AMDG

Not many people know this, but the Staff of the Joint Committee on Taxation published a description of the CARES Act, available on their website: https://www.jct.gov/publications.html?func=startdown&id=5256 See pages 18-19 of the PDF regarding the impact of the 2020 RMD waiver for participants whose first RBD would be April 1, 2021. (tl;dr: The participant's "first" RMD due by April 1, 2021 is waived. Only the "second" RMD is required and must be distributed by December 31, 2021.)

Here's the bigger question: When do repayments start?

I agree with Austin3515. Better safe than sorry.

It's not a drafting error. Section 109(c) of the SECURE Act changed the structure of 403(b)(7)(A) completely. "The CARES Act statutory language says a distribution satisfies 403(b)(7)(A)(i)" - and it is correct.

Hi. Does section 112 of the SECURE Act (401(k) plans must allow long-term employees working more than 500 hours but less than 1000 hours per year to participate) apply to grandfathered 401(k) plans? I don't think so, but would greatly appreciate additional perspectives. New section 401(k)(15)(A) says the 3 years with 500+ section (i.e., 401(k)(2)(D)(ii)) “shall not apply to an employee unless the employee has met the requirement of section 410(a)(1)(A)(i)” [i.e., age 21]. But governments are exempt from all of 410 by 410(c)(1)(A), and the result is that no governmental 401(k) employee ever meets the requirements 410(a)(1)(A)(i), strictly speaking. If 401(k)(15)(A) were intended to apply to governmental plans, then it could have specified the age 21 requirement directly rather than through cross-reference. Governments don’t have a history of excluding part-timers unfairly and plan eligibility is typically very liberal. As public policy, there doesn’t seem to be a strong argument that SECURE now wants to apply a part of 410 to governmental plans contrary to 410’s blanket exemption and create a new minimum participation requirement for them. And many government EEs are covered by collective bargaining agreements, so those EEs are clearly exempt. It doesn’t seem apparent that Congress intends to complicate state and local government plan administration by applying this new part-time eligibility section to nonunion EEs, who are exempt from 410, 401(a)(4), and 401(a)(5). Thanks!

Okay, fair enough. It's not a new right. Poor word choice. But where exactly is the "option" - the distributable event - in the Code? I don't see where the birth or adoption of a child is defined as a distributable event, unlike the other clearly defined distributable events. I am concerned that what some practitioners find reasonable will differ from what the regulators permit. We'll have to wait and see.

Hi. Peter, LG, RBG and other esteemed contributors: Which provision of the SECURE Act created a new in-service distribution right under the plan? Imagine an employment-based § 401(k) plan allows—without waiting for age 59½, severance from employment, hardship, or some other distribution-permitting event—a qualified birth or adoption ("QBOA") distribution (up to $5,000) within what Internal Revenue Code § 72(t)(2), as added by SECURE § 113, permits. Under the SECURE Act, a QBOA distribution will simply be exempt from the 10% excise tax under new section 72(t)(2)(H). The SECURE Act does not appear to me to create a new withdrawal right under code section 401(k), 403(b), or 457... unlike when Congress added the exemption under section 72(t)(2)(G) for distributions from retirement plans to individuals called to active duty and simultaneously created new distribution rights under those sections of the Code. Section 113(a)(vi)(IV) of the Secure Act does not create a new distribution right, it simply states that QBOA distributions will be treated as meeting the [existing] distribution restrictions/requirements of sections 401(k), 403(b) and 457(b). This seems to be a significant issue to resolve before advising clients to add what could be a disqualifying provision to their plan document and creating an operational violation for the plan administrator. Has anyone heard from Treasury or the IRS on this point? Please share. Thank you.

Hi. I am looking at a 457(f) plan that permits after-tax contributions. Please help me - why would a person want to give their already-taxed compensation back to the employer? Deferral of taxation on earnings for a few years does not seem to warrant the risk of the sponsor's bankruptcy. What am I missing? Thanks! This board'S moderators and contributors are the best! P.S. All I could find on Google and elsewhere was a GuideStone plan adminstrator's guide that had a reference to 457(f) plans that permit after-tax contributions.

Did the participant consider a gross-up for applicable taxes?

