RatherBeGolfing

Assuming $42,000 is rolled over, leaving him with $8,000 distributed for 2020: He can include $8,000 in income for 2020, or include $2,667 in 2020, $2,667 in 2021, and $2,666 in 2022. He can avoid income inclusion by repaying the $8,000, but if the repayment is done after any amount has been included in income, he will need to file an amended return

It really isn't a problem at all for me. Most clients like the reassurance that they can reach me after hours if needed, but very few actually use it unless it is truly an emergency. Keep in mind that I am not saying that other should do this, just that it works for me in my situation. It depends on how your business is structured, what your responsibilities are, and the type of clients you have. I am fortunate enough to be able to say that we pick our clients as much as the clients pick us. To use a @Larry Starr-ism, we are not a TPA. We are the retirement plan consulting department of a larger consulting firm. There are clients who are retirement plan clients only, an there are clients who have multiple engagements with our firm. Many of these clients want more than a provider to perform a task, they want a trusted adviser to help them with many parts of their business. I also travel and do more problem solving / "firefighting" and business development than I do day to day admin, so being reachable outside of banking hours comes with the job. Maybe its just me, but I have never looked at it this way (doesn't mean it is wrong for others though). In my opinion, when you treat something as "just a job", that means you are replaceable at a moments notice with someone else to just do the job. When you have clients who have been with you for 20-30 years, that call 5 years ago could absolutely matter.

At this point, a blanket delay is not likely.

It does. Section 4F

Mostly noise. Copy/Paste of my answer from a similar question earlier today Short answer: No, Im not concerned. The same question was asked when payroll providers started using admin (if you can even call it that) as a loss leader to capture the payroll service The same question was asked before and after the DOL slammed the door on the fingers of the Open MEP providers The same question was asked when some bigger national players started gobbling up every mid size service provider they get their hands on These services will be a good fit to some plans, but nowhere near a majority. My clients are with me because of the service I provide, not because I'm $10 cheaper than the other cookie cutter providers. If a client is only looking at cost, they wouldn't sign with me in the first place. We are not the most expensive, but we aren't on the low end either. One of the biggest complaints I hear from people coming from the big national TPAs or payroll providers is that the service aspect just was not there. It was hard to get a call back, their rep kept changing, they were not flexible enough, "we dont do that" was a common answer, and so on. That is not how we work. Most of my clients have my cell phone number, but very few "abuse it". My clients know that if there is an issue that needs solving it will get solved. They want and expect a premium service, and for that they need a premium service provider. If you are a small shop that does mostly very simple admin, that may be different.

That is correct. Payments made after the 2020 tax return due date (As extended), cannot reduce the distribution amount included in income for 2020 until you have reduced the 2021 amount to be included in income. Excess recontributions for a given year can be carried back to a prior year or forward to a subsequent year.

Short answer: No, Im not concerned. The same question was asked when payroll providers started using admin (if you can even call it that) as a loss leader to capture the payroll service The same question was asked before and after the DOL slammed the door on the fingers of the Open MEP providers The same question was asked when some bigger national players started gobbling up every mid size service provider they get their hands on These services will be a good fit to some plans, but nowhere near a majority. My clients are with me because of the service I provide, not because I'm $10 cheaper than the other cookie cutter providers. If a client is only looking at cost, they wouldn't sign with me in the first place. We are not the most expensive, but we aren't on the low end either. One of the biggest complaints I hear from people coming from the big national TPAs or payroll providers is that the service aspect just was not there. It was hard to get a call back, their rep kept changing, they were not flexible enough, "we dont do that" was a common answer, and so on. That is not how we work. Most of my clients have my cell phone number, but very few "abuse it". My clients know that if there is an issue that needs solving it will get solved. They want and expect a premium service, and for that they need a premium service provider. If you are a small shop that does mostly very simple admin, that may be different.

Since the tax industry (and others) have spent lots of time and money defending the position that checklist document preparation is NOT the practice of law (therefore not prohibited as unauthorized practice of law) I would stay far away from implying that anything you do is "legal work" unless part of what you do is authorized practice of law. There are still plenty of ABA members who would love to cut out part of what we do as TPAs and CPAs. I like consulting. If they need more descriptors, consulting-compliance-admin.

It was part of the 2016 proposed 5500 changes. Counting participants based on account balance rather than just being eligible was a trade off for the increased reporting and data collection on Schedule H. Congress did not appropriate funding to to do anything beyond the proposed changes, and the proposal died on the vine with the change of administrations (as usual). There has been discussion, but since we have several years before the first return is due, it is low on the priority list when compared to Covid, MEP/PEP, etc.

It does address this, but there are some additional requirements. Section 4F. If you make a payment after the 2020 tax return due date, that payment will first have to satisfy the 2021 repayment amount. Any payment in excess of the amount includible in income for 2021 can be applied to 2020 and/or 2022.

Using the PPA language, it should be an EZ. Now we finally have some guidance on it.

