CuseFan

CRDs are optional and an employer can place more restrictions than are legally required (e.g., limit eligibility, limit amount, etc.). If wanting to allow for just for terminated employees, OK. That gets them out of having to withhold 20%, but otherwise no difference as everything else is an individual tax issue if employee is a Qualified Individual.

They could exclude from match (subject to coverage) but not salary deferrals because of universal availability, is my opinion/understanding.

I think the plan must accept rollovers, which typically isn't the case with a DBP.

Mr. Peabody and his pet boy Sherman would be proud.

Agreed, and the sponsor being able to afford the cost would not even be a consideration for any relief since the expense can be paid from plan assets.

Happy Birthday and Thank You for this valuable resource!

with exception for small plans (under 100), which have essentially 7 months.

Yeah, that had me confused too. If a plan will not permit CRDs, then I don't see how it justifies not w/h 20%.

Plans can impose whatever limits they want, is my understanding, provided they are applied uniformly without discrimination.

Everything I have read says a "qualified person" can treat a distribution received in 2020 as a CRD. From NAPA Q&A, and read similar in other places as well. Plan treatment and Participant treatment are independent. CD4: Are terminated participants eligible for a COVID-19 distribution? A: Yes. The treatment to an individual participant is independent from the treatment by the plan. In other words, it doesn’t matter to the participant what the distributable event from the plan was. It may have been due to the plan permitting a COVID-19 distribution or due to another triggering event, such as termination of employment. If the participant is a qualified individual and receives a distribution in 2020, then the individual is entitled to treat the distribution as a COVID-19 distribution—there is no 10% additional tax; the amount can be included in income over three years; and there is a three-year repayment right.

Could a plan that does not otherwise want to permit CRDs in terms of expanded distribution availability nonetheless allow for them on a limited basis (identical to existing distribution availability) such that the 20% w/h is waived? Plans can limit CRDs as desired (on a uniform and nondiscriminatory basis). I assume an amendment would be necessary to do so. Thoughts?

I've been searching for a definitive answer to that for a couple of days and have not seen anyone (industry group and/or legal summaries) explicitly say that if a plan does not permit CRDs that they still w/h 20% even though a qualified participant can treat a 2020 distribution as a CRD. Maybe it's there between the lines - that a 2020 distribution can be both not a CRD as determined by the plan, in that it doesn't permit, and a CRD as determined the participant. Each treats distribution in that fashion. I can get there, was really hoping someone "official" would come out and clearly state it. Both a CRD and not a CRD at the same time? I am hereby renaming CRDs as Schrodinger's Distributions.

Agreed. The only thing I would expect might be allowance for more "virtual" witnessing or notarization of consent, which there was a discussion thread on that last week? Week before? Six Sundays from next Tuesday - anyone know what the heck day it is?!

I think you may be OK if none of those earning an accrual is an HCE, otherwise, you may have to amend (if no fail safe language) in some fashion to provide accruals, like lowering the hours requirement to the extent necessary to benefit 40%.

Fully agree with you both and here's an example of why our interpretations make sense compared to the alternative view. What if the 401(k) plans are both safe harbor and what if one or both exclude HCEs from the safe harbor? Not even considering the transition rules concerning amendment, if you amend a safe harbor plan mid-year to change who is and is not an HCE and thereby also change, mid-year, who gets and does not get the safe harbor, I think you have a big problem. I believe the transition rules were designed so that for a brief time after a merger (1+ PY) that plans of merged entities could continue to fully operate on an "as is" basis (so no "change" amendments) and have time to iron out the logistical details regarding future compliance of the respective plans. These rules are there to help ease the problems of dealing with plan differences, not exacerbate them! Otherwise, WTF bother with the transition rules at all? IHMO

Yes, saw this, hopefully this kind of relief will be granted. Thanks

Not to mention tax return due dates of 3/15, 4/15, ..... It's the zombie apocalypse - where is Rick Grimes when you need him?

The only unwritten rule in retirement plan administration is that those who follow unwritten rules in administering plans end up in trouble with the IRS and/or DOL.

It looks like CEO is being paid/treated as an independent contractor, which may or may not be proper based on facts and circumstances - not your call, the employer's call. On that basis he is not an employee and not included in your testing. You are not making an assumption, you are acting on the facts as represented to you by the employer/plan sponsor.

Does anyone know if any of the ARA bodies have advocated to the IRS or if the IRS is considering filing deadline extensions due to the pandemic? DB plans in particular have a 4/30 PPA restatement adoption due date and, if required, determination letter application filing due date. Just curious, as an unexpected prolonged sickness hitting service providers or their client plan sponsors could derail the timing necessary to complete the process.

Which plan says the DB will satisfy TH - the 401k document, the DB document, both? It should be both, or at least one w/o being contradicted by the other. In a DBP, you generally have a 2% TH minimum accrual. If the plan accrues a 4% benefit you should be good. NOTE, this does not mean a 4% credit allocation in a cash balance plan - the benefit accrual must be at least 2% and a 4% credit won't get you there. If that's the case, switch to provide in DC, especially if you're doing another 2% or close to it in PS.

I do not work with government plans so I'm not sure on the coordination between 457(b) and 401(a) - but in the private sector, you could have 401(k) deferrals of $19,500 (plus catch-up if eligible) and yes, $37,500 in employer contributions taking you up to the $57,000 415 limit. I cannot see your arrangement being limited to anything less than that, I'm fairly certain.

Thanks, but that trail appears to apply to statutory minimums and the timing of amendments to comply, remedial amendment periods and such. You can change things like the lookback month and protect the greater of for a year, but this is totally different. I know we could change for prospective accruals, but the plan is frozen so that doesn't matter. Thanks anyway.

Client has frozen plan with a subsidized lump sum interest rate using the 30-year Treasury less 50 bp. Plan is currently partially restricted under IRC 436, but in the current environment lump sums are valued at 1.16% - OUCH! Does anyone have experience with or knowledge of getting a PLR allowing removal/changing of an unsustainable provision such as this? We know this is otherwise protected, but in the interest of protecting the future viability of the Plan we are looking into options. Thanks

Yes, employer provided group term life insurance coverage in amounts in excess of $50,000 is not tax-free and the value of such is taxable income to the employee.