RatherBeGolfing

S.3612 Small Business Expense Protection Act of 2020 is the Senate bill that drafted to make "fix" the IRS position.

Are you talking about 404a-5 disclosures? I may need more coffee, but it sounds like you are talking about participant disclosures rather than covered service provider - plan sponsor disclosures. The 408b-2 disclosure should discuss the CSPs services, compensation and fiduciary status. If nothing changes, there is really no requirement for a new notice. Many smaller firms combine their service agreement and 408b-2 disclosure, which could be evergreen or annual. 404a-5 disclosures should disclose participant level fees and compensation formula on an annual basis. Quarterly statements with some information is also provided, which must include actual fees deducted from a participant account in the prior quarter.

LOL yea I had a pretty good idea based on the description....

Slightly off topic, but we had a prior discussion on the certification of necessity. Two additional questions were added (5/13/20) to the Treasury FAQ on PPP. PPP loans under 2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

Correct. And the relevant language in Notice 2018-58 can be found in Section 8.1 (page 40)

I had a conversion with one of the auditors from a very big plan audit firm earlier this. He recalled that AICPA stopped short of actually saying that it violated its independence standards due to some heavy lobbying from at least one firm with plenty of influence. Not sure how accurate that is though.

2020-23 postpones certain due dates, including loan payments, but my understanding is that it is up to the plan whether to extend it to the participants. Loan payments otherwise due between April 1 and July 14 are now due July 15, all of them. Interest accrues, no extension of amortization period, and no automatic reamortization. Assuming the plan uses the maximum cure period, 12/31/20 would be the date in order to avoid default.

Agreed. We will absolutely get more guidance. It isn't just mom n pop stores struggling to figure out what will count towards forgiveness etc, the biggest CPA firms in country are waiting on guidance as well since there are too many unanswered questions.

Well they can, they would be paying people to stay home, or using funds that will be (or at this point should be) forgiven to offset employee cost while the business is not making a profit. It isn't the best use of the money from a business owner perspective though.

In this example, the $100k is a corporate asset until contributed as $105k right?

At the time, I think there was also immense pressure on providers to offer a way to utilize the relief in CARES.

The funny thing is that incorrect usage of certain words or phrases can become so common that they are accepted as alternative. I don't know how common it is for schools to offer formal logic anymore, but it was one of the best courses I took as an undergrad.

just a guess on my part, but the lower you get in cost/fees, you are also likely to get less flexibility for something like this.

FYI The "return" date has been extended to 5/14. Also hearing that banks are contacting loan recipients of less than $2,000,000, asking them if they are completely sure that they need the loan, which is adding fuel to the fire.

Yea I know what you are referring to, but I dont know if denying an employee certification and refusing to qualify a DRO are really comparable. I see where you are coming from though

Point taken.

Did anything really change though? Did the law actually have to state that you cannot rely on a statement you know to be false? Maybe Derrin will talk about the Q&A in an hour...

FWIW, I think every form I have seen just lists the requirements for a qualified individual, and then has the participant certify that he or she is a certified individual. I do not believe I have seen one that requires the participant to certify which requirement they actually meet.

I wouldnt say impossible, but it's rare. Even if we increase the odds of having actual knowledge to the contrary, nothing in the IRS Q&A states or implies a duty to question or verify. Unless you know they are lying when they make the statement, you dont have actual knowledge to the contrary and you may rely on participant certification. Dont ask dont tell works fine for CRDs

The majority of my clients have not adopted CRDs or CRLs. Those that did were affected to some degree, from business slowing down to being shut down completely.

$100k contribution, $100k deduction, $5K gains/earning. Otherwise, it would have to be held in suspense, and think we have agreed that is improper right?

We will have to agree to disagree. In 99% of cases, I just don't think the sponsor will have actual knowledge. Also, just because sponsor may rely on participant certification, it doesn't prevent them from verifying the claim if they really think the participant is lying.

The safe harbor did not use different amounts once restarted and then a higher amount once re-amortized, it re-amortized the full amount as of the restart. That is the easiest way to do it. You are not required to use the safe harbor. I don't expect guidance to be too different from 2005-92. The dates/periods are different, and they may be creative there, but most people who argue for "no payments at all for a year" are using the "any subsequent repayment" language to say that you move those payments along with the suspended payments. That was not the interpretation of the same language in 2005, so I doubt they will say it meant X then, but it means Y now.

Im with MoJo on this one. You have a pooled plan, you deposit $100k on January 1, 2020. It is a contribution for 2020, it is allocated for 2020, it is invested according to trustee direction when it hits the account. Just because we don't have a valuation (per the plans formula) that says $3K to Joe, $20k to Sally, etc, doesn't mean that we dont have $100k allocated for 2020. That is very different from a participant directed plan with "holding account" where they park contributions until they figure out who gets what. Unless the plan document is drafted very specifically, you have a problem either way you twist and turn it. If it is allocated when it hits the holding account, then you have failed to properly invest the contribution for each participant once the valuation tells you that Joe gets $3k and Sally gets $20k. If it is unallocated, then you have the problem of an unallocated account. If you want to make deposits as you go to make sure you don't spend it, open a separate corporate account to hold cash until you are ready to make a contribution. You don't get the benefit of shielding the cash from creditors by putting it in an unallocated plan account. We have one PITA plan that insists on funding during the year, and we make them contribute directly to the participant accounts, knowing that once the contribution hits the account it is allocated and cannot come back out. It requires ongoing calculations throughout the year, and the all but guarantees that a maximum contribution will be made.

You are correct that spouse being laid off does not qualify. I would be very surprised if the IRS didnt add that when they issue guidance though. That said, you are reading way too much into what the "Administrstor must know". An employee could have a second job, so the admin would only know that hours had not been reduced with the employer. Another employer still qualifies. I'll double down on "you don't know what you dont know". Just because the employer has not been notified that the employee or employees spouse/dependent has been diagnosed, does NOT mean that the employer had actual knowledge that a diagnosis has not been made. Actual knowledge to the contrary is like knowing the employees house didnt burn down because he lives in your spare bedroom.