Belgarath

Q–5. For required minimum distributions after an employee's death, what is the applicable distribution period? A–5. (a) Death on or after the employee's required beginning date. If an employee dies after distribution has begun as determined under A–6 of §1.401(a)(9)–2 (generally on or after the employee's required beginning date), in order to satisfy section 401(a)(9)(B)(i), the applicable distribution period for distribution calendar years after the distribution calendar year containing the employee's date of death is either— (1) If the employee has a designated beneficiary as of the date determined under A–4 of §1.401(a)(9)–4, the longer of— (i) The remaining life expectancy of the employee's designated beneficiary determined in accordance with paragraph ©(1) or (2) of this A–5; and (ii) The remaining life expectancy of the employee determined in accordance with paragraph ©(3) of this A–5; or (2) If the employee does not have a designated beneficiary as of the date determined under A–4 of §1.401(a)(9)–4, the remaining life expectancy of the employee determined in accordance with paragraph ©(3) of this A–5. (b) Death before an employee's required beginning date. If an employee dies before distribution has begun, as determined under A–5 of §1.401(a)(9)–2 (generally before the employee's required beginning date), in order to satisfy section 401(a)(9)(B)(iii) or (iv) and the life expectancy rule described in A–1 of §1.401(a)(9)–3, the applicable distribution period for distribution calendar years after the distribution calendar year containing the employee's date of death is determined in accordance with paragraph © of this A–5. See A–4 of §1.401(a)(9)–3 to determine when the 5-year rule in section 401(a)(9)(B)(ii) applies (e.g., there is no designated beneficiary or the 5-year rule is elected or specified by plan provision). © Life expectancy —(1) Nonspouse designated beneficiary. Except as otherwise provided in paragraph ©(2), the applicable distribution period measured by the beneficiary's remaining life expectancy is determined using the beneficiary's age as of the beneficiary's birthday in the calendar year immediately following the calendar year of the employee's death. In subsequent calendar years, the applicable distribution period is reduced by one for each calendar year that has elapsed after the calendar year immediately following the calendar year of the employee's death. (2) Spouse designated beneficiary. If the surviving spouse of the employee is the employee's sole beneficiary, the applicable distribution period is measured by the surviving spouse's life expectancy using the surviving spouse's birthday for each distribution calendar year after the calendar year of the employee's death up through the calendar year of the spouse's death. For calendar years after the calendar year of the spouse's death, the applicable distribution period is the life expectancy of the spouse using the age of the spouse as of the spouse's birthday in the calendar year of the spouse's death, reduced by one for each calendar year that has elapsed after the calendar year of the spouse's death. (3) No designated beneficiary. If the employee does not have a designated beneficiary, the applicable distribution period measured by the employee's remaining life expectancy is the life expectancy of the employee using the age of the employee as of the employee's birthday in the calendar year of the employee's death. In subsequent calendar years the applicable distribution period is reduced by one for each calendar year that has elapsed after the calendar year of the employee's death.

The only place I ever saw it stated "definitively" was in IRS Notice 2008-13. You might want to read it if you want your blood pressure to rise. Two excerpts below. Mind you, as in my other posts on this subject, I think it is ridiculous. Until further guidance is issued, solely for purposes of section 6694, an information return listed on Exhibit 2 that includes information that is or may be reported on a taxpayer's tax return or claim for refund is a return to which section 6694 could apply if the information reported constitutes a substantial portion of that taxpayer's tax return or claim for refund. A person who for compensation prepares any of the forms listed on Exhibit 2, which form does not report a tax liability but affects an entry or entries on a tax return and constitutes a substantial portion of the tax return or claim for refund that does report a tax liability, is a tax return preparer who is subject to section 6694. Exhibit 2 - Information Returns That Report Information That is or May be Reported on Another Tax Return That May Subject a Tax Return Preparer to the Section 6694(a) Penalty if the Information Reported Constitutes a Substantial Portion of the Other Tax Return Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding; Form 1065, U.S. Return of Partnership Income (including Schedules K-1); Form 1120S, U.S. Income Tax Return for an S Corporation (including Schedules K-1); Form 5500, Annual Return/Report of Employee Benefit Plan; Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues; Form 8038-G, Information Return for Government Purpose Tax-Exempt Bond Issues; and Form 8038-GC, Consolidated Information Return for Small Tax-Exempt Government Bond Issues.

