Belgarath

Silent.

Nope. But why should the Plan Administrator be tasked with determining (or questioning) this? If it is done pro-rata, seems like that question takes care of itself?

Sole prop (with employees) defers. But ends up with zero Schedule C income. Deferrals returned timely. Do you report this on the 5500SF on line 8(e) for the year of distribution, or another line, or not at all?

Gracias - that was my answer, but I thought it would be good to get the opinions of QDRO experts.

Say a QDRO specifies a lump sum of "X." Participant has several sources - deferrals, match, Roth, Pre-tax, etc. QDRO and plan are silent on the issue of which source(s) from which the funds would be distributed. My answer would be proportionately from all sources - but does the Participant or Plan Administrator have the right to then dictate the source(s) from which the distribution is made? For example, all from Roth, or none from Roth, etc.? Thanks.

Thank you! And yes, the actuary wants to offer a pre-termination window. We don't administer the DB plan, but get dragged in to some extent due to the 401(k). Again, the details are very convoluted and it isn't worth even attempting to explain!

Since I'm distinctly not a DB person, I'll spare you the weirdness of this situation and just ask one small question: When you have a terminating plan that wants to offer a lump-sum window, and the AFTAP is too low to allow it without (in this particular case) going with the special bonding rule to allow the lump sum to a couple of Highly Compensated people... For these purposes - are the "top 25" HCE's or former HCE's determined under the 414(q) definition, or does it mean the 25 highest paid, regardless of whether they are HCE's under 414(q)? I believe it is the former, but I'd love to get confirmation from someone who knows something about all this! Thanks in advance.

Hi Bird - ok, that would make more sense. So in that situation, then maybe the plan has made overpayment(s) to the participant, and then yes, I agree - try first to get it back, then if not successful, plan sponsor makes it up with interest.

Huh? What do you mean by "mistakenly" made RMD's from other assets? The cash value of the insurance policy is included in the participant's account balance. So the RMD is made based on the entire account balance, including the cash value of the life insurance. It isn't one distribution from the fund, and a separate distribution from the life insurance. And if the RMD's were made from "other" plan assets, (which is fine) then why is the life insurance cash value zero? Was the premium being paid by automatic premium loan or something, etc.? And although I find your post confusing, what makes you think the plan sponsor is responsible for making the plan "whole?" Nothing in your post suggests to me that the plan sponsor has distributed funds in excess of what should have been distributed. Please explain why you think the plan isn't "whole." Maybe there are distributions in excess of the total the participant is entitled to? As to the policy in the plan past NRA, you should look at your plan document. Is this participant still employed, or terminated? It sounds like you could have an operational violation - the plan will almost certainly specify the appropriate provisions regarding life insurance policies. Good luck.

Assuming you are talking about an "eligible rollover distribution" if ALL distributions for a calendar year total less than $200, generally no 20% withholding applies. You should look at the regs under 31.3405(c), as there are certain "unusual" circumstances.

I had started to reply, but got interrupted. Since my reply was going to be substantially the same as shERPA's, I'll just say, "What shERPA said."

The penalties may be imposed on either the Plan Administrator or the Employer. (Usually one and the same for small plans, but not always). You can strike fear into him by quoting the penalty amount. And don't forget that the IRS can impose penalties as well. Also, was the plan amended as required (or restated) for the termination? Yet another landmine. Probably goes without saying that you should get paid up front before doing any work... Note the following from the DOL FAQ's on the DFVCP program: Q15. Can plan assets be used to pay the civil penalties assessed under ERISA § 502(c)(2)? No. The plan administrator is personally liable for the payment of civil penalties assessed under ERISA § 502(c)(2). Civil penalties, including penalties paid under the DFVCP, cannot be paid from the assets of an employee benefit plan. Willful failure to file can result in CRIMINAL penalties on top of all the other fun. I'll bet you can scare him sufficiently, but if not, tell him to enjoy bankruptcy and possible criminal charges. Playing Russian Roulette with the DOL is an unrewarding form of entertainment. (I know I'm preaching to the choir on this.)

Talk to a divorce lawyer. Soon!

Y'know, if it weren't legislatively mandated, such a provision would otherwise be a benefits/rights/features issue, right? Seems inconsistent with general principles of fairness. Now, having previously worked for an insurance company decades ago where annuities, at that time, were REQUIRED as a portion of the plan's investments in order for us to do plan administration, I agree fully with the experiences above. In all my many years there, I saw a grand total of 3 annuitizations in Defined Contribution plan payouts. Hopefully this proposal will go nowhere. Total waste of time. As Peter said, anyone wanting an annuity can buy one with their distribution proceeds.

