Vlad401k

Let's say a plan allows for In-Plan Roth conversion. A participant has only Pre-Tax Deferrals in his account, but he's not yet 59 1/2. I have 2 questions: 1) Since Deferrals always have a 59 1/2 age restriction for In-Service Distribution, would he be able to convert his account to Roth? 2) If so, what if he decides to withhold a certain amount, let's say 10% on that distribution? Would that be permitted? Seems like it shouldn't be as the amount going to the Roth Conversion would be less than the original amount (the other 10% being the taxes paid). Thanks,

Ok, so the software would allow a deferral of over $24,000? What if the distribution is only made next year and code P is used? Shouldn't the deferral be decreased to $24,000 in 2017 in this case, because it's taxable in the previous year (2017) and the 1099-R is only issued in 2018 with code P indicating that the distribution was already taxed? Thanks.

Let's say there is a catch-up eligible participant who defers $25,000 instead of the allowed $24,000 for 2017. Let's say he then takes a distribution for excess deferral during 2017. Let's say the distribution is for $1,050 ($50 being the earnings). How would that be reported on 1099-R? Would $1,050 be the taxable amount on 1099-R? In this case, wouldn't the participant end up paying taxes on the amount of excess twice? Once when it's distributed (on the 1099-R) and also when he files the taxes and the tax software doesn't let him deduct more than $24,000 limit. Or would a software allow a deduction of more than $24,000 in this case (since there is a corresponding distribution for the excess)? Thanks,

It's been less than 60 days, but that rule wouldn't apply because the participant chose direct rollover (or transfer), so no taxes were withheld on the original distribution. I would think that he's no longer a participant at all and the option to put the funds back into the plan should not be permitted. Would you agree?

Let's say a participant is terminated earlier in the year. He elects a rollover distribution, but later (after the check is issued), decides to put the funds back in the original 401k account. Is that permitted? I would think that it wouldn't be because he's no longer an employee of the original 401k plan. Would you agree? Thanks,

Let's say the plan allows for loans to be rolled over, but does not allow new loans to be taken. A participant rolls over the loan from the previous employer (let's say that employer has weekly pay frequency, so 52 loan payments were made a year). The new plan has bi-monthly pay frequency (24 pay periods). Since the new plan does not allow for loans, should the amortization schedule stay the same as it was with the previous employer or can it be changed to a bi-weekly schedule? Also, if the amortization schedule is changed, there might be a slight discrepancy (by a few days) when the loan is paid off. Is that allowed? Thank you.

If a Safe Harbor plan is terminated mid-year, what are the ramifications? It seems that it doesn't matter now if the plan is SH Match or SH Profit Sharing, since the IRS has provided additional guidance. I've read from a few posters on here that the ADP/ACP testing must be done in this case. However, the IRS guidance seems to indicate that Final Short Plan Year is a valid reason to avoid testing: "The safe harbor plan regulations set out several exceptions to the requirement that plan provisions satisfying the rules of §§ 1.401(k)-3 and 1.401(m)-3 be adopted before the first day of the plan year and continue for an entire 12-month plan year. These include exceptions for (i) a short first plan year, (ii) a change in the plan year, (iii) a short final plan year" So, the question is: does testing (ADP, ACP, and Top Heavy) have to be done for a Safe Harbor plan that terminated mid-year? Also, does it matter what the reason is for termination? For instance, does it matter if the plan simply terminated or if it terminated due to a merger into another plan? Thanks.

Let's say that there is plan that defines a plan year as 1/1 to 12/31. The limitation year is based on the plan year, so if the plan is terminated, the 415 and 401(a)17 limits will be pro-rated. What if the plan terminates of 3/2/2017? How would the limits apply? Specifically, since the plan terminated during the month of March, should be limits be: 1) 270,000 * (3/12) and 54,000 * (3/12) for 401(a)17 and 415, respectively. or, 2) 270,000 * (61/365) and 54,000 * (61/365) for 401(a)17 and 415, respectively. Basically, when the pro-rated computation is done, is it based on the number of months or the number of days? Thanks in advance.

We have a plan where the owner (more than 5%) started to participate in the plan when she was 72 years old (in 2015). When would be her RBD for the first RMD distribution? In 2015, she made some contributions, but had no required RMD, because her 12/31/2014 was $0 in the plan. In 2016, she is required to take an RMD because she has a 12/31/2015 balance. Does her first RMD in the plan have to be processed by 12/31/2016 or 4/1/2017? This seems like a unique situation because the owner started to contribute to the plan after turning 70 1/2. The regulations state that the RBD for owners is April 1 following the year in which the owner turns 70 1/2. However, would be RBD for this participant (who at the time of the first RBD) is over 70 1/2 be April 1st of the following year or 12/31/2016 of the same year since the participant is over 70 1/2 at the time of the first RMD? Thank you.

