Belgarath

I'm looking at a 457(b) document and adoption agreement specifying that payments must commence no later than April 1 following date of termination. Obviously done back when that was the required beginning date. I just want to confirm - for a 457(b) plan, I assume it is still ok to retain this provision, (if they want to) even if RMD date for active participants is the new 72 or 73, depending upon DOB?

Well, I guess there is a fine distinction sometimes between "knew" and "understand." I would say that they "knew" but I doubt they really had an understanding. Honestly, I don't know the arguments AGAINST including QDRO provisions - my general thought would be, "Why not?" I'll be interested to see how the discussions here play out.

My experience in this arena is limited, so I can't really address your questions. I can say that all the 457(b) plans for tax exempt or governmental that I've seen include QDRO provisions.

If the DFVCP filing is done promptly, it won't be anywhere near $750 - more like $250-$300. Go the the DFVCP calculator and enter the appropriate information. IMHO, absolutely file under DFVCP in this situation. The amount is so small that it overrides the hassle of requesting relief, even if you would be "guaranteed" to get that relief.

I figured some people might get that reference.

Ok, thanks!

Let me see if I can give you accurate information pertinent to the question. XXXX is the business sponsoring the XXXX plan. Joe Schlobotnik is a 70% owner of XXXX, which is an LLC taxed as a partnership. Joe has ownership in some other LLC's taxed as partnerships, but not considered a CG nor an ASG. None of the other LLC's are signed on as participating employers. ???

So, I'm not a CPA, and I wondered if this statement from a client's CPA makes sense, where there are two or more Schedule k-1's, but not a CG/ASG, and there are no participating employers? To me it seems odd, but perhaps it is perfectly normal: The K-1 from that (other LLC) will have a substantial effect on his K-1 from (XXXX), but it won't change his earned income from (XXXX). His 2023 self-employment income from (XXXX) is expected to be ($$$$$) prior to employer contributions and reduction for self-employment taxes.

So, the wording in IRS Notice 2004-2, Q&A L-2, and similarly in Q&A L-9, seem to contemplate the taxable year when "allocated" in a different manner than the normal interpretation of "allocation" for valuation, deduction, and 415 purposes. In this case, "allocation" seems to be synonymous with "deposited" or "contributed." Which makes sense - since it has to be reported on a 1099, how could it be done otherwise if the employer went on extension, and the employer contribution wasn't made until September, for example? Any other thoughts on this? Q. L-2: If an employee designates a matching contribution or nonelective contribution as a Roth contribution, for which taxable year is that designated Roth matching contribution or designated Roth nonelective contribution includible in the individual’s gross income? A. L-2: A designated Roth matching contribution or designated Roth nonelective contribution is includible in an individual’s gross income for the taxable year in which the contribution is allocated to the individual’s account. The preceding sentence applies even if the designated Roth matching contribution or designated Roth nonelective contribution is deemed to have been made on the last day of the prior taxable year of the employer under section 404(a)(6) of the Code.

Ah, well said. Serves me right for being too lazy to look it up this morning. Mea Culpa.

I agree with Jeff. The distribution calendar year is 2025, yes, but the Required Beginning Date is April 1, 2026. I see that C.B. and I were typing at the same time.

I'm too lazy to look it up right now, but my memory agrees with Lou.

Thanks all. We did the first couple with the "a" but have since modified it. Update - we use FT William for our 5500 software. Their system instructions, (which for this question are taken from the 5500 form instructions) do NOT specify that the "a" must be used. Yes, when you enter the number Qxxxxxx, it flags it as red, and when you go out to edit check, it adds the "a" to the number on the form. We've sent a question to their support folks (who are outstanding) to ask about this. I will let you know what they respond. Also, in case it matters, we are talking about a 5500-SF. I don't know if similar issues arise on a Schedule R. 10:00 AM - excerpt from FT William response - there was a bit of back and forth - but they are our 5500 software provider, so we'll do what they say! "EFAST2 is programmed to only accept the input when formatted as Q123456a."

So, preapproved plan, you have to give the Opinion letter Serial #. Ours has the format Qxxxxxx with a small "a" after the 6 digits. The 5500 instructions do not appear to require inclusion of the "a" - has anyone heard otherwise? I always assumed the "a" meant "approved" so maybe it is meaningless in the context of filing 5500's at this point?

