13 hours ago, austin3515 said:

OK I give up.  For those clients who say they know I'll tell them Larry Starr and Mike Preston say you're mistaken ?.  

And you would finally be right!?

9 hours ago, Luke Bailey said:

I guess another question that is begged here is whether the participant's certification just says the equivalent of, "Yeah. I read them and I satisfy one of them," or he or she must check a box specifying which one. The former would virtually eliminate the plan administrator's ever having knowledge that the representation was untrue. Oddly, the statute (2202(a)(4)(B)) would tend to support the former interpretation, because it says the participant must certify that he or she "satisfies the conditions [for getting a CARES Act distribution]," not that he or she satisfies one, or at least one, of them. But that support is weak because the most literal interpretation of the language would in effect turn the "or" at the end of 2202(a)(4)(A)(ii)(II) into "and," and that is clearly not right.

Several things: first, I have said in several threads that the participant certification is going to be "I certify that I am eligible for a CRD" and that's it.  No check the boxes, no need for the PA to "guess" if the participant actually meets one or more of the conditions.  It's just that easy.

Second, please read this about "begging the question"; one of my  pet peeves.  https://www.logicallyfallacious.com/logicalfallacies/Begging-the-Question

It doesn't "beg the question"; it RAISES the question.  Almost never will you be correct in using "begging the question" unless you are truly making the logical fallacy argument in the citation.

34 minutes ago, Kac1214 said:

C.B. - Thanks for the info. I will have the Admin check the form.  All we can figure is they what to self direct the $1400 they have in their account

 

If the form doesn't reflect what is supposed to happen, change the form or use a different one.  The "forms" are NEVER supposed to drive the plan operation; they are there to SERVE the plan operation.

29 minutes ago, C. B. Zeller said:

Coronavirus-related distributions are exempt from the requirement to allow direct rollover. Most of the provider forms I have seen so far don't even have a spot to enter rollover info.

What is the participant trying to accomplish in this case? Rollovers are already exempt from the excise tax under 72(t), and not includable in income, so why bother with the qualified individual certification?

Kac1214: You don't have to and shouldn't be trying to get into the participant's head. That's why we have self-certification.  If he wants to roll it over, he can.  If he wants to take it in cash he can. If the plan wants to adopt CRD's it can, and they CAN be rolled over if the participant wants; maybe he's got enough cash for a couple of months and wants to warehouse the dollars until he needs to spend them. In any case, "I'm an educated man, but I'm afraid I can't speak intelligently about the travel habits of William Santiago" which is to say you have no idea why he wants to do that and it isn't up to you to figure it out since self-certification solves all that.  Take YES for an answer. (If anybody doesn't get the reference, please watch A Few Good Men.)

27 minutes ago, Jess C said:

Question came up, if an employer wishes to adopt a profit sharing plan in 2021 effective 12/31/2020, can they apply a last day rule to the 2020 profit sharing allocation?  

How many angels can fit on the head of a pin?  Stop overthinking this.  Of course they can do that.  The only thing that  has changed is to give us MORE time to adopt a plan; that changes no other rules.

30 minutes ago, Mike Preston said:

It is, but is rare. It is almost but not quite blood diamond take the case of the drunken party where the employee blurts out they committed fraud when submitting the application. That might give me pause.

Me too; I would pause for a minute, give him the form to sign, and then the pause is all over!

1 hour ago, Peter Gulia said:

Several writers in BenefitsLink discussions have mentioned an idea that a plan provision for a coronavirus-related distribution might be unnecessary if the participant who would take it is severed from employment or otherwise entitled to a distribution.  But here’s one further reason why a classification might matter.

 

Some recordkeepers are waiving a processing fee for a coronavirus-related distribution, but not for a normal distribution.

I hate that arbitrary distinction; if I was still in that big HO in the sky, I would be arguing that our "recordkeeper" operation should be waiving all distribution fees for the short period that this applies.  To do otherwise is nonsensical; if I'm the employer, I'll just tell the recordkeeper that it IS a CRD even if it may not be.  What's the downside of that?  Since the participant is the one who decides whether to treat it as a CRD, then I would suggest all distributions likely could be a CRD and the participant so certifies.  Just typical home office stupidity.

9 hours ago, MoJo said:

No I understand completely.  A pooled plan is one where the participants do not control investments.  But in a pooled plan - the money is ALLOCATED.  You may or may not value the plan daily - which means you may not have a number of what earnings are allocatable to each participant's account until you do that valuation - but it can be done at any point in time with no other conditions or information.  The lack of a current valuation does NOT mean the money is not allocated.  It is.  

Amazing, you say you understand and then you spout nonsense.  I have a 401(k) plan for my company QPC.  We contribute approx 5% of payroll with every payroll period, then true it up at the end of the year to make sure I have a 5% contribution.  Since I have a last day of employment provision to get an allocation, there is no way the contributions made during the year are ALLOCATED until we reach the allocation date, which is also the valuation date, which is the last day of the plan year.  Until that point, it's invested in the pool but it has not been allocated to anyone's account.  If someone terminates on 5/1 of the calendar year plan, they get nothing of the 5% contribution that I'm planning on making for that year and those funds are freed up to help pay for the other people who, at the end of the year, are going to get their funds allocated.

