B21

The Secretary of the Treasury has the authority to waive the 60-day participant rollover deadline in the event of a federally declared disaster, such as, the corona virus. Any word of this being part of any kind of relief bill? I'm a TPA & it's been asked if an individual could receive a 401k or IRA distribution at this time & then rollover to an IRA or qualified plan later even if after the 60-day deadline.

Thanks. As a TPA, I hate to give the advise of letting sleeping dogs lie. But I'm sure that's the response I'll get from the plan sponsor & accountants. For now, we'll wait & see if any further taxpayer relief is issued.

Any chance the IRS would provide relief for a plan sponsor (partnership) that filed their 2019 partnership return on 3/16/20 but was unable to fund the pension deductions reported on the return? An extension was not filed. Given the situation with the corona virus that has been developing over the past two weeks & the fact that they announced today that 4/15 filers have a 90-day extension to file their returns would the IRS permit the plan sponsor to keep the pension deductions if the deposits are made as soon as possible? Is there any recourse the plan sponsor can take to keep their deductions? VCP or SCP?

The policies will be made available to all eligible participants both highly compensated & nonhighly compensated. Therefore, this would pass the 410(b) ratio test for BRF. Am I correct?

I understand that if a cash balance plan (or any defined benefit plan) permits the purchase of life insurance policies that this benefit has to be offered to all participants to satisfy the nondiscrimination requirements. Does this mean a policy has to be issued on behalf of each eligible participant or only that the participant has to be provided the option to have a life insurance policy purchased on their behalf? I thought, unlike a defined contribution plan, a participant cannot make an election to include a life insurance policy in a defined benefit plan.

Can anyone provide any citation or guidance regarding the definition of modified cash accounting for Form 5500 reporting purposes. It was my understanding that this method reports all activity on a cash basis with the exception of employer/employee contributions & distributions which are accrued. However, I've seen audit reports completed stating the Form 5500 was prepared on a modified cash method & that contribution receivables are not required to be reported.

I have a client who is In the process of establishing an LLC as an investment vehicle for self-directed IRAs. I'm aware of the 25% rule that would cause funds transferred to the LLC to be considered as "plan assets" & subject to the prohibited transaction regulations if the aggregate equity in the LLC held by all IRAs exceeds 25%. Assuming the LLC does not satisfy the 25% rule exemptions. My question is does a prohibited transaction occur at the time an IRA accountholder purchases equity in the LLC (IRA equity exceeds 25%) or does a potential prohibited transaction occur based on the use of the funds once invested?

The accounts are individually self-directed.

I left out an important fact. The plan has been filing as a large plan & attaching the auditor's report since 2013. Therefore, the group trust currently exceeds 100 participants. Does this matter? Client is trying to eliminate future audit requirements.

Our client is considering splitting their existing 401k plan into two separate plans through a spin-off to avoid a Form 5500 audit requirement on the existing single plan. To effectuate a spin-off, does the plan assets for the spun-off plan have to be physically transferred to a separate custodial account or can the accounts remain where they are if the custodian is able to segregate the accounts among the two plans within the single contract? My inclination is no, that the plan assets have to be transferred to a new account under the new plan name & number.

If Company A acquires Company B in an asset sale where Company B maintains a 401k plan which Company A does not takeover as part of the asset purchase, is it permissible for a former employee of Company B who had an outstanding 401k loan balance as of the date of purchase which will be offsetted; to obtain a loan from his Company A 401k account & then rollover the amount of the Company B 401k loan offset to an IRA within the permitted deadline (due date for filing personal tax return)? Company A does not accept rollovers of participant loans. I'm thinking this would be allowed because the requirement of a rollover of a loan offset is that the employee must come up with outside funds to be deposited to an IRA or qualified plan to cover the offset amount.

The sending financial institution lists the funds as "Funds in Transfer" as of 12/31/17. The receiving institution books the funds as of 1/2/18. Therefore, it appears, these funds should be listed on the Form 5500 as plan assets as of 12/31/17?

I'm prepare a Schedule H (Form 5500) for a 2017 calendar year 401(k) plan. The plan merged with another plan effective on 1/1/18. The majority of mutual funds were liquidated around 1/28/17 which was the trade date reported by the financial institution & received by the other plan on 1/2/18 which would be the settlement date. How should these transferred plan assets be reported on the 2017 Schedule H?

Thank you all for your responses. They are all very helpful.