I remember that when I was young (lo, those many, many years ago) I thought that Yogi Berra had been named after the cartoon. At some point, my parents informed me it was the other way around, and I was crushed.

Generally yes, BUT... as per DOL Reg. 2520.102-3, the SPD must properly disclose this.

We don't use Relius, but that question is, I think, (as Tom mentions) meant to distinguish beween a DB subject to minimum funding, and a DB plan NOT subject to minimum funding, such as a 412(e)(3) plan. Interesting. I just looked at the instructions, and there is no plan code for a 412(e)(3) - so you would have to answer "no" to this. Your position that you would answer "no" for a DC plan seems eminently reasonable, BUT - whenever we fight with software, we always lose.

Sigh. Nothing is ever easy, is it? Thanks for the input.

Is a cow tht has had an abortion decalfinated?

Merely trying to "steer" you in the right direction.

I wish I had a dollar for every time something like this happens. Usually the check is not written to the Trustee - it is written to "XYZ fund" with some sort of instruction to deposit it to the plan. I've seen plans audited where this precise situation took place, and the IRS never questioned it. Not to say that they couldn't! I suspect that the longer the gap between the tax deadline and the actual deposit, the greater the chances of it being disallowed. At the very least, as Bird says, they should keep good notes/records.

I don't believe the value of the securities matters a fig. The instructions say that you may not file an SF if the plan holds any employer securities at any time during the year. I'd take that at face value, and say no dice to an SF.

Ok, can I ask a stupid question. I don't have a good understanding of this whole issue, so I'm trying to work through it. Is it really easier to fill out a paper 945, with a 945-V voucher, and submit a check (and most of our small plans don't have a trust checking account, despite our urgings) with each distribution, than it is to do it electronically? I'm having a hard time understanding which option is really more work for the parties involved, and maybe that depends entirely upon what the asets are, as well as the particular arrangements with the custodian. On one hand, you have larger, more automated platforms, and when a distribution is made, they submit the withholding anyway. So these shouldn't be a problem. So let's say it is an investment where the funds are liquidated, and a check for $10,000 is sent to the Trustee/PA. Let's further assume that they had two checks issued - one for $8,000 to sign over to the participant, and one for $2,000 for the withholding to submit to the IRS. Apparently there may now be two options. One is to fill out a 945 and 945-V, and submit the $2,000. Will the IRS accept the check endorsed over to them by the Trustee/PA, or must it be in some other form? If they won't accept it endorsed, what would you do? Now let's say either voluntarily, or depending upon the interpretation of the regs, as a mandatory item, it is done electronically. What are the steps? Once any proper id# and an appropriate account (?whatever that is?) is opened, is it then more difficult, less difficult, or roughly the same amount of work? I've never been involved in the "nuts and bolts" processing of the actual transfers of money, so I'd appreciate any input you might have. Thanks!

But would this be acceptable? Pardon my ignorance, as we've never done 945's. I thought a 945 was an annual return? If you distribute a participant's benefit in any given month, can you then submit the withholding (for de minimus amounts) on a 945-V filed with a 945 any time you want, on multiple dates throughout the year? It somehow seems unlikely. Or of course, even if possible, at some point it must end up being more work than just doing the @$%) things electronically...

Bird - how could it work? There's no tax return filed by the Trust with which such payment could be submitted, right? But if you can find a way to make it work, I'll be the first in line to nominate you for sainthood!

Sweet, but my definition of "affordable" is unlikely to match theirs...

From the world's shortest lists: People Who Are Interested In My Opinion. But I'll give it anyway. I agree with Masteff. Conceding that I have no direct experience with an audit or enforcement action in such a particular situation, IMHO it seems unlikely that the IRS would deny hardship treatment in this situation. Has anyone actually seen such a situation, or heard of a case?

Was it a convertible? Even living in the Northeast, I still can't imagine why someone would buy a red Mustang hard-top rather than a convertible. But maybe my wife's yearnings for a hot red convertible have prejudiced me against the hard-tops. Those of us in the land of deep snow (especially my wife) are still hoping for a nice, affordable (like a Miata) convertible in FRONT WHEEL DRIVE. Rear wheel drive just doesn't cut it on snowy roads.

