AMDG

There is probably also a "cumulative list" for DB plans that is published by the IRS. Just google it.

Does anyone know why an employer would choose to define NRA under a 401(k) plan as the later of, say, age 65 or the 5th anniversary of the first day of the plan year in which participation commenced? Unless there is a connection with the employer's DB plan, or the employer hires a lot of part-time folks over age 60, why go through all of this hassle? TIA. Your comments are greatly appreciated!

One idea to consider: Spin off those 15 participants into Plan B, and then terminate Plan B and tell the insurer that they are required to treat the annuity contracts as distributed from Plan B upon termination. Another idea to consider: Determine if the 15 annuities are unclaimed property (e.g., bad addresses for participants; dormant accounts and no activity by participants). If so, the insurer is required to escheat the assets to the relevant state unclaimed property fund. ERISA will not preempt state unclaimed property law, because the insurer says that ERISA does not apply. Final idea to consider: Review Section 109 of the SECURE Act and related updates to Code section 403(b). Tell the insurer that the sponsor has deselected the annuities as investment options, amend the plan, and tell the insurer that they must treat the contracts as qualified plan distribution annuity contracts. Good luck and please respond with what happened!

Has anyone come across guidance regarding whether Code section 72(t)(2)(A)(v) applies to distributions made to rehired employees. Any guidance is greatly appreciated. TIA.

Self-certification is now permissible for governmental 457(b) plans, but the 457(b) regs are not as formulaic as the 401(k) regs regarding the events that constitute a hardship. Pending IRS guidance, it seems reasonable to me for a gov't plan sponsor to adopt the 401(k) self-certification service model for its 457(b) plan, especially as EPCRS applies differently (basically, no risk of plan disqualification). I would love your thoughts! Thanks!

FYI, from the IRS in the context of Cycle 2 403(b) plan submissions, if this is what you are looking for. Source: Q&As for 2nd Cycle Preapproved 403(b) Plan Providers | Internal Revenue Service (irs.gov) Q11: Are you taking the same positions relating to discretionary matching contributions and definitely determinable benefits as you took with the Cycle 3 DC plans? A11: The basis for our position on discretionary matching contributions contained in a Cycle 3 Section 401(a) defined contribution plan can be found in Treasury Regulation 1.401-1(b)(1)(ii). This regulation states that a 401(a) profit-sharing plan must provide a definite predetermined formula for allocating contributions made to the plan. Our application of the written defined contribution plan requirement (Treas. Reg. 1.403(b)-3(b)(3)) to the 403(b) Pre-approved Plans Program for Cycle 2 expects any allocation formula for an employer matching contribution to satisfy the concept of a definite predetermined formula. We will not permit the plan language for a discretionary matching contribution formula which represented a compromise on this issue in June of 2020 between the IRS and the practitioner community for the Cycle 3 401(a) defined contribution plans program. We will no longer accept the following compromise language: If a discretionary Matching Contribution formula applies (i.e., a formula that provides an Employer with discretion regarding how to allocate a Matching Contribution to Participants) and the Employer makes a discretionary Matching Contribution to the Plan, the Employer must provide the Plan Administrator (or Trustee, if applicable), written instructions describing (1) how the discretionary Matching Contribution formula will be allocated to Participants (e.g., a uniform percentage of Elective Deferrals or a flat dollar amount), (2) the computation period(s) to which the discretionary Matching Contribution formula applies, and (3) if applicable, a description of each business location or business classification subject to separate discretionary Matching Contribution allocation formulas. Such instructions must be provided no later than the date on which the discretionary Matching Contribution is made to the Plan. A summary of these instructions must be communicated to Participants who receive discretionary Matching Contributions. The summary must be communicated to Participants no later than 60 days following the date on which the last discretionary Matching Contribution is made to the Plan. For a discretionary matching contribution formula to satisfy the definite predetermined requirement, the following aspects must be addressed in the plan document: The matching computation period, such as payroll period or plan year, must be identified; this will eliminate ambiguity over the need for a true-up. There must be a note regarding the possible need for a true-up at year end where the employer contributes more often than the computation period There must be a definite allocation formula for the discretionary match, such as “a discretionary match shall be allocated to each participant as a uniform rate, for example 100%, of deferrals up to a uniform deferral percentage The employer can have discretion over the matching contribution amount, the rate at which deferrals are matched, and any limit on the deferrals that are matched. The rate and limit are both factors in the determination of the amount of the contribution. The above sample discretionary matching contribution allocation formula retains this discretion but allows someone to know how it will be allocated.

