RatherBeGolfing

Thanks Luke. I'm still not sure how you square it with the requirements under CARES, and the special advantages it provides. For example, as a qualified individual, I take a distribution of 1,000 shares of Stock A at $70 per share. Stock A has taken significant losses during the first couple of months of Covid lockdowns. I get a 1099-R for $70,000 which is less than the $100,000 aggregate limit under CARES. In 2022, Stock A has benefited from global recovery efforts and has bounced back to $105 per share. I never sold the stock, and would now like to take advantage of the repayment provision in CARES, so I contribute the identical 1,000 shares to my IRA. The value of the shares at contribution is $105,000, which exceeds both the general aggregate dollar limitation of $100,000, and the requirement that "1 or more contributions in an aggregate amount not to exceed the amount of such distribution". 2202(a)(3)(A) I know you are arguing that "amount" should not be limited to just a dollar amount, but for tax purposes a dollar amount has to be assigned to both distribution and contribution, no? You need to get a 1099 for the distribution, and any amount included in year 1 and 2 would be credited when repaid in year 3. I guess Im still struggling with applying the general rule to the requirements in CARES.

Luke , you would still be limited to value at distribution though, right? If I distribute 1,000 shares at $70/share today, I cannot contribute 1,000 shares at $100/share next week.

No. How are you getting the CRD into the Roth IRA without a repayment/contribution? Put different accounts, rollovers, and conversions aside for a minute and make it super simple. $100K can move FROM your 401(k) or IRA once (the distribution). $100K can be repaid/contributed once (the contribution into the IRA). Thats it. You moved money out and you moved money in. For CARES purposes you done.

Luke, I'll concede that the statutory language does not seem to prohibit a pre-tax CRD from being repaid to a Roth IRA. I disagree with the assertion that it consistent with the spirit of the statute. The spirit of the law is that unless you repay over three years, you include the the CRD as income over three years. As I see it, the use of Form 8915 backs that up (assuming that Form 8915-E will not have some new feature). The 8915 seems clear that the amount NOT repaid is included in income, and any excess repaid in a carries forward or is refunded. Ive seen plenty of people on the investment side urge caution on the issue absent guidance, and I think that is the most sensible thing to do at this point. We know the IRS will issue more guidance, so hopefully they will help clear it up. Id be curious to hear what @Appleby has to say on this issue...

He is getting the most basic elements very wrong. You have to consider aggregate distributions and repayments, they don't cancel each other out. The limit is $100k. You cant repay $100k twice. To put it in very simple terms, if I withdraw $100k today and put it back tomorrow, then withdraw $100k again next week, the second $100k cannot be repaid and has to be included as income in 2020. If he "repaid" the CRD into a Roth (assuming that is permissible), he can't also repay it to the 401(k).

I would actually argue that it would be the opposite. The Roth conversion isn't a repayment, its another transaction triggering another taxable event. If they meant for the rule to include as backdoor Roth conversion with three years to include the amount in taxes, there would be some way to account for it, and there isn't. Repayment negates inclusion of that amount in income, and repayment of an amount already included triggers a refund.

Luke, the 8915 is pretty simple. You elect to include as income in year 1 or spread over years 1-3. If spread over years 1-3 and you repay less than 1/3, include difference in income. If you repay more than 1/3, excess can carry forward to year 2. In year 2, if you repay less than 1/3 (including any excess from year 1), include difference in income. If you repay more than 1/3, it can carry back to year 1 or forward to year 3. If you included any of the distribution in income in year 1, and repaid an excess in a subsequent year, you file for a refund. There is no option to repay and still recognize as income. Its either income or repaid. CARES and 8915 both address repayment or include in income. that to me suggests an apples for apples distribution and repayment.

The preamble touches on it without going into detail on page 31889

I agree, but I think that if you require an email for some form of HR or safety notice that is regularly occurring and not just ad hoc, you should be ok. It is an area where you need to be careful though. I have some clients where this simply would not fly because most of the participants do not understand computers, internet, and email well enough.

Peter, I think thats enough. The compromise from the proposed rule's provision that you could assign an email just for disclosures is that you can use an employer assigned email as long as it has at least some other purpose. As long as it fills some other function as well, you are ok. It is not enough if applied to @shERPA separate server for terminees example though, which requires a private electronic address.

Yes. Its a no go.

Its not a new form though, the only expected changes are the applicable years

Im not so sure about that. Distributions and repayments have to be reported on Form 8915. That is how you determine the taxable portion of the distribution and whether you receive a tax credit to carry back or forward due to payments already made. From what I have seen, there is no place to indicate that the repayment was made to a Roth IRA to negate the fact that a repayment lowers the amount included in income. Im not sure that the discrepancy here requires human review.

Lol. No worries Austin. FWIW, I have been involved in the back and forth with DOL on this issue for many years, and it has taken a lot to get them to move this far.

You are mixing apples and oranges. Your have an obligation to provide the participant with certain documents. You can always provide the documents on paper by mailing them. The DOL is giving you three outs to provide them electronically with a safe harbor. 1. Get participant consent to electronic delivery 2. Default to electronic delivery. The website delivers the communication. delivering the NOIA is just one of the requirements. You do not have an option of sending the NOIA on paper if the actual document has to be accessed electronically. 3. Default to electronic delivery of the communication itself. If you cant/wont do one of the three, you dont get the safe harbor.

