bito'money

In an old presentation by IRS on EPCRS (when RP 2008-50 was still in effect) they provided the following example for a failure to include bonuses in deferrals: Correction: Missed deferrals attributable to excluded elements of compensation need to be determined. Generally, the employee’s elected percentage of compensation would be used to determine the amount the employee would have deferred from the excluded elements. The corrective contribution for the missed deferral opportunity would be 50% of the missed deferral (adjusted for earnings). If the plan calls for matching contributions, a corrective contribution must be made equal to the full matching contribution that the employee would have received (adjusted for earnings) had the missed deferral (attributable to the excluded element(s) of compensation) been made to the plan. Do not apply the 50% missed deferral opportunity rate. Any missed discretionary contributions on the omitted compensation (plus earnings) must also be contributed. Ginco, Inc. had 4 employees in 2010. The plan document for the Ginco 401(k) plan provides that bonuses are included in the definition of compensation. Alan and Lourdes were the only employees receiving bonuses in 2010, and each received a $20,000 bonus. They each also elected to defer 5% of compensation. In 2010 Ginco decided to make a discretionary profit sharing contribution equal to 6% of compensation on behalf of each employee. In operation, the contribution was calculated without regard to Alan and Lourdes’ bonuses. The total compensation for all 4 employees excluding bonuses was $200,000, with each employee earning $50,000. Thus, each employee received a $3,000 profit sharing contribution. The missed deferral for Alan and Lourdes is $1,000 each (5%x$20,000). Ginco must contribute 50% of this amount ($500) plus earnings each to Alan and Lourdes’ account. Alan and Lourdes should also each receive a $1,200 (6% x 20,000) contribution for the discretionary profit sharing contribution.

Yes. If they are terminating the plan on 8/31, it's going to be a short plan year from 1/1 to 8/31, but that doesn't give them a free pass for the short year.

Is $2,948.26 the monthly amount he would have received if the 5-year C&L annuity started on his required beginning date, and is the $43,342.26 single sum simply the make-up annuity payments (with interest on the retro payments from required beginning date to the annuity commencement date)? (Since you didn't say, when was this person's required beginning date?) If so....the deemed RMD (subject to excess accumulation excise tax in each year from the year containing the required beginning date until 2022) would be 9-months of payments for the year containing his required beginning date, and, assuming the required beginning date was not 4/1/22, it would be 12-months' worth of payments for each subsequent year until the end of 2022. The RMD for 2023 would be equal to the 12 months of the annuity payments for 2023. Since the lump sum is to make up for annuity payments that were supposed to have been received from required beginning date until the benefit commencement date and that would not have been eligible for rollover in the first place, none of that lump sum amount would be eligible for rollover.

Paul I, I disagree with the following statement because the High Paid threshold (145,000) applies to the FICA wages of the individual participant, not the combined household income: "Further, the High Paid threshold will impact a subset of the NHCEs. A common scenario is where the children finally are financially off the parents budget and both parents now are working and trying to save more for retirement. This provision works against them because combined household income makes them High Paid."

Another important consideration is the RMD separate account rules (which allow you to apply the rules separately to the account of each beneficiary). To avoid having to use the life expectancy of the oldest beneficiary for all the beneficiaries, avoid applying the 5-year rule to all the separate accounts if a non-person is one of the beneficiaries, or avoid having to use the 10-year rule if one of the beneficiaries is not an eligible designated beneficiary, it usually makes sense to split the account by no later than the end of the calendar year in which the death occurred if at all possible. If the participant died after required beginning date and the participant didn't satisfy his RMD before death, it is best to split the accounts even earlier since the beneficiaries are required to receive the remainder of any RMD the decedent was owed by end of the year anyway, and you are going to need to report the distribution as taxable to each beneficiary separately.

PS, I don't think you have provided enough info for anyone to properly help with your inquiry. What kind of plan is this? DB or DC? (Guessing DC since you asked about loans, but is it a plan with a cash or deferred arrangement? Does it have a match or after tax feature, or just profit sharing?). Is the plan PR-qualified only or dual-qualified in both US and PR? If it's a 401k or 1081.01(e) plan, can you confirm that the plan sponsor does not sponsor an alternative defined contribution plan that would subject the distributions to the successor plan rule under both the US and PR law?

One thing you may want to warn your client about is that he may end up owing unrelated business income tax on the limited partnership interests (which can involve filing 990-T annually and paying the associated tax).

ConnieStorer, the regulations say the presumptions apply starting with the 4th month/10th month of the PLAN year and it stands to reason that these deadlines are based on plan months (as defined under 1.430(j)-1(e)(7)(ii) for plan years beginning on a date other than the first day of the month), not calendar months. Therefore, I think your first interpretation is the correct one. Better safe than sorry by certifying and issuing the AFTAP a few days before the deadline in any case.

You're not missing anything Austin3515... https://buck.com/secure-2-0-significant-changes-for-employer-sponsored-retirement-plans-start-now/ Buck comment. Currently, 150% of the age 50 catch-up limit is greater than $10,000, so the limit at ages 60-63 would already be $11,250 (even before cost-of-living increases are applied). Additionally, the elimination of pre-tax catch-up contributions for high-income earners will also apply to these catch-up contributions.

