Belgarath

It does rather look that way, doesn't it?

Well, let me be clear - I'm wasn't commenting on whether you will have a tax "headache" or not - that is a separate issue, and there are different definitions of a "tax headache."

Seriously?

It may not just be the Summary Plan Description (SPD) - there may be a Summary of Material Modifications (SMM) that was provided - essentially an addendum/modification to the SPD - that you might not have reviewed. The DOL issued updated disability claims regulations that might apply to your plan. Check with your Plan Administrator,or check your records/website/whatever to see. A sample of general language (and there are many variations) : In the case of a claim for disability benefits, if disability is determined by a physician (rather than relying upon a determination of disability for Social Security purposes), then instead of the above, the Administrator will provide you with written or electronic notification of the Plan's adverse benefit determination within a reasonable period of time, but not later than 45 days after receipt of the claim by the Plan. This period may be extended by the Plan for up to 30 days, provided that the Administrator both determines that such an extension is necessary due to matters beyond the control of the Plan and notifies you, prior to the expiration of the initial 45‑day period, of the circumstances requiring the extension of time and the date by which the Plan expects to render a decision. If, prior to the end of the first 30‑day extension period, the Administrator determines that, due to matters beyond the control of the Plan, a decision cannot be rendered within that extension period, the period for making the determination may be extended for up to an additional 30 days, provided that the Administrator notifies you, prior to the expiration of the first 30‑day extension period, of the circumstances requiring the extension and the date as of which the Plan expects to render a decision. In the case of any such extension, the notice of extension will specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and you will be afforded at least 45 days within which to provide the specified information. P.S. - if anyone really wants to delve deeply into it... https://www.federalregister.gov/documents/2016/12/19/2016-30070/claims-procedure-for-plans-providing-disability-benefits

Check to see if the plan allows in-service distributions at Normal Retirement Age.

Just in general... Over the years, I've seen a few (but very few) participants actually repay it after they get the letter. Mostly they say, "So sue me" and I've yet to see an Employer willing to bring suit for at most, a few hundred or thousand dollars ( why would they - legal costs exceed recovery amount, not to mention the hassle, time, and stress - although if amount was very large, it might be a different mindset) so the Employer makes the restorative contribution to the plan. The participant gets the revised 1099 - they have gotten free money; what do they care if the pay taxes on it? It is still free money in their pockets.

I don't think you can use the special correction. See this older thread, but still applicable, unless there is some new guidance of which I'm unaware. Others, of course, may disagree.

I don't read Peter's question # 3 as addressing the issue DOL lenience or enforcement. Rather it is a question about whether a prudent fiduciary might find it difficult or impossible to find a recordkeeper who would accept the pending-blackout payment, for a very small plan. I'll leave it to Peter to clarify he thinks it is necessary.

Deleted.

Well put!

Thanks. What I really meant to ask was: let's say a current standard Notice is based on the "old" IRS model Notice. So it doesn't currently comply with the changes due to CARES Act. Is there any timeframe by which updated 402(f) notices must be used? Seems like there must be some reasonable lead time before you go to jail for using one that isn't updated. The IRS Notice 2020-62 doesn't address this question.

Did any of the NHC terminate with less than 500 hours, so that you have something other than 6/10? At any rate, for coverage, they are considered as benefiting if they receive a Top Heavy allocation.

Re new 402(f) Notices. How quickly do you think these (or similarly updated Notices) need to be utilized? For distributions as of today, or are we realistically ok for a couple of weeks, etc.? Doesn't take long to manually copy the IRS model into a Word document and do this manually, but takes a little time to update systems/procedures, etc. Curious as to how quickly folks are implementing this. Of course, sometimes these are produced by the recordkeeping platform, so that's a separate question.

Thank you Peter.