Gotcha. Thats an unequivocal NO. First, the safe harbor requires that it is sent electronically after the initial notice. Second, for terminee's the safe harbor requires that you have a personal electronic address. If you fail to request and receive one upon termination (unless the employee has already provided one), the terminee in NOT a covered individual, and the safe harbor does not apply. Third, for reasons stated earlier in this thread, requiring the participant to do more work to accesss disclosures and miss out on the instant notification and on the go availability of the notice is a non starter. Its not, but you can follow most of the steps and email the documents directly under the safe harbor. The hoops and hurdles are to obtain the luxury of not needing participant consent to electronic communication/notification. The biggest issue with your approach is that you want to take the electronic notice out of the equation, which is really the foundation the DOL crafted the rule on. You can default to electronic disclosure because the participant has indicated that they are willing to communicate directly by giving you an electronic address. You have to monitor this electronic address, and if notifications bounce back or become deliverable, you can no longer assume that the participant is willing or able to access communications electronically, and can therefore not rely on the safe harbor. DOL may be ok with your method (without participant consent, I highly doubt it) , but it does not get the reliance of safe harbor.

Still a few out there, and even more that don't know how to use them ? Good point.

You can deliver the words of the notice on paper or email, but you are not really arguing that an email/text and a paper communication are interchangeable are you?

Yea that is the point I was trying to get across yesterday, a paper notice requiring participant to access the document manually through electronic means is a non-starter for the DOL. The point is convenience and ease of access for the participant, not an easy out for the service provider. It may not be evident in the final rule, but its part of the reasoning and discussions we have had with the DOL for the past decade (or longer). Possibly, but only if the electronic address is a smartphone number. What benefit is a QR code if you are using email rather than accessing it via smartphone? It also fails to capture the other benefits of electronic communication, such as instant notification and access to the notification from anywhere. You are not going to carry around a folder of paper communications so that you can access the disclosure website quickly and easily.

Is anyone aware of IRS activity with similar repayments from other disaster distributions like hurricanes or wildfires? Surely there must have been some folks who tried this in the last couple of years...

Are you reading the rule itself or someones summary? The rule covers disclosure/delivery of "covered documents" to "covered individuals". A covered individual (§ 2520.104b-31(b)) For terminated individuals, it also requires (§ 2520.104b-31(g)) No, what you are looking at is the Initial notification of default electronic delivery and right to opt out , which is always delivered on paper. This notice is different from the NOIA you have to deliver when you publish a covered document. A link isn't required, but they want it to be very simple for the participant (§ 2520.104b-31(d)(3)(i)(D))

Or, "any amount required to be included" is there to differentiate between pre-tax and after-tax assets distributed as part of the CRD. If I take $100K as a CRD ($50K from my IRA and $50K from my Roth-IRA) only $50K is required to be included as taxes.

The big give is opt-out rather than opt-in. That is what we have been asking for for a over a decade. I think you are missing the overall point though. It isn't about what what is most efficient or practical for the service providers, it is about making sure that participants get the disclosures and documents in the easiest and most practical way for the participant. While service providers would love the idea of a form letter and posting something on a website, it doesn't benefit the participant. Your proposed situation is pretty much what the DOL does NOT want. They dont want an easy out for RKs that puts it on the participant to do the leg work to get the information. You can send them a paper copy that is in their hands when they open the envelope, or an email with a link that takes them right to the notice/disclosure. They don't want a bunch of menu's and click-through's to get to the right document. For the safe harbor, it is path of least resistance for the participant. You can use any reasonable method you want, you just don't get the benefit of the safe harbor.

It is a safe harbor for electronic disclosures. The whole point of the safe harbor is that electronic communication is the default because of the advantages of electronic communication (accessibility, reducing postage fees, click a link in an email for a document, etc.) There is little value to the participant to get a form letter sent via snailmail every time the RK or TPA uploads a new document. Why not? It is actually not that complicated. The DOL wants communication to be as clear and simple as possible for the participant. We have bugged them for a long time about electronic disclosures as the default (opt-out). The DOL has always expressed concern over access, and has been hesitant to give us an opt-out as default because it could make it more difficult for some participants with limited access or limited computer/internet literacy (AARP's argument against the rule). They don't want you to default to electronic means for communication/disclosure if you don't have an electronic address (email or smartphone number) that you can send to and monitor. You can always use a different method, it just won't be safe harbor.

Yes and no. You cant just say "log on and read". The rule has requirements for how the notice and access has to work. It needs to be very simple, so more like "go to austin3515.com/disclosures/anotherdisclosureyouwontread.pdf" . The document or link also has to be labeled a certain way. Current terminates would need the initial paper disclosure, and you would need to know a good email for them now in order to send the notice of availability. Future terminates, you could make it part of the termination process to deliver the initial notice get a good private email and phone number for future notices. Many small employers may not be able to do a website for disclosures, but could comply with the new email requirements. Once we iron out the wrinkles I think this will be very helpful.