse is employed by the other. My statement to exclude the wife was meant to imply that they are not interested in establishing a multiple employer plan, as may be considered by some couples in such a situation. I will ask them about minor children. Hopefully it's not an issue since the couple is in their 60s, but you never know.

Husband and wife each own a business. The businesses are unrelated and are not members of a controlled group or ASG. The wife has a SIMPLE IRA. The husband wants to sponsor a 401(k) plan and exclude the wife. Is there anything preventing the wife from contributing to her SIMPLE IRA after the husband's 401(k) plan is established?

I'm guessing you're required to file electronically because you have to file >250 various returns during the year, otherwise a paper form can be filed. Your suggestion seems to be the way to go since the IRS isn't giving you a choice.

It is not a controlled group.

That's a very good point, Former Esq. Would you happen to have any insight regarding whether or not the husband's 401(k) plan would prevent his spouse from contributing to her SIMPLE IRA?

Thank you, Bill. The 401(k) in question will be an owner-only 1-man plan. If the owner's wife also has a SIMPLE IRA, do you know whether the wife can keep contributing to her SIMPLE IRA while the husband contributes to the 401(k)? Each spouse owns a business but the businesses have nothing to do with each other, and each spouse is the only employee in their respective business.

A single plan can be established for them, and as there are no NHCEs participating, nondiscrim tests are n/a. If the business entity can be construed as a partnership, a filing would not be needed until plan assets exceed $250,000, otherwise a 5500-EZ would be required when such threshold is reached. If it can't be considered a legal partnership, a 5500 or 5500-SF would be needed right off the bat, generally depending on what type of assets are held in the plan.

Although contributing to both a 401(k) and a SIMPLE IRA in the same year is not allowed, can an employer keep the SIMPLE account open if the only contributions made going forward are to the 401(k), or must they close the SIMPLE account before the 401(k) plan is started?

No Roths. Thanks everyone and have a great weekend!

The 100% owner and only participant is over age 59-1/2. She has always invested the assets in an account where it was never determined what part constituted deferrals and what part was employer contributions. Luckily, no withdrawals were ever made before she attained age 59-1/2 or since. It's unlikely that she will be able to produce the past trust accounting that will enable the establishment of separate balances for each source at this time. Given her age it would appear that each source would be treated the same in all respects (e.g., distributions, taxation), so as a practical matter would it be acceptable to continue not separating (even just on paper) how much is the deferral balance and how much is not? As a side note, she will continue to make both types of contributions.

Thx RBG and Luke - the participant should just consider himself fortunate that the tax on the conversion can be spread out over 3 yrs.

Isn't the CRD only being repaid once, though, RBG? The $100k is going from the 401k to the Roth IRA and instead of the Roth repaying the 401k, it's a different account (the personal taxable one) making the reimbursement.

One last twist from my conversation with the participant - he was under the impression that after rolling over the CRD from his 401(k) to the Roth IRA, which under normal circumstances would be a taxable event, he mused that if he were to repay the CRD back to the 401k during 2020 that no taxes at all would be due. It seems he has a personal taxable account somewhere from which he could make the repayment, the net benefit of all this being that he would have $100k placed into the Roth rather than have it sit in his taxable account. Even though I kind of see what he's getting at regarding how the CARES Act allows for the recouping of any taxes paid, i.e., he believes there wouldn't be a taxable event if the net amount of the CRD paid as of 12/31/20 is $0, I have to question whether it's possible to avoid taxation being that the end result is basically a permissible Roth conversion. Did he find another loophole or am I just worn out by this circular argument and can't think straight?

Thank you all for the insightful observations. I was reminded of another CRD-related topic that the participant brought up concerning state-level taxation. As it seems that the 3-yr tax spread is not available for state tax purposes, he argued that if he took half the CRD now and rolled it over into his Roth IRA immediately, and took the other half at the end of December but didn't roll it over until January he could at least spread out the state tax liability over 2 years. I hope I'm not taking Luke's quote above out of context, but is it implying that something like that can be done, perhaps relying on a 60-day RO rule? I would guess that the tax liability occurs when the $ leave the pre-tax account regardless of when it is deposited in the Roth.

A qualifying participant wants to take a $100k CRD from their 401(k) plan and roll it over directly into their Roth IRA since the tax liability can be spread out over 3 years. Although this is not what the legislators had in mind when the CARES Act was drafted, I can't seem to find anything that specifically prohibits what essentially amounts to a Roth conversion. Is such a direct RO legal? If not, could the $100k be paid to the participant and then rolled over into a Roth IRA, or is a Roth conversion only possible via a direct RO?