RatherBeGolfing

Does notice 2020-50 change anyone's opinion?

So many issues beyond the actual special val if we take plaintiffs allegations at face value...

Still reading it lol

It isn't necessarily a matter of getting out of the obligation, but the details are going to be important. I had a similar discussion with a client not too long ago. "I cant afford the SH contribution" rarely means that they truly cannot get the money to make the contribution. If there is no income, no assets to liquidate, and no line of credit that can be used or established to fulfill the obligation, then it is a different conversation, but most of the time it is more of a cash flow issue. When I had this same conversation with my client, we got to a point where they could at least find the assets to fund the non-owner portion of the contribution. Why? Because the IRS and DOL will ultimately look at the best interest of the participants. If you truly cannot get the cash to fund the contribution, you will be in a much better negotiating position if you can show that you at least found a way to make the non-owners whole. In my case, after the non-owners were funded, the remaining obligation wasn't as impossible to fund when considering that all of the remainder would go to the owners.

How much of the $32K is going to non-owners?

irs.gov sort of addresses the Rev Rul 2014-9 and Form 5310 issue.

Dont forget about DOL...

Ive been out of commission due to a virus (appears to not be Covid though :)), but I wanted to circle back and just wrap up from my perspective. I don't disagree with the policy argument(s), offering protections to both a possible spouse and plan sponsor. My concern is pretty simple, what is the legal basis for denying a distribution to a participant who is otherwise entitled to a distribution. The only reasoning I have seen before is that spouse has an interest because he/she is the 100% beneficiary absent a waiver, but I don't think that is enough. A sponsor could always elect to be subject to QJSA rules, which shouldn't be an undue burden since no one elects an annuity anyway... This is basically the same issue I have with plans that have vague or overly broad QDRO procedures, which can deprive a participant of distribution at the mere mention of a divorce, rather than the receipt of a DRO as required by statute.

Ok, same here, but what does that have to do with anything? QJSAs were primarily put in place because many families were single income with one spouse taking care of home and children. Mandating the survivor part was a way to protect the non working spouse by creating a right top a benefit that had to be waived. Obviously, that doesnt exist in a non-QJSA plan.... Legal reality? I get your point, but where does the legal authority to prevent Mr. or Mrs Dirtbag from blowing the money in vegas come from? Since more and more young people are NOT getting married, what about couples with kids, been together for 20 years, just not married? Same dire need of protection right? Same legal right to a benefit (none) in the non-QJSA plan. We all work with legal requirements right? The same thing that has us saying "sorry, the document is the document" would also apply to things like when someone can take a distribution. There are tons of stuff I would love to do to prevent people from making really stupid mistakes (like no participant directed plans....), but that doesn't mean I can just unilaterally do it.

The big development here was to default to electronic without consent. Part of the reasoning being that it is difficult/inconvenient to get an affirmative election from a large number of people. Presumably, you dont need to default to electronic delivery for a document that is available only by request.

Im sure there are, I have at least heard people talk about them, but what are they consenting to? In a plan where QJSA applies, you consent to a distribution other than the QJSA (where the survivor annuity benefits you directly rather than benefitting the particupant). In a non QJSA plan, what are you consenting to/waiving?

...insofar as such documents are consistent with ERISA

A couple thoughts on this.... When QJSA applies, spousal consent is needed for a form of payment other than qualified joint and survivor annuity, since part of that annuity is for the benefit of the spouse. When a plan is not subject to QJSA, spousal consent is not required since there is no survivor annuity benefit to waive. If the plan still requires spousal consent, what exactly is the spouse consenting to if he/she does not have a benefit to waive? What about the participant's right to a distribution? Can the plan prevent the participant from getting a distribution by requiring someone without a direct claim on the benefit to consent to it? Requiring a notary or plan admin to witness execution of the paperwork is a separate issue. This is to make sure that the person requesting the distribution is actually the participant, to prevent fraud. I don't see any issues there, even if it is inconvenient.

