RatherBeGolfing

The $600 over payment has to make it back to the plan. If the participant won't pay it back, the trustees/plan sponsor is on the hook. Since its an MSSB mistake they should pay it, but since the client has moved on that might be difficult. They need to suck it up and make the plan whole and then try to get money back from the participant or MSSB. As a side note, was this a MSSB brokerage account? If it was, then its pretty clear who is at fault since you have to put the payout amount AND what to do with any funds left over. If MSSB paid an amount other than on the form, they will make it right.

? Why do you assume participants are better off in a state plan? Why is it greedy to utilize retirement plans to maximize your savings?

Why do you assume that the participants are better off in a state plan? Why is it greedy to utilize retirement plans to maximize your savings?

We do the same, but that does not stop people from complaining ? I know some practitioners who have "removed" their document fee by making smaller increases to the annual admin fee to avoid the "why do I have to pay for this AGAIN?" conversation. Im not quite sold on it, but hey whatever works...

Obviously the answer will largely depend on the state plan design, but very few of my clients would dump their current plan for a state plan. Those who would drop their plan are probably those employers who only have their plan because the other companies they compete with also offer a plan. Most (99%) of my plans are designed to maximize the benefits to the owners, and that wouldn't be available in any state plan.

With a $5 balance why not just cash him out and be done?

A roll over to an IRA would not be a taxable transaction and not subject to a 10% excise tax.

It is very possible that what they are telling you is true, but they should still be able to explain it to you. The SPD will not necessarily spell out rules for partial withdrawals if the plan does not allow it, it is more common that it will spell out what you CAN do rather than what you cannot do. So in their example, the SPD might not refer to partial withdrawals simply because the plan does not allow them. I understand what they are saying but it sounds like they need to explain it better to you rather than telling you "tough luck". Is there a reason you have chosen to keep the assets in the 401(k) plan rather than roll them to an IRA? You would have full control in the IRA.

Andy Remo with ARA had a brief rundown of the lame duck tax bill in NAPA net today. Per his article it would require bi partisan support in the Senate so I assume that means they cant use budget reconciliation to pass it without help from the Dems

I agree with @Bird that you cannot force someone to continue payroll withholding for loan payments. Simply having loan defaults does not put the plan in danger, even if it is because the participant withdrew consent for payroll withholding. That said, if the plan admin or fiduciary responsible for approving loans knows that the participant does not intend on making loan payments, the loan should not be approved. I would argue that in that case, it is a distribution rather than a loan and what @QDROphile said above applies.

Thanks Luke. That pretty much sums up how I looked at it too, I just had this nagging thought that I was missing something.

Participant A owns 100% of XYZ corp which sponsors the XYZ Plan. As of 1/1/19, participant A will acquire a significant percentage of ABC corp, which sponsors the ABC Plan. ABC and XYZ will be a controlled group as of 1/1/19. XYZ corp is mostly management, ABC Corp is mostly non-skilled labor. The ABC Plan and the XYZ Plan are both at the same recordkeeper, and the plans will have the same plan design and availability. The only difference is that the ABC Plan has higher recordkeeping fees. As of right now, they would prefer to keep the plans separate. I had a chat with the financial advisor (same advisor on both plans) the other day, and his concern is whether different pricing could be a nondiscrimination issue. My assumption is that the pricing difference is not arbitrary but based on assets, participation rates, and so forth. I believe that all participant features like loans and distributions have identical pricing. It “feels” like a discrimination issue because the plan with mostly low paid labor is priced higher than the plan with mostly higher paid management, but each plan is priced on its own merits. Maybe the turkey leftovers is making me overthink this... Anyone see an issue with keeping the two plans separate based on the difference in pricing?

Im not sure things would have been ready by 1/1/19 even if the proposed regs came out fairly soon after congress acted. You still need a proposed reg, comments, and then a final reg. Then the amendments have to be drafted and the software updated. If it was 2020 rather than 2019, we probably wouldn't have proposed regs yet...

No, I think there will be plenty of people using the new rules 1/1/19, at least in good faith. The bigger issue is that what you do operationally needs to be in your amendment, and if you rely 100% on a document provider for amendments, are you going put something in motion operationally before you know what your document provider is going to include in the amendment? If you have a document/compliance department that is comfortable with handling in-house anything that differs from what the document provider includes in the amendment, then I see no reason to wait longer than when it is possible from a tech/software/training standpoint. I don't think many of the smaller TPAs are going to be in that position, but the bigger ones would.

The law change is effective 1/1/2019, but there are still questions as to how to implement the change. I think most people are uncomfortable with operating outside of what their document provider has prepared. Or in other words, if you operate in a way (even if its a small detail) that is materially different from the amendment that is later prepared by the document provider, who will will amend for that provision, what is the deadline for that provision, and will you now need a det letter?

Yea the proposed regs provide But that is for the final regs. I guess if you use something from the proposed regs that does not make it to the final regs, it would be due by the end of the calendar year?

Like @Bird, we are holding off until we know more. No amendment no distribution ?

This. Im surprised to hear the RK proposing to fix it with negative contributions, they usually resist creative accounting fixes, for good reason...

"B" is the correct answer, but for the 2018 SSA, not the 2017 SSA, unless you code it as voluntarily reported on line Line 6b. "A" is only used for participants who have not been previously reported. "D" is for participants who have been paid out (or started receiving benefits) after being reported as an "A" "B" is used to modify previously reported information, so for example, you could use it to change the vested balance reported as an "A", or to update the status of a participant previously reported as paid out or receiving benefits as a "D". It makes more sense when you also consider the annuity and payment codes. When the participant was first reported as a "D", it should have been with a payment code other than A (lumpsum) to reflect the frequency of payments. Now that the payments have ceased in 2017, it will be reported as a "B" with a payment code A to reflect the lumpsum and annuity code A to reflect single sum. With all that in mind, I don't think there are any consequences for reporting the participant as an "A" rather than a "B", and we know they will screw it up anyway ?

Some are hesitant to do anything document related without a formal amendment from their document provider, even if they could operate in good faith based on the proposed regs. As a more general observation, a lot of folks don't even want to get into the details of rules and regs until they are final. I think its partly the PITA aspect, but also that some are simply uncomfortable stepping outside clearly drawn lines.

My document says that the PA shall correct such excess pursuant to the procedures outlined under EPCRS. My guess is that most documents address it in some way

Yea you are missing something big. I don't know where you get the idea that the loans are secured by other participants balances. That is not how it works, and that is not what was discussed above...

If its a write in ("other") section of the document, I would probably insist on a determination letter. I would not do via an administrative procedure if the document clearly allows for both without restrictions.

Why violate the rules instead of fixing the internal process like you are supposed to?

The Maximum loan is the lesser of $50,000 or 50% of the vested balance. If the vested balance is less than $100,000, the maximum available loan will be less than $50,000 The IRS issued this memo back in July of 2017 in regards to the computation of the maximum loan amount under IRC § 72(p)(2)(A). In the memo, the IRS says that a plan could determine that the highest outstanding balance is could be either the highest balance at one point during the year or a total of all loans during the year. So, both $32,000 and $46,000 are acceptable as "the highest outstanding balance". While it is up to the plan to make the determination, most recordkeepers will probably insist on THEIR determination rather than yours depending on how their system is set up.