SECURE 2.0 also includes a provision (Section 327) that allows a surviving spouse as sole beneficiary to elect to treat their inherited interest in the plan as if they were the employee starting with distribution calendar years in 2024 and later (sort of like the rule that applies to allow IRAs inherited by spouses to be treated as if they were their own). If a spouse elects to treat their inherited interest as their own (as if they were the employee), this would change the date when RMDs are required to begin (to no earlier than when the spouse attains RMD age rather than 12/31 of the year the dead participant would have attained RMD age) and for purposes of calculating the RMDs (so they can use uniform lifetime table factor instead of single life table factor for years after the year of the employee's death). I think we need guidance from IRS on the following: Whether it's optional or mandatory for plans to offer this election to spouses. Exactly when is the spouse be required to begin if they elect to treat as their own? For example, would it be 4/1 after end of year the spouse hits the RMD age - as would be the case if they are actually treated like the employee, 12/31 of the year in which the spouse hits RMD age, or the actual date the spouse attains the RMD age? When exactly does the election have to be made by the spouse? Can spouse put it off until the earlier of when either the spouse or the participant would have had an RMD required? If the employee doesn't make an affirmative election and doesn't take an RMD in time based on the employee's birth date - would a deemed election apply as would be the case with an IRA inherited by a spouse? Such a rule could help spouses avoid RMD penalties in a lot of cases. Is this type of provision something a plan would have to include a provision for, or will plans be subject to some sort of default rule in the regulations unless the plan affirmatively says it will not apply? If a spouse elects to treat as his/her own and then starts before the spouse attains 59 1/2, would spouse's distributions then become subject to 10% penalty tax before age 59 1/2? I would think so, and that in order to avoid this possibility, it may make sense for the spouse to wait until after the earlier of when the spouse turns 59 1/2 or when the spouse would be required to take an RMD based on participant's age. What changes are needed to the special tax notice in 2024 or later for this rule? Can a spouse who treats their inherited interest as their own name a subsequent spouse as a beneficiary and can that subsequent spouse also elect to treat their account as their own? Can this rule be applied to a QPSA under a DB plan? I would think so, but typically QPSA is only payable as life annuity and spouse wouldn't get choice of optional forms like the employee and generally couldn't elect a J&S under 401(a)(9). Is it ok to only allow life annuity if spouse elects to treats as her own? If a DB plan is required to, or allowed to permit a spouse to elect forms of payment that provide for another beneficiary for life, are there any new incidental death benefit limits to watch out for? Does this rule mean that a spouse/former spouse Alternate Payee under a QDRO can also apply this rule to delay their commencement date? If the QDRO is silent, is the plan required to offer AP an election to treat account as her own if it offers surviving spouses such an election?

Rev. Ruling 2002-27 said that the participant's cafeteria plan right to elect to receive cash instead of medical benefits was effectively impinged upon (by requiring them to certify they have other group health coverage) - and that practice effectively converted the amount that would have been an elective deferral under 125 (that would have been includible in comp under section 415) into an employer-paid medical premium that was excludible from comp under section 415 (as employer provided medical coverage excludible under section 106(a)) - but only for those who didn't or couldn't certify their ability to receive other coverage). This was a messy and somewhat inequitable result - because the amounts that would have been paid toward the employee's portion of medical coverage for some people was 415 compensation (who certified that they had other coverage) but was not 415 compensation for others (who didn't and couldn't certify they had other coverage). The ruling probably was issued in 2002 because some employer had adopted this practice and treated the amounts that the employee wasn't allowed to elect to receive in cash as elective contributions under 125 (and thus includible in 415(c) pay) and was looking for a way to include these amounts in 415 pay (to avoid some sort of retirement plan qualification failure). The issue probably came up when an employer submitted a plan for a determination letter for GUST (when section 415 pay definitions were required to be amended to include elective deferrals under section 402(e)(3) and 125 for the first time - starting in 1998). I think the upshot of the ruling was that even though the plan in question shouldn't have included the amount that they mistakenly included in comp as if they were still section 125 elective deferrals, IRS gave them relief by saying they could treat such amounts as if they were section 125 deferrals (even though they were really employer contributions excluded from income under section 106, not section 125 elective deferrals). I still see some plans that include deemed 125 comp in their plan documents. Nowadays, employees can go to the ACA marketplace and get access to coverage going forward without pre-existing condition exclusions. Now employers seem to be more concerned about meeting the ACA employer mandate (and offering affordable coverage to enough employees) than they are about paternalistic concerns about employees opting out of employer sponsored coverage and then not being able to get coverage outside of the employer plan. Mostly, those who still have deemed 125 comp in their plan documents probably don't still carry on the practice of requiring proof of other other group health coverage for employees to opt out of employee only coverage to receive cash (or taxable benefits) from their cafeteria plans, but since they are a pension plan (and they need to look at pay over the employee's career), they did so at one time and still include the deemed 125 comp in their pension plan's pay definitions for the period back when they used to do it.

Ftam, if, as you say, the plan document really says it is a safe harbor plan, and you sent out notices telling everyone it is, I don't think that's the end of it. There's more to being qualified than 401(a)(4). How about 401(a)(7) (failure to meet section 411 due to a 411(d)(6) violation)?

I think that under the regs, you can have a safe harbor plan for less than 3 months in the initial plan year if the employer just came into existence during the year and you started the plan as soon as administratively feasible after they did. If the plan doesn't say that safe harbor matching will be determined based on each payroll period, and that the match will be deposited by the end of the following plan year quarter, that may be seen as requiring the true-up (and that taking away the true-up after the fact would be a cutback). You can't do a cutback amendment under SCP.

You don't have to provide the W-4R (but note that the $200 threshold is based on the total of all distributions during the same year). See IRS regulation section 35.3405-1T, F-6 and F-7 (which exempts distributions under $200 from the requirements to provide a withholding notice and election), 31.3405(c)-1, A-14 (which exempts distributions under $200 from mandatory withholding) and 1.401(a)(31)-1, A-11 (which exempts the plan from offering a rollover election on distributions reasonably expected to total less than $200).