I don't have time to do any research to confirm my memory on this, but I do believe that the regulations provide for a person to be considered a designated beneficiary if the plan document provides a default designation. I'm sure someone else will chime in.

I respectfully disagree. Also see the following from the IRS: https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans#:~:text=Yes.,IRA without also including earnings.

I agree with the statements above, that it isn't a mistake of fact. Given that, there's no excise tax (assuming the entire 30k falls within the 404 limit) and the 30 k must be allocated for 2020.

Ignoring, for the moment, the timing, there's certainly no anti-cutback problem with increasing the cashout limit - see 1.411(d)-4, Q&A-2(b)(2)(V).

Thanks C.B.

We just had a client receive one of these. Like C.B.'s, it doesn't ask for a reply or require any action. Different from the compliance check situation on the IRS website, which follows: Why did I receive an EPCU Compliance Check Letter? You filed a Form 5500 series return indicating that the plan had a significant decrease in plan participants. Employers who have a decrease of 20% or more in participation may have experienced a partial termination. Background The Partial Termination strategy focuses on information from employers' Form 5500 (Annual Return/Report of Employee Benefit Plan) filings which indicate that their plans have had a significant decrease in plan participants. The strategy will determine: if the plans have experienced a partial termination and whether the plan sponsors are following the requirements of the plan document and related law pertaining to partial terminations, and if the information reported on the Form 5500 is accurate. When a group of participants is involuntarily terminated from the plan due to employer-initiated severance or a plan amendment, a partial termination occurs if the reduction of plan participants is deemed "significant." A percentage test is used in determining what is significant. Generally, there is a presumption that a partial termination occurs when more than 20% of the plan's participants are involuntarily terminated from the plan during the "applicable period," which is generally the plan year. When a partial termination occurs, section 411(d)(3) of the Code requires full and immediate vesting of all "affected" participants, including those participants who voluntarily terminated from the plan during the applicable period. (See Revenue Ruling 2007-43). What is the EPCU attempting to determine? We want to determine if the plan experienced a partial termination and if the plan administrators complied with the vesting requirements of Internal Revenue Code (IRC) section 411(d)(3). Additionally, we want to determine the accuracy of the information provided on Form 5500. The EPCU will send contact letters, seeking data regarding the percentage of involuntary terminations from the plan and the circumstances which led to company downsizing and the reduction of plan participants to a selected group of Form 5500 filers. We will request an explanation or discussion of any special circumstances that may have an impact on whether a partial termination has occurred. The EPCU will evaluate the response and work with the plan sponsor to take appropriate action. What actions do I need to take? Please complete the information request. You may also furnish any other documents or clarifying material that you believe will be helpful for us to review. You should make every effort to be as complete and accurate as possible in your responses and respond by the due date. If you need additional time, make sure to contact the person whose name is listed on the letter to request an extension. Failure to provide the information could result in examination of your plan. If You Have Questions Please feel free to contact the person listed in the cover letter with questions about this strategy and how it relates to your situation. Return to Top

I don't think there is a simple answer to that, but in my world, the recordkeeper's PRIMARY function is tracking assets on daily valuation platforms. Many of them also perform other functions, particularly on larger plans, and different recordkeepers perform different functions.

Tommy - FWIW, I don't think that 12 providers/vendors/platforms or whatever are necessarily too many. We are just a fee-for-service TPA, and many of our referrals come from CPA's and investment Advisors. They, and their clients, choose the investments and the platform. So we work with a lot of platforms/providers. Mind you, it would be NICE if they'd work with a limited number, but we have no control...

Interesting and creative solution. I would never have thought of this possibility.

Well, be a little careful here. IMHO, you cannot make a valid election to defer to a plan that doesn't exist. So merely signing a deferral election in December would not allow you to retroactively adopt a 401(k) the following year and deposit deferrals for that prior year. Others may have a different opinion on this.

Caveat - going from memory - just based on my quick reading of 2021-30 when it came out. 1. Was the first year of the error 2017? If so, then even under the new Rev. Proc. 2021-30, it would be too late for SCP. It allows self correction until the end of the 3rd plan year following the year of error. So you'd have to do at least that year under VCP. 2. Is this a safe harbor plan? Match or nonelective? If so, then your "missed deferral" is ether 3% (for the nonelective) or the greater of 3% or the maximum deferral percentage which would be eligible for a 100% match (i.e. 3% for a non-enhanced safe harbor). And possibly catch-up corrections, etc. I'm not sure where the 4% comes from. Fun times.