Practically speaking, why would an employer choose to not allow participants age 60-63 to make the higher catch-up contribution? I mean, catch-ups are excluded from 415(c) and NDT and can be excluded from matching contributions. What am I missing, other than perhaps a vindictive plan sponsor? Thanks in advance for your engagement!

Riley - Thanks. To clarify, your opinion is that the plan MUST permit the FULL increased catch-up limit for ages 60-63?

Hi. Just curious if the change to 414(v) (based on Section 109 of SECURE Act 2.0) is mandatory. In other words, a plan sponsor may choose to permit age 50 catch-up contributions. If permitted, then *must* the plan permit the full increased catch-up limit for ages 60-63, or *may* the plan impose the same catch-up limit for all age 50 catch-up contributions regardless of age? Survey says... TIA for your insights.

It's unclear from the prior comments, but if this is a "qualified plan distribution annuity" (QPDA) then no 1099-R reporting is required. It's not a rollover distribution. There is no reporting requirement in the 1099-R instructions or the Regs for transfers of assets from a retirement plan trust to an insurance company. The insurance company must report distributions from the annuity on Form 1099-R. Also, the Schedule H (form 5500) reporting for QDPAs also differs from rollovers and other distributions. 2e(1) is benefit payments to participants, including direct rollovers. 2e(2) is to insurance carriers for the provision of benefits. Hope this is helpful.

Some practitioners think that this is a legally valid approach - to require that catch-up contributions be made on a Roth basis. Hopefully, the IRS will soon clearly state its official position.

FWIW, as an anonymous contributor, I can't think of any -- other than to make sure that the plan allowed for Roth elective deferrals in all years for which the make-up contributions relate.

The exception to the 10% penalty for terminal illness would really only apply to those who terminate employment before 55, right?

Has anyone read Atlas Shrugged? Or am I the only one thinking about the perils of over-regulation?

Gilmore - I hate to be cynical, but tax revenues may be more important than leakage at this point in time.

🙂 And thank YOU.

After years of reading your excellent commentary, I am glad that I have something to offer in return: See paragraph (7) of Section 9.03 of Rev Proc 2021-37. Amendments that will not cause an Adopting Employer to lose reliance on an Opinion Letter include "(7) amendments to the administrative provisions in the plan (such as provisions relating to investments, plan claims procedures, or the Adopting Employer's contact information), provided the amended provisions are not in conflict with any other provisions of the plan... and do not cause the plan to fail to satisfy the § 403(b) Requirements ..." Hope this is helpful!

Hi. If a payment is made to the custodian for the benefit of the minor in a UTMA/UGMA situation, should the 1099-R also name the custodian as the recipient? If so, how does the minor obtain the tax benefits? Just curious if anyone has looked into this. Thanks in advance.

It's a facts and circumstances question for the participant - if the RV is their principal residence, then so be it. Although RVs are not mentioned specifically, this excerpt from IRS Pub 523 (Publication 523 (2021), Selling Your Home | Internal Revenue Service (irs.gov)) may be helpful: Sale of your main home. You may take the exclusion, whether maximum or partial, only on the sale of a home that is your principal residence, meaning your main home. An individual has only one main home at a time. If you own and live in just one home, then that property is your main home. If you own or live in more than one home, then you must apply a "facts and circumstances" test to determine which property is your main home. While the most important factor is where you spend the most time, other factors are relevant as well. They are listed below. The more of these factors that are true of a home, the more likely that it is your main home. The address listed on your: U.S. Postal Service address, Voter Registration Card, Federal and state tax returns, and Driver's license or car registration. The home is near: Where you work, Where you bank, The residence of one or more family members, and Recreational clubs or religious organizations of which you are a member. Finally, the exclusion can apply to many different types of housing facilities. A single-family home, a condominium, a cooperative apartment, a mobile home, and a houseboat each may be a main home and therefore qualify for the exclusion.

This is good foundational guidance: E:\PUBLAW\PUBL229.106 (govinfo.gov)

Peter's advice regarding state unclaimed property laws is a good idea. Uncashed checks from governmental retirement plans are generally subject to escheatment because there is no ERISA preemption. It doesn't matter if the payee's address is correct or not. The plan administration complexity occurs because the applicable state law is generally that of the payee, not the payor (although exceptions apply). Here's a handy site: What is unclaimed property? – National Association of Unclaimed Property Administrators (NAUPA)

FWIW - I love these message boards! I try to guess at the answer before clicking on the links in the email - and my memory served me well today. A big thank you to everyone who contributes!

Check the plan document. It's typically specific regarding the allowable uses of forfeitures.

Y2K issues - Yet another thing that was not included on my 2020 BINGO card...

I love these message boards and everyone who contributes their wisdom to the community at large. jevd, thank you for your 644 posts and enjoy your retirement!