I was very disappointed in the ASPPA recommendation. IMHO, they should have requested outright that this not apply to someone preparing a 5500 form. Sounded to me like they were playing politics. The 5500 is an informational return!!! (In spite of the fact that under some definitions that it is a "tax" return for some purposes) Does the IRS require you to attach a copy of your 5500 when claiming a tax deduction on your return? Of course not. Adding insult to injury, the testing procedure (as proposed at this point) will be testing on items that have nothing whatsoever to do with 5500 preparation. This is the grossest kind of stupidity, and I would encourage all ASPPA members to urge the committee to take a stronger stance. http://www.form5500help.com/ASPPA_comment_lette_PTIN.pdf

If you have split personalities, does that make your other personalities employees for 204(h) purposes? What if SHUT UP YOU IDIOT who said that are you talking to me? no, I was talking to herBoys, Boys, please don't fight ##%%&^!**

I agree with you. P.S. - Citations - Treasury Regulation 54.4980F-1, Q&A-3, which will also refer you to DOL reg. 2510-3.

Some of the problem depends upon the plan size. A small plan with 10 participants is likely to have a hard time affording what a good ERISA attorney will charge to do a SPD that is, as oberved earlier, accurate, complete, and readable. A plan with several hundred or more participants can spread this cost out much more reasonably. Major document providers tend to err on the side of covering every possible legal technicality, which of course doesn't make for a very readable SPD. In their defense, I'm not sure I can blame them. One lawsuit can put an awful hole in your bottom line. I'm not sanguine that this is going to get better any time soon.

Let's say a Cycle B filer adopts a new individually designed plan in 2010. (Modification of a pre-approved VS plan document - from whom I have no idea as I haven't seen it, although I think perhaps Datair ight have been mentioned.) I'm just trying to figure out if I'm nuts. The normal deadline would be 1/31/2013, right? But if client wanted to submit sooner, it appears that it would be eligible for preferential review under Section 14 of Revenue Procedure 2007-44 - excerpt below. Would you agree? (2) A new individually designed plan whose next regular on-cycle submission period ends at least two years after the end of the off-cycle submission period during which the plan sponsor submits its application. For this purpose, a new individually designed plan is a new plan that as of the date the application is submitted with respect to the plan would be a new plan within its initial remedial amendment cycle under §1.401(b)-1(b)(1) of the regulations, as summarized in section 2.03 of this revenue procedure (determined without regard to the extension under section 5.03 of this revenue procedure).

Hi Kevin - it was during a plan audit, where the plan sponsor was going to terminate the plan anyway in an informal plan termination. Don't know any other details. Client apparently had a nice auditor, and auditor allowed the client to simply adopt an EGTRRA document. That's all I know - client was referred to us by someone else to see if he could get an EGTRRA document. I sure wouldn't want to count on receiving this type of treament as a general rule!

I have heard second-hand, from someone who has had similar situations, that the IRS accepted going back to a TRA '86 document, and didn't require anything further back than that. And in one other case, where I spoke directly with the employer on a case we never administered, they simply allowed the employer to adopt a current EGTRRA document and then approved the termination. But I'd certainly go with VCP if someone came to me with this problem.

Kevin, I'm not disputing that the plan has already satisfied 401(a)(9). It clearly has - although I didn't cite it in my last response, see 1.401(a)(9)-7, Q&A-1. But anyway, now that I've said my piece on this latest question, I'll shut up again unless a new question is raised. This has been an interesting discussion because this is a situation that actually occurs now and then.

Sorry, I said I wouldn't bother you any more, but you have now raised a separate issue, and I believe you have a flaw in your proposed action. There's no need for the PLAN to do a correction. The Revenue Procedure 2008-50 correction is for when a plan has failed to make a distribution in an amount that satisfies the 401(a)(9) requirements. The fact that the ineligible RMD amount was rolled over to an IRA does NOT make this a plan failure. For 401(a)(9) purposes, the plan is treated as having made the RMD distribution and has satisfied 401(a)(9). Making another distribution from the plan will not "correct" anything. So the plan is already fine. The participant is not.