I was just looking at an engagement agreement, and I saw something that I don't recall seeing (or perhaps never noticed, because I don't necessarily review a prior TPA's engagement agreement) before. It states that the TPA will bill the Plan Sponsor for services, then goes on to state that the TPA may deduct the service fees for the services directly from the participants' accounts upon non-payment of fees by the plan sponsor after 60 days. Is there any problem with this from a legal standpoint? It feels funny, but maybe it is fine as long as the plan sponsor/fiduciary has authorized it. Is this a common provision?

A nice general blurb. https://www.irs.gov/retirement-plans/tax-consequences-of-plan-disqualification P.S. I also found this blurb in some old notes, FWIW. Disqualification. The tax advantages of a qualified retirement plan are: (1) employer contributions to the plan are immediately deductible, (2) earnings on qualified trust assets are sheltered from income tax, and (3) participants only have to include amounts in gross income when they are distributed from the qualified plan. While there are exceptions to each of these, they generally describe the tax attributes of a qualified plan. Disqualification removes these tax benefits. In general, disqualification will arise from the time the IRS determines that a plan failed to meet the Code § 401(a) requirements. So disqualification is likely to be retroactive in nature, and it follows that the change in applicable tax rules for the employer, the trust, and the participants will likewise be retroactive. This raises the distinct probability of underpayment interest, and the possibility of penalties being assessed. The statute of limitations could serve to limit the period for retroactive inclusion. Generally, the statute of limitations is 3 years from the return filing date. However, Code § 6051(e) provides for a 6 year statute of limitations if the amount omitted from the tax return exceeds 25% of the amount of gross income claimed in the tax return. If the plan is the subject of a favorable determination letter, the general position of the IRS is that the plan is entitled to Code § 7805(b) reliance on that letter. As a result, disqualification would only apply from the time the IRS provides notice of the qualification defect (i.e. no retroactive disqualification).

Yes.

So I'm just curious, not being even remotely tech-savvy by today's standards. Let's say you (plan sponsor, and/or recordkeeper/TPA in conjunction with plan sponsor) decide to avail yourself of these new regs. Does it open up big potential holes for a breach of security, when a gazillion participants are receiving e-mails stating that their statements are available, and providing a hyperlink or instructions, etc. on how to access them? A lot of participants have internet access that isn't as secure as perhaps what they have at work, and it may be easier for passwords to get stolen, ghosted, whatever? It just seems like in a general way, the more things are done via internet-based applications, the more potential security breaches come into play. Just wondering what folks think about this aspect, entirely aside from whether the process is better/worse/indifferent from an administration viewpoint.

Nice!

https://www.businessofbenefits.com/2020/08/articles/403b/are-there-partial-terminations-of-403b-plans/ The information in this article, while interesting (and I didn't bother to evaluate it), makes no difference to us, as our plans provide for 100% vesting upon full or partial termination anyway. I expect most plans do...

BG -just in general, I'd say Bipartisan Budget Act Amendment, SECURE Act Amendment, and possibly CARES Amendment. You'd also maybe need the Disability Claims procedures Amendment. Maybe others, depending upon your plan...

They trust us. They just don't trust their payroll service! Kudos to you if 100% of your clients do exactly what you recommend. Our percentage isn't quite that high.

Run - it does occur to me that I should mention my assumption that we are talking about "regular" Roth IRA contributions. If you are "converting" an existing IRA to Roth, and you subsequently take a distribution prior to age 59-1/2, a premature distribution penalty may apply. This is generally referred to as the "recapture" rule. You'd want to run this by your tax advisor if such a situation applies. I know this wasn't the situation you posited, but I thought I'd toss this in FWIW.

We also have a few (very few) holdouts on this. Typically it is bad memories of an incompetent payroll service (or in-house payroll administrator) who constantly screwed up deferral changes and caused a lot of work/expense to fix.

Agreed, and this brings up a question I asked in another forum. If the formal termination date is after the date of the IRS letter for the pre-approved documents that most plans use these days, (generally 6/30/20) are you restating - in which case the time and expense is no longer minimal? And in case anyone cares, my stance is that if the formal termination date is prior to the 6/30/20 date, then just update with Interim Amendments. If on or after that date, restate. The line of doubters may now form on center stage!