Is your question whether all employees need to receive the matching contribution safe harbor notice, or only the employees who are actually eligible to receive it? If so, I think that the answer is unclear, because the definitions of eligible employee differ and the (k) definition is broader than the (m) definition: “Eligible employee” is defined in §1.401(m)-5 as “an employee who is directly or indirectly eligible to … receive an allocation of matching contributions (including matching contributions derived from forfeitures) under the plan for all or a portion of the plan year.” This implies that the SH notice needs to be sent only to those employees who are eligible to receive the SH match. However, 1.401(m)-3(e) states that “a plan satisfies the notice requirement of this paragraph (e) if it satisfies the notice requirement of §1.401(k)–3(d).” “Eligible employee” is defined in §1.401(k)-6 as “an employee who is directly or indirectly eligible to make a cash or deferred election under the plan for all or a portion of the plan year.” This implies that the SH notice needs to be sent to all employees who are eligible to contribute to the plan. Does anyone know if there is a definitive answer to this question? Thanks!

I have never seen any guidance that tells employers how to "shed" ERISA coverage, other than the 1978 transition guidance. See DOL Reg. Sec. 2510.3-2(f) and the preamble. Once a plan is "established and maintained," the employer is out of the safe harbor.

Some participants in ERISA plans have hired registered investment advisors (RIAs) to manage their retirement plan accounts -- selecting investments from the plan's menu, rebalancing the investments, considering in-plan and out-of-plan assets collectively, etc. The plan sponsor/fiduciaries do not endorse any RIAs to plan participants. Assume that the plan sponsor has permitted RIAs to access participants' accounts, and further, to deduct the RIA's asset management fees directly from the accounts. The Deseret Letter (DOL advisory opinion 2005-23A) does not directly address the fee deductions. The question is whether the plan fiduciaries will have co-fiduciary responsibility and liability for ensuring that the RIA's fees were reasonable, and if failure to monitor the fees is a breach of fiduciary duty. Is there any DOL, IRS, or other guidance on this topic? Thank you.

Robert has big shoes to fill, but he will do a great job! It's never too early!

Here's the link to the IRS guidance on this topic: https://www.irs.gov/retirement-plans/self-correct-defective-403b-plan-provisions-during-the-remedial-amendment-period

"it does not require the plan that originally held the loan to extend the period that it will accept repayment" ...but if it did, then this would be a nifty way to avoid inadvertent loan defaults if a severed participant missed a lot of payments due to the change-over from payroll deduction repayments to ACH repayments.

ETA Consulting - What Code section are you relying upon for your answer? The distribution amount was reported incorrectly, but that does not change either the basis recovery rules or the taxable and nontaxable amounts that were actually distributed. The solution is to recreate the account balances at the time of each distribution, and determine what the correct reporting should have been. Corrected 1099-Rs can be generated for open tax years. As "With Appreciation" implies, someone else may need to make the participants whole for excess taxes paid in the closed tax years.

If this is an ERISA plan, don't forget the DOL's point of view. The VFCP requires use of their calculator (in most situations) for the VFCP filing. It seems reasonable to me to use the calculator, especially if the Plan's Form 5500 shows that there was a delinquent contribution or other prohibited transaction and the DOL follows up.

Does anyone have any data about the number of 401(a) plans that are in existence? Thanks!

We have a pre-approved plan document that requires participating employers to adopt the plan by signing a Participation Agreement, which is also signed by the signatory employer. Participating Employer X and the signatory employer signed a Participation Agreement properly in 2012, and again to mark Participating Employer X's cessation of participation in 2015. During the restatement process, it has been discovered that Participating Employer X is now totally out of business. Participating Employers are supposed to sign a Participation Agreement for the plan right now, in order to adopt the terms of the restated, pre-approved plan. But Participating Employer X does not exist. The pre-approved plan does not address this situation. Do others think that it would be sufficient for the signatory employer to add a note to the restated plan indicating that the Participating Employer cannot be found, and attach the old Participation Agreement that was originally signed? Thanks.

My understanding is that there is currently uncertainty regarding whether the MEP rules can be applied to 403(b) plans as well.

The money should never have been deposited into the trust under the plan in the first place. Why not treat it as a mistake of fact contribution, and return it directly to the plan sponsor? The plan sponsor can then address the payroll withholding failure issues. The amount appears to be wages and should have been reported through the payroll system. It is not an "after-tax" amount because it appears that the amount was not even included in the participants' w-2 wages. The earnings on the amount can be retained in the trust in the forfeiture account.

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Thank you all very much. I guess we should pray for a miracle. :-)

My educated guess is that the budget people (CBO) determined that the taxes generated by setting the bar at age 59.5 would be sufficient to offset other spending in the same bill. Same thing for MRD rule at age 70.5.

Have you ever tried to use voice recognition software? The posts above are the words that the software thinks I am saying!