The EZ is supposed to be electronic starting with the 2020 PY filing so lets hope the coders are staying busy...

The will if the taxpayer calls, or if you have POA. Its a pain to get through on a good day, and as far as I know they are not processing paper filings at all right now, so if you want to verify a 2019 PY filing you will need to file an SF one participant plan like you suggested.

I would only add that in addition to the amendment, if the sponsor wants to not withhold it would be some version of a partial adopter rather than a non-adopter since it has to be a CRD in order to not withhold. If they are an adopter (partial or otherwise), I think they need to notify the participants of the availability and extent of what they will consider a CRD.

Withholding isnt determined by the document though, it determined by the Code. In order for the plan to treat a distribution as a CRD, it has to amend for CARES. The reason you have voluntary withholding on a CRD is because it is not treated as a rollover eligible distribution. Absent an amendment, the distribution in question (and most other distributions) would be rollover eligible and would require 20% withholding and 402f notice. I don't see any room for maybe here. Whether they would enforce the penalties for failure to provide notice and withholding is a different matter.

Doesn't this mean that if an employer so chooses the plan must be amended at some point? Yes.

All??? That is not the norm for sure. informal surveys and distribution statistics have shown that CRD/CRL adoption have been lower than expected, and leakage has been surprisingly low. Im in Florida. I have clients in the biggest cities of the state and in the most rural areas of the state. We have had a handful of adopters, thats it.

This.

Yep, that's the one. It was quite the outrage until they issued the revised FAB.

I don't have time to find a source, but I know the DOL has weighed in on as well. I don't think it is in the form of actual guidance, but part of the discussions they had when they released guidance on 404a-5 and the changes they made to the brokerage window part. Even though the participant picks the investment, plan fiduciaries are still supposed to make sure that any investments available are appropriate. I recall some heated discussions with the DOL and the industry when they said something along the lines of fiduciaries having to monitor ongoing investment elections in brokerage windows because if enough people invest in the same investment at any point in time, it has to be reviewed as a DIA.

This is very important point. There are limits on what the regulatory agencies can do, even if the do seem to color outside the lines sometimes. Industry groups have been pushing for more legislative relief, so it may be included in the next Covid bill (assuming they get their #$%^ together and reach a compromise).

Denise, you explained it very well in the article. I did make a note on the "to the extent the distribution is eligible for tax-free rollover treatment" part of the article that points to the continued use of the phrase in Notice 2020-50. I believe the context of that phrase in 2020-50 is unrelated to Roth IRAs, and is there because a distribution to a qualified individual as a beneficiary can be treated as a CRD for income inclusion purposes, but is not permitted to be recontributed. But even with that note, I think your argument in the article is solid.

I agree with this version of the hypo. Worst case scenario is that you have a tax deferred loan and miss out on the tax deferred earnings during the three years when you are sitting on the cash. I disagreed with prior version where the idea was that you might be able to repay in to the Roth after three years of income inclusion, and whether that would even need to be reported on the 8915. I think where we split is whether the IRS is required to address it, we clearly both agree that they should. I think I have understood your position as the statute permits (by referencing certain sections of the code), or at least does not prohibit, repayment of a pre-tax CRD to a Roth IRA. Further, if the IRS intends to prohibit a Roth conversion of a pre-tax CRD, it needs explicitly do so. The counter to that argument is that the code references are needed simply because Roth assets can be distributed and repaid as a CRD, and the IRS would only need to address it if its interpretation is that Roth conversions are in fact allowed. So if we agree that the statutory language does not explicitly permit CRD Roth conversions, I suppose it comes down to method of statutory interpretation. I cant get there using plain meaning, and would defer to agency interpretation. At least that is how I get to my conclusion.

Yes this will work. Payments made before the due date of the tax return will count for that taxable year, so the first payment could even be made in 2021 on behalf of 2020. We haven't seen 8915-E yet, but Notice 2020-50 details repayment with examples. CRDs are subject to voluntary withholding, so participant can waive the 10% withholding Notice 2020-50.pdf

The statutory language argument is that CARES does not prohibit it because the code sections referenced do not distinguish pre-tax and Roth accounts, correct? Since you can take a CRD from a Roth IRA or Roth 401(k), you can also repay that CRD to a Roth IRA or Roth 401(k). Wouldn't that also explain the why the statute would reference code sections including pre-tax and Roth? I don't think it is at all clear that the the statutory language was meant to allow conversion of a pre-tax asset to Roth. You cant just put money into the Roth, its either a contribution or a conversion. I think your argument is that repaying into the Roth is a conversion, but I'm still not sure I buy that. In order to repay a distribution, it has to be a CRD. In order to be a CRD repayment, it has to be reported on Form 8915. Notice 2020-50 is pretty clear on how recontributions work. While we haven't seen the 8915-E yet, there is no reason to think they would include a "don't reduce the amount included in income because you repaid to a Roth IRA" option without even mentioning it in 2020-50.