lisam

I have seen documents that allow discretionary true up on discretionary match, however (unless I am missing something) I think the question was on a safe harbor contributions. My understanding in talking with a few of these providers is that the safe harbor does not have the same discretionary true up capabilities that the discretionary match offers. I believe the IRS indicated in the PPA documents they wanted this feature removed from the safe harbor section as the safe harbor contribution was a mandatory contribution and the true up should be disclosed at the beginning of the year. I would suggest you check this out with FTWilliams, if this is something that has been changed from their EGTRRA to PPA documents they would know best.

I don't think there is any formal guidance on this as of yet, but I would imagine a code 1. The participant will be limited to a $100,000 qualified plan aggregate distribution limit and there is no way for the plan sponsor to confirm the distributions from IRAs or other sources. If it is a code 1, generally there a corresponding exception code the participant would enter on their form 5329 prepared with their tax form claiming a penalty tax exception (similar to first time homebuyer from an IRA.)

I believe the penalty per day for a missing auditor's report is $150 up to a $50,000 maximum. You can file with the auditor's information blank, however my understanding is you subject yourself to the per day penalty. In comparison, the VFCP program is a $10 per day penalty with a $2,000 maximum (extensions not taken into consideration). Depending on when the opinion is ready, it may be more cost effective to not submit at all and go through the late filer program.

Yes, the plan is required to keep documentation showing the dollar amount requested is an outstanding obligation for the participant. I believe what you are referring to with the immediate and heavy need is the safe harbor hardship reasons, which should be defined in the plan document. If you follow the predefined reasons (medical, purchase of a principal residence, tuition, etc.) then the reason is automatically determined to be valid but you must still provide proof of the amount being requested. The participant is allowed to self certify that they do not have additional funds outside of the plan (IE, you don't need to get copies of their bank statements, denied loans, credit card statements, etc.) and you can accept their word that they have done their due diligence outside of the plan. However you still need proof that the amount being requested inside the plan is valid and will need documentation. See Treasury Regulation Sections 1.401(k)-1(d)(3)(iv)© and (D). Treasury Regulation 1.401(k)-1(d)(3)(iii)(B)(1) indicates medical care that would be deductible under section 213(d) is Deemed to be an immediate and heavy financial need. If you cross reference this section to Regulation 1.213-1(1), "...a deduction is allowable only to individuals and only with respect to medical expenses actually paid during the taxable year, regardless of when the incident or event which occasioned the expenses occurred and regardless of the method of accounting employed by the taxpayer in making his income tax return. Thus, if the medical expenses are incurred but not paid during the taxable year, no deduction for such expenses shall be allowed for such year." This leads me to believe if the amounts have not been paid by the participant than they can still be taken from the plan. However perhaps the plan may want to get an updated invoice to show the current balance due rather than relying on an outdated one?

Yes, Treasury Regulation 1.401(a)(9)-4 is the code section that indicates the timing for determining a designated beneficiary and it allows any disclaimers that satisfies Code § 2518. I think you need to look at the plan document and determine who the default beneficiary is when there is no named beneficiary. By disclaiming the plan assets, the son is essentially being treated as if they were never named the beneficiary in the first place. The default beneficiary may well be the estate, in which case you would take the executor's direction to get the estate information. My understanding is this is treated like any other death distribution. They have a 10% early distribution penalty tax exception but withholding would apply. The 1099-R will be issued directly to the estate. I have no idea how estate taxes work however I think generally administrator responsibility is only to know who to issue the report to not offer tax advice. As MoJo so aptly puts it, for that it's attorney time.

I was at a conference in the beginning of the month, a suggestion a presenter had would be to request a copy of their management approval to be auditing for that year. Their ability to audit should be the current restatement and previous one (no longer the GUST documents) and if they seek to go back further it requires approval from their manager. I have never tried this, so do so at your own risk.

I agree, based on IRS Notice 2007-7 Q&A 36. My opinion is that a rollover would not solve this as Treasury Regulation 1.402©(2) Q&A 7 states: if a minimum distribution is required for a calendar year, the amounts distributed during the calendar year are treated as required minimum distributions under section 401(a)(9), to the extent that the total required minimum distribution under section 401(a)(9) for the calendar year has not been satisfied. Accordingly, these amounts are not eligible rollover distributions. Thus, if a rollover distribution is done it will first count toward the RMD even if distributed to a charity later. Perhaps this can be done if someone were to do a direct transfer of the funds between the IRA's (and therefore there is no 1099-R created) however I couldn't find anything that supports or denies this.

You are correct, the Roth 401(k) clock has no effect on the Roth IRA clock per Treasury Regulation 1.408A-10, Q&A 4. I agree, IRC § 408A(d)(4) talks about the ordering rules for distributions and lists "Contributions other than qualified rollover contributions to which paragraph (3) applies. " If you review (d)(3)(B) it states "This paragraph shall not apply to a distribution which is a qualified rollover contribution from a Roth IRA or a qualified rollover contribution from a designated Roth account which is a rollover contribution described in section 402A©(3)(A)." Therefore, because paragraph 3 doesn't apply to designated Roth rollovers it is treated as a contribution. Excellent point. To determine if it is a Qualified Distribution, your five year clock starts January 1st of the first year any Roth IRA contribution or conversion is made. For example, if I had a Roth IRA contribution for the 2010 calendar year, My five year clock would be satisfied January 1, 2015. To use this clock, I must also be at least 59-1/2, disabled, deceased (in other words, a beneficiary), or a first time home purchaser. If I do not meet both of those conditions (the qualified 5 year clock and one of the qualifying conditions) you then need to look at each individual conversion which will maintain its own 5 year clock. After all contributions and designated Roth account rollovers are depleted the conversions will be removed on a first in first out basis. Hope this helps everyone!