CuseFan

As a DBP, participants are whole as the employer assumes the investment risk (unless it's a ROR CBP). If the employer, as a fiduciary, could be considered to have committed a breach, maybe they could do a restorative contribution/payment but not sure it would be deductible. The $100k recovery must go into the plan and there is no deduction for that. As you note, the net loss will flow through the plan's funded status and affect minimum required and maximum deductible contributions, so I would expect the employer would be able to make up the loss on a deductible basis if it so desired (unless already extremely over funded).

No. The plan is required to make the RMD and such portion of any larger lump sum is not rollover eligible. So if lump sum was $100,000 and the RMD portion was $20,000 then only the non-RMD portion of $80,000 may be rolled over. What the IRA owner does with the $80,000 IRA in terms of future RMDs/charitable donations is of no concern to the plan.

Yes, but as you know very well I'm sure, "can" does not mean "should".

For permitted disparity, yes.

1099R reporting goes to both the employee and the IRS, so even if you "filed" the undeliverable employee copy (not recommended) you still owe the IRS a copy.

Just going from memory and defer to experts out there if I'm incorrect but I thought bona fide severance arrangements were exempt from 409A.

so they answer to your question is no - if person was 70.5 prior to 2020 then they must continue RMDs

Depends - check to see how the form reads. Also need to know when the contingent beneficiary died in relation to the primary beneficiary. I could see situation where the lone surviving contingent beneficiary gets it all and I could see a situation where the deceased contingent beneficiary's estate is entitled to his/her half.

Vesting would trigger application of payroll taxes, unless you have a DB SERP formula with a pension offset where the present value cannot currently be reasonably ascertained.

Need more facts - is R the owner, is this an owner-only plan, or is R an employee/NHCE? If R is the owner and no employees/NHCEs impacted, then I think you can do at the 50% rate provided amendment adopted by 12/31. I don't think subject to 204(h) in general and even so, having not completed 1,000 hours, the expected rate of accrual for R for 2019 is zero, and it also looks like the future expectation is also under 1,000 hours a year - hence the lower hours (and lower rate) amendment going forward. So this amendment appears to actually be a benefit increase rather than a decrease. If there are other employees involved then all bets are off.

We have client in kind of a similar situation - benefit is 415 max but plan is over funded on a lump sum basis because the sole participant continues to work into his 70's (and is taking RMDs). However, the plan is slightly under funded I believe on the basis of a 100% J&S because his wife is significantly younger, so he can continue deductible contributions.

Not to be unsympathetic, but you certainly bear some responsibility here by not recognizing that the salary deferrals that were withheld from your pay were not in accordance with your election, if that indeed was the case. It still boggles my mind to hear stories on how various over or under adjustments to someone's pay go unnoticed for extended periods of time. If your salary deferrals maxed out 3 months earlier than planned (i.e., September rather than December), that is a 33% error (if truly an error) - how does that go unnoticed, presumably for the entire year and be a "big surprise"? I would sure notice a withholding error of that magnitude in my pay, regardless of how much or how little I made. If this was not the surprise, and you wanted the accelerated deposits, but were surprised by the lack of a true-up, then you either failed to read the annual safe harbor notice and/or SPD as applicable or your employer failed to properly provide those to you or their narrative was deficient, in which case (and the only case in my opinion) you may have a beef with your employer. Good luck.

I think you have the same 204h timing issue. Would not the increase in hours requirement result in an expected decrease in the rate of accrual? In which case your amendment could not take effect until after 1/1 and then participants would already have earned an accrual, at least on 2020 comp to date. Also be careful in case you have any flat dollar credits. If all participants were expected to work 1000+ hours then maybe the amendment would not necessitate a 204h notice - but remember that IRS can take a series of amendments and consider them as one, the reason being to prevent circumvention of various rules, which is what you are trying to do here, so a savvy agent (don't laugh people) could say you did not comply with 204h on that basis. I would tread lightly, do 204h now and freeze effective 15 days hence and provide minimal 2020 credit (assuming no flat dollar amounts, especially for HCEs). If the first 2020 payroll doesn't happen until 1/10 say, then maybe your argument can be zero plan compensation thru 1/3, for example, and so no credits on that basis. Good luck

That $400,000, if properly reported, will come to him via a W-2 from his (former) employer as it is (formerly deferred) compensation from that employer. So in no way may it be considered self employment earnings for pension purposes.

You are missing nothing - this makes absolutely zero sense.

Did the plan really terminate or was it just frozen? It doesn't sound like a plan termination because you are ultimately required to distribute all plan assets/benefits within a reasonable time and a couple of years is not reasonable.

If still PC, then either it's a C or S corp and a C wouldn't be issuing K1's so sounds like an S, and the Bird tweets correctly - not on W-2, not compensation/earned income. Simple rule of thumb question - are you paying FICA/Medicare taxes or SECA self-employed version on the income? If yes, OK for comp/earned income but if not, then SOL.

I would suggest adding loans as directed investment even if pooled investments, especially with the owner looking to borrow the max. That way, issues that may surface if payments are late, loan default, the interest rate/rate of return, etc. have no impact on other participants.

Yes you can do this, I have a couple clients that do. Need to make sure the after-tax contributions and money-type "bucket" are properly recorded and separately record-kept.

Yes and maybe, if you don't have high enough percentage of NHCEs in Plan 1.

No, the terminated participant cannot be prevented from getting a permitted distribution. The other two cannot get distributions until after they terminate employment or the plan terminates.

The IRS position is that the distribution has been paid and is a taxable event to the participant whose failure to negotiate does affect. That would lead me to believe it should now be part of the estate. DOL might opine otherwise, considering uncashed check still a plan asset, which obviously takes you in the other direction. IRS recently issued a Rev Ruling, not sure about DOL guidance but remember reading about their opinion concerning stale checks, but that's not quite your situation. I was my father-in-law's executor 25 years ago when he passed with an uncashed social security check or two and for the life of me I can't remember if I was able to deposit into his account (estate) or had to have reissued in three pieces to his surviving children. I think you have a taxable distribution to the now deceased participant and the funds are part of the estate.

I don't know that world, but I do know that you need to find an advisor you can trust and who demonstrates that (s)he will put the (all of the) plan participants' needs and interests first, will ensure the plan sponsor employer is compliant with the rules thereby also protecting participant benefits, and who knows and regularly practices in that area instead of someone who may only dabble in that field and/or puts their own self interest first.

There is double taxation on the loan interest because it is paid with after-tax dollars and is considered investment earnings and taxable when distributed, but not on the loan principal. Usually the amount of interest is inconsequential, but as Larry said - do the math (including how your assets would do if remaining invested rather than borrowed) to see how you make out.

Don't hold back Larry, tell us how you really feel - LOL! All kidding aside, I agree ROBS plans are almost always a very bad idea. In some instances they are just a bad idea (sans very). Also agree that protection is contingent upon being a qualified plan, so if all the i's aren't dotted and t's crossed, no PT's etc., then that is the basis where a creditor will challenge ERISA protections.