Yeah, I've resigned myself to that - I assume most, if not all, will have to be signed - this won't be a typical "cookie cutter" amendment. I am VERY thankful that we already did the CARES amendment, so we don't have to try to reconstruct all that garbage - going to be bad enough dealing with the SECURE/2.0 amendments. We might just require signatures on all of them for administrative consistency - no danger of missing one that way. And thanks to you and C.B. for the responses.

This subject has come up in discussion before, but since I've seen the new FIS plan termination amendment, I thought I'd bring it up again. We've been taking the conservative position (rightly or wrongly) that the jump to $7,000 only applies if the plan ALREADY has a $5,000 limit. A plan that has a $1,000 limit, we've been amending to $5,000, then operationally switching to $7,000. The FIS plan termination amendment, which of course isn't IRS approved language, does provide an option to jump directly from $1,000 to $7,000. But, this is a termination amendment, not an amendment for an ongoing plan. I believe in one of the webcasts quite a while ago, there was some musing that operationally jumping directly from $1,000 to $7,000 operationally, and catching up with the formal SECURE/2.0 amendments, would be acceptable, but that was REALLY unofficial - just some general discussion. Anyone have any new thoughts on this subject?

If you are looking for a great source, you should obtain (or get access to) Derrin Watson's "Who's the Employer." Derrin deals extensively with Controlled Group/Affiliated Service group issues, and has examples that may well shed light on the specific situation that you are dealing with.

What Bill said. Also, if you haven't already, check to see if the participants have been given the option to purchase the policies from the plan, rather than having them surrendered. Presumably the plan language would give them this option.

Thanks again. It confirms what I was thinking, but my question was very inaccurately worded. Pathetic, in fact, as I read it again!

I was actually referring to a plan that specifies, say, 3 month eligibility for deferrals, and 1 YOS for safe harbor. Probably should have worded it better! Such a plan loses its automatic TH exemption, right? I assume your word "not" is a typo? Ok, this is what I was thinking. Thank you for your response!!

Everyone's favorite subject...I just want to see if I'm understanding this correctly, with regard to safe harbor plans using Otherwise Excludable Employees exception. So, in a safe harbor plan that does NOT use the OEE provision, LTPT employees can be excluded from all employer contributions, and the plan does not automatically lose its top heavy exemption, assuming only contributions made are deferrals and safe harbor match or nonelective. However, the loss of top heavy exemption remains in place if the safe harbor plan uses the OEE exclusion, even though LTPT employees are still permitted to be excluded from safe harbor and top heavy if the plan is top heavy. Have I got that right? For some reason, I'm finding this very confusing.

I think this (paying back to the plan to avoid a taxable event so the entire amount could be rolled over) was more important before the QPLO rules. Since the participant terminated employment, it should be treated as a Qualified Plan Loan Offset (QPLO), and the employee has until extended tax filing deadline for the year of the offset to use other funds as a rollover. So, seems to me that there's nothing much to be gained from a tax perspective by depositing those funds back to the plan to repay the loan. Maybe easier administratively somehow by having it all directly rolled over in one lump sum, I suppose. Maybe I'm missing something here...

Very quick answer - distributions (including rollovers) from a plan are reported on a 1099. I suggest you go to the IRS website, and read the instructions for a 1099 - there are many different situations and reporting codes, and these boards are the wrong place to try to get detailed answers to a laundry list of all the potential situations. Once you have read and digested the instructions, then if you have a specific question on a situation, these boards are very helpful. Good luck!

So, suppose a calendar year plan is terminating in March. The plan must, of course, amend for SECURE and SECURE 2.0 - (CARES amendment was done way back). I believe that technically, since the amendment is ADOPTED in 2024, and there is a 210 day period following the end of the PLAN YEAR IN WHICH THE AMENDMENT IS ADOPTED (hence 210 days into 2025) that no SMM is required. Now, employees were previously notified if certain provisions applied - QBAD's, for instance, albeit not in a formal SMM. If I'm correct, this makes the plan termination process easier, because the SMM's can be wildly variable with the voluminous possible changes, and are a royal PIA. Thoughts?

Thanks for the info. Fortunately, in the situation I was working with, the final paycheck (which included the true "severance pay") was paid several days AFTER the severance from employment date, so I wasn't worried about excluding this from the eligible "post severance pay" category. But it got me to thinking about a situation where it was paid on the severance date.