RatherBeGolfing

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.

Loan default can NOT be treated a CRD. Loan offset CAN be treated as a CRD. If the participant is a qualified individual and the loan offset is treated as a CRD, 10% penalty is waived and the amount is eligible for 3 year income inclusion. Simple example $20,000 total balance (10k loan, 10k cash) Plan terminates and the loan is offset The $10,000 offset is not subject to the 10%, and can be taxed over 3 years and repaid over 3 years (1099 code 1M I think, also reported on Form 8915-E as a CRD) $10,000 can be rolled to an IRA (1099 code G)

Yep Yep. Yep

I just want to know just who this "pension broad" is...

The 10% waiver applies to a coronavirus-related distribution. The list of factors that make a distribution a CRD was expanded by Notice 2020-50, but it is still a bit more than "impacted in some way". Factors in CARES (ii) to an individual— (I) who is diagnosed with the virus SARS– CoV–2 or with coronavirus disease 2019 (COVID– 19) by a test approved by the Centers for Disease Control and Prevention, (II) whose spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) is diagnosed with such virus or disease by such a test, or (III) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary’s delegate). Factors added in Notice 2020-50 an individual who experiences adverse financial consequences as a result of: • the individual having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19; • the individual’s spouse or a member of the individual’s household (as defined below) being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19, being unable to work due to lack of childcare due to COVID-19, having a reduction in pay (or self-employment income) due to COVID-19, or having a job offer rescinded or start date for a job delayed due to COVID-19; or • closing or reducing hours of a business owned or operated by the individual’s spouse or a member of the individual’s household due to COVID-19. For purposes of applying these additional factors, a member of the individual’s household is someone who shares the individual’s principal residence. Whether the employer elects to offer CRDs does not impact the final tax treatment for the participant, but CAN impact withholding on a plan level. If plan sponsor does not elect to offer CRDs, John Hancock (and other platforms) will withhold 20% as usual. Participant will file Form 8915-E with the 2020 return. The 8915 is what tells the IRS that the distributed amount is subject to the waiver of the 10% penalty and 3 year taxation. Whether the 1099-R says code 1, 2, or 7 doesn't matter, the 8915 is what will be important for the taxpayer. Only if the participant is a qualified individual. 10% penalty waiver applies regardless. You will need to adopt CRDs and fill out a special form for the platform to withhold as a CRD.

n-20-52.pdf Hot off the IRS press....

Small business operating with the owner and a few part timers could run into this issue with some turnover among the part timers.

You have it covered. The US income means the "non-resident alien" exclusion won't apply, so for testing its like any other employee.

Because it very rarely happens (better chance of winning the lottery and being in a plane crash on the same day). Emergency legislation like CARES is often recycled with the exception of dates. The same sort of goes for agency guidance. The starting point for DOL & IRS "what guidance have we issued for similar situation in the past" and then "what is different this time, and what didnt work last time". What makes you think that this wasn't done? Guidance on legislation doesn't just happen in an IRS vacuum. Regulatory agencies ask stakeholders input all the time, and this is in addition to all the unsolicited input. Im sure they looked at plenty of scenarios, but the safe harbor is a very simple solution. I would probably call the guidance "not inconsistent" with the statutory language rather than consistent.

No problemo! Looked it up in a 6 year old 5500 answer book to confirm lol