I have a situation where a client recently deceased & has her estate as beneficiary of her IRA. Her will created a trust for estate assets. Since the trust is the beneficiary of the estate which will receive the IRA funds, can the beneficiaries of the trust be considered as designated beneficiaries for IRA RMD purposes?

Thanks for the replies. Confirming what I suspected. Making sure there wasn't some loophole.

Is it permissible to spin-off a portion of a safe harbor 401k plan to an identical safe harbor 401k plan for a calendar plan year after January 1st of the current year with an effective date of January 1st to avoid a plan audit for the 2018 plan year? Safe harbor mid-year amendment issues?

Thank you for your reply. That's my understanding too that the amount considered as the eligible rollover for determining the one-rollover-per year rule is based on the chronology of events. Is it permissible for an individual to withdraw $27k in funds from an IRA & make a deposit within 60 days for the same amount withdrawn but indicate to the custodian that this deposit is a regular contribution not a rollover contribution & treat as an excess contribution? Then withdraw $50k in funds & deposit within 60 days for the same amount withdrawn & indicate this as his rollover contribution? Would the IRS look at this as an attempt to maneuver around the rule?

If an individual takes multiple distributions from a single IRA within a 12-month period & redeposits all the funds back into the IRA within the 60-day deadline, can the individual designate which redeposited funds are treated as an IRA rollover & which funds are considered excess contributions to be withdrawn? My initial response is that the funds redeposited first are treated as a rollover & each subsequent deposits are treated as excess contributions. What if the individual doesn't designate the first deposit as a rollover but rather designates the largest deposit as a rollover?

An elective deferral only plan for household employees would be permitted & the ADP test & 410(b) coverage would apply?

Can a household employer establish a 401(k) plan on behalf of the household employees & be exempt from the 4972 10% excise tax on nondeductible contributions if the plan restricts contributions to only elective deferrals? Elective deferrals are not taken into account for purposes of Sec 404 deduction limits, so I'm assuming this can be done. A Simple plan would be the alternative, but they require employer contributions.

I have a client, age 91, who recently died. He has an IRA annuity which has been annuitized & receiving regular payments. His beneficiaries are his 3 children. I understand the annuity payments would satisfy the RMD requirements of Code 401(a)(9). Upon his death, the IRA annuity stopped making payments & his beneficiaries are entitled to receive a lump sum distribution of his remaining annuity balance. How is the decedent's 2017 RMD calculated? Would his remaining 2017 annuity payments have to be paid to the beneficiaries? Would the calculation be based as if it was a non-annuitized IRA & divide his 12/31/16 balance by the appropriate life expectancy factor & net his 2017 annuity payments? Once the decedent's 2017 RMD is distributed from the IRA, can his beneficiaries rollover the remaining balance to separate inherited IRAs? Would the remaining balance be considered not an Eligible Rollover Distribution because it would be considered as one in a series of substantially equal periodic payments which would not permit rollovers to inherited IRAs.

Is there an established deadline for a nonprofit to establish a 403(b) plan for a plan year? Is the only requirement that a written plan document needs to be in place prior to allowing 403(b) deductions?

We are a CPA firm & a new client provided a copy of her business' SEP prototype document. We discovered the plan has the following noncompliance issues: The document was adopted by the business when it was a sole proprietorship & wasn't restated when the business converted to an S-corp. SEP contributions continued to be taken after becoming an S-corp. All SEP contributions were made on behalf of the owner only. The document indicated "no age or service" requirement, however, the client applied the 3 out of 5 year statutory eligibility requirement. There were 3 eligible employees that were excluded. To correct the document failure, we would file under the IRS VCP. We would also correct the excluded employees under the VCP, however, regarding the method to correct; can the deductions for the excluded years be allocated prorata among the owner & the employees & have the employees' shares transferred from the owner's SEP-IRA to newly created SEP-IRA for the employees? I know the regulations forbid reducing an employee's original SEP allocation as a means to correct, but does it matter if the employee is an owner? Any advise would be appreciated.

This past month a client acquired a medical practice (Sub S corp) that has an existing safe harbor 401k plan. My client currently maintains a SEP under an LLC. The SEP is a prototype doc which allows acquired employees to be excluded pursuant to Sec 410(b)(6)©. For 2015, my client wants to contribute to both the SEP & 401k plans. The 401k plan receives only elective deferrals & a safe harbor match. Will my client's SEP contribution disqualify the 401k top heavy exemption under Sec 416(g)(4)(H)? Does Sec 410(b)(6)© extend the transition period to top heavy minimum requirements?