Typical year might vary depending on the number of participants. If you have 50 participants, there are notices and disclosures that will probably not be triggered every year, or even every other year. If you have 1,000 or more, those rare notices and disclosures for the 50 participant plan may happen at least once per year. SAR SPD SMM QDIA Annual 404a-5 disclosure and Investment Comparative Chart Changes in investment alternatives Changes in fees charged to participant accounts (404a-5) Changes in fees (408b-2) Quarterly 404a-5 QACA EACA Annual benefit statement 404(c) Promissory note for particpant loans Truth in lending disclosure (still applies to some loans right?) QDRO procedure upon request QDRO notice (DRO received is qualified or not qualified) Mapping notice black out notice AFN, accrued and vested benefits, 204h, failure to meet minimum funding, funding based limitations [Im sure there are more, I admit I rely heavily on the actuaries to handle the DB related stuff....]

@Luke Bailey if the account balance is $100,000, it will be a $50 fee plus a $99,950 distribution, with a 1099-R for $99,950. If the account balance is $100,050, it will be a $50 fee, $100,000 distribution, and $100,000 1099-R. The fee is paid by the participants account in the plan, not by the participant after the distribution has taken place. Although I have seen one TPA try to take the fee after the amount left the recordkeeper but before it got to the participant. It was a poor attempt to get around 404a-5 disclosed fees by not having the plan pay the fee... If the participants account (the plan) pays the fee, it is not part of the distribution, it is treated like any other fee in the account.

I pretty much agree. The one exception may be the rare participant that outright says "I dont qualify but I really need the cash...." But even then, circumstances can change.

We have a handful, all "elective procedure" type of practices who had to shut down. The last one dragged their feet but finally allowed it, and the flood gates have opened....

I wouldn't be surprised if they looked for it as a part of a larger PPP abuse initiative rather than a qualified plan issue

Id say qualified individual without hesitation.

I'll second Erisapedia, they put on lots of good free webinars. You should be able to get at least half of your CPE from them in a given year.

Yep HR 7010 passed Senate. If you want to talk fairness, why should taxpayers pay for an employer to sit on free cash while the employees cant pay their bills? I get the argument, but the forgiveness part wasn't intended to just benefit the employer. It was meant to keep paychecks flowing while the country was shutting down in a panic. The 8 weeks was too narrow, there is no doubt about that. Especially since the first wave of PPP loans was essentially over by the time we had some decent guidance. But even businesses that did keep payroll going had a hard time spending the bulk on payroll, so an extended window makes sense. Dont get me wrong, I dont oppose the fixes and extensions in the bill. I just dont care for the argument that an employer couldn't spend it on payroll while they were closed, when the intent was never to let employers sit on Payroll Protection cash until they could get a windfall from it.

It was never about fairness though. Different circumstances yield different outcomes. I wish it could have been more restrictive to prevent employers from just getting a windfall. At the same time, the employers did assume some risk since there were so many unknowns. Could it have been restricted to help only those who fit a narrow set of circumstances? Sure, but we would still be reviewing applications from March. My point is that if they miss out on forgiveness because they sat on the cash hoping to spend it when they opened up again, thats on them. The loan part made cash available for employers. While the forgiveness part has not been clear, we have known for months that if you don't spend on payroll, even if you paying your employees to pick their bellybutton and watch Netflix, you will lose out on forgiveness. It was up to the employer to decide what was more important, the loan or the forgiveness.

They could (and should) have paid their employees while they were closed.

Yes Yes The distributed amount is included as income in 2020 or over 3 years. If the withholding exceeds taxes due, it could be refunded or carried forward to the next year.

Right, thats an easy NO. The loan itself has to be limited to 5 years (except for a principal residence loan). The delay of repayment is a separate issue. You would have to issue the loan at 60 months, immediately suspend loan payments until [date pending guidance], and then extend the loan repayment period by [pending guidance]. In the end it may be 72 months, but more likely 67 months if the loan was issued today.