If a participant takes a Qualified Hurricane Distribution, which distribution code must be used. Because the 10% penalty is waived for Qualified Hurricane Distributions, would it be Code 2 if the participant is under 59 1/2? Thank you.

Let's say a participant is 75. He's not an owner so he didn't have to start taking RMDs at any point in time. Then, let's say he gets terminated in the middle of 2017. The first RMD is now due to be paid by April 1, 2018. What happens if the participant decides to rollover the entire balance to another plan or IRA? Can he do that or would he have to take the first RMD before rolling anything over into another plan? Thanks.

I have a question about bottom up QNECs. Let's say the employer wants to give a 5% QNEC to his employees because of the failed ADP test. Does the employer have to give the first contribution to the lowest paid employee and then give it to 2nd lowest paid employee, etc. until the test is passed, OR is the employer permitted to give the QNEC to anyone? Every example I've seen has the employer giving the QNEC to the lowest paid employee first, but I was wondering if that's a requirement. Thanks.

That's what I figured. Just wanted confirmation. Thanks.

Thank you. That was very helpful. What about SEP? Can it be merged into a 401k plan or does it have to be terminated too? Thanks.

What happens to the existing loans when a plan changes loan provisions? Let's consider these scenarios: 1) There were 2 loans allowed in the past, but now the plan is amended to allow only 1 loan. Can participants who had 2 loans outstanding prior to the amendment still maintain both loans? 2) What if a participant with 2 loans wants to refinance them? Can he do that even though the plan only allows for 1 loan now? 3) What if the participant had loans outstanding and the plan was amended to not allow any loans. What happens to the existing loans? Can the participants still refinance? Thanks in advance.

Can SIMPLE IRA be merged into a 401(k) mid-year. I know the SIMPLE IRA cannot be terminated mid-year, but can it be merged mid-year into a 401(k) plan. If not, would it be required to wait until the end of the year, then terminate the SIMPLE IRA and rollover the assets into the 401(k) plan. Thanks in advance.

Thank you, Tom. That was very helpful.

I'm trying to figure out how DATAIR generates the Permitted Disparity Factor (for DB portion). Is there a table that is referenced? I thought it was based purely on Retirement Age, but it looks like the participant's age also has an effect. Depending on these two variables, I get a value between 0.32% and 1.1%. The calculation seems strange to me as it increases up to 1.1% if the retirement age is 70, but then drops down to 0.75% if the retirement age is 71 or later. Does anyone know if these calculations are correct? I read somewhere that the max rate should be 0.75%, which is why I'm questioning the accuracy. If so, could you please provide the table that's being referenced? Thanks.

Let's say the participant elected to defer a bonus payment, but the company did not deduct the deferral or match attributable to that. I have a couple questions: 1) Does the missed deferral get categorized as QNEC or "Deferral"? Would it be attributable to the year in which the missed deferral should have taken place for Form 5500 purposes (accrual basis)? 2) Does the missed match get categorized as QNEC or "Match"? Thanks in advance.

I have a general question about Bottom Up QNECs. Does the employer have to give the QNEC to the lowest paid employees first or can the employer pick and choose the employees that receive the QNEC? Thanks,

Hi, So, does that mean that the date by which the distributions have to be made in DB plans stays as April 1st of every year? Thanks.

Hi, I don't usually work with Defined Benefit plans. Could someone please confirm if the RMD dates are different for DB plans than for DC plans? Is the RBD April 1st of the year following the year in which the first RMD is required and then it switches to December 31st of each year after that? Thank you.

Let's say the participant is terminated and has a loan outstanding of $10,000. The company then does the loan offset and the participant receives a 1099-R with code "1" or "7" for $10,000. Can the participant then rollover these $10,000 within 60 days to another 401k or IRA as if that amount was a direct distribution?

Thanks, Kevin C. That was very helpful. I have another question about successor plans. What about loans? Let's say the loan is made from the deferral source and then the employer creates a successor plan. What happens with the loan? My thinking is that it must be transferred to the successor plan because it's technically from deferral source. What are your thoughts? What if the successor plan does not want to allow loans?

Hi, I recently read a provision that stated that for prototype plans, the number of allocation rates for NHCEs is limited to at most 25, but could be even less depending on the number of participants. Do you know if this provision still applies, or if it no longer applies after PPA or because of some Revenue Procedure? Could someone please clarify if this provision still applies to Prototype plans? Thank you.