BTW, I'm done responding.    You are entitled to your opinion, wrong though that it is.?

6 hours ago, QualGeek said:

I am trying to track down a copy of the Basic Plan Document for the Corporate Benefit Administrators Inc. PPA Non-standardized 401(k) Plan that goes with an opinion letter issued on 3/31/2014 with Letter Serial No:  J396139a.  Corporate Benefits Administrators Inc. is located in St. Cloud, MN.  I keep a repository of basic plan documents for this purpose, but we came up empty looking for this one.  Is there anyone out there that might have access to this Basic Plan Document and would be willing to share it?

Did you try asking them?

952-806-4300

TSC TO ACQUIRE CBA’S RETIREMENT PLAN ADMINISTRATION BUSINESS

6 hours ago, Peter Gulia said:

An IRS interpretation states:  “If the Eligible Employer lays off or furloughs its employees and continues the employees’ health care coverage, but does not pay the employees any wages for the time they are not working, the employer may not treat any portion of the health plan expenses as qualified wages for purposes of the Employee Retention Credit because no portion of the health plan expenses would be allocable to wages paid to the employees.”  That website display includes: “This FAQ is not included in the Internal Revenue Bulletin, and therefore may not be relied upon as legal authority.  This means that the information cannot be used to support a legal argument in a court case.”

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-amount-of-allocable-qualified-health-plan-expenses-faqs

 

A letter from three members of Congress asks the IRS to interpret differently CARES Act § 2301.

https://www.finance.senate.gov/imo/media/doc/050420%20Letter%20to%20Treasury%20on%20ERTC%20health%20benefits.pdf

 

I attach the statute’s § 2301.  And the Joint Committee on Taxation explanation.

 

Imagine your client wants to file its tax return with the position the Congressmen suggest, that the credit applies for health plan expenses even if no other wages is paid.

 

Your client tells you it wants your written opinion to help protect against penalties.  Your client doesn’t ask for a more-likely-than-not opinion; a substantial-authority opinion would meet the purpose.  26 C.F.R. § 1.6662‐4(d)(3) https://www.ecfr.gov/cgi-bin/text-idx?SID=2498c4ede6da62c6daa26b3f833d07b7&mc=true&node=se26.15.1_16662_64&rgn=div8

 

Could you, acting within your profession’s conduct rules, render the requested opinion?

Would you?

 

My queries are not about anything for my law practice.  Rather, I’m tooling-up to teach my summer-semester course on Professional Conduct in Tax Practice.  (My students include people in law, accounting, and actuarial firms, and some who render tax advice for other businesses.)  The New York Times reported on the letter mentioned above, and I hope the story—and your ideas—might illustrate some points about how practitioners manage uncertainty in tax law.  I'll be grateful for any ideas you're willing to share.

This is a case where by the time you are teaching the course, it will have been resolved, so you won't have to deal with the issue! Time heals all wounds?

8 hours ago, Belgarath said:

Austin - I have to say I agree with the previous posters. While I grant that a very small employer would generally "know" that most of these statements were PROBABLY not applicable, there are certainly circumstances where you might THINK you "know" when you really don't. For example, suppose your business partner was diagnosed with Covid, but did NOT disclose this to you? I realize this raises other serious issues, but for purposes of the certification, you don't KNOW. Another situation that comes to mind is a dependent.

"Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;"  - again, MAYBE their spouse got diagnosed and they have not told you, for fear of adverse consequences such as being forced to stay at home and miss work. MAYBE they have  a dependent that you don't know about - a child from an illicit affair, etc., etc...

I suppose I can see your point, if an active employee sends you an e-mail and says, "I want a Covid distribution because I've been laid off" and the employee is still working for you every day, then yes, in such a situation, I'd refuse to accept a self-certification. But other than a completely ridiculous situation like that, I feel very confident that the Plan Administrator is allowed to accept self-certification without a second thought.

IF my plan allowed CRD, then my response to the participant is: "That does not qualify, but here are the things that do. If you can certify that you are eligible, that  is what we need to make the distribution.  See attached self-certification form and sign and return to us if you qualify".  I (my client) never had to deal with the qualification rules; it's always on the participant.  If they lie, they lie.  But no one is going to check.

6 hours ago, austin3515 said:

I have a client where 75% of the staff was laid off/furloughed.  Butt hen again 25% were not.  So its not irrelevant in any event.

I am quite willing to bet that the additional guidance that is coming will expand the definition substantially.  Neither IRS nor Treasury  nor Congress nor the White House want to be in the business of trying to figure out who is affected and how. That's why they put the self-certification in the law in the first place.  IF I have a client who actually adopts CRD language (I don't expect very many), then they will simply get a signed statement from the participant that says "I certify that I am a qualified individual for purposes of section 2202 of the CARES Act to receive a Coronavirus Related Distribution".  QED. The PA is done.

I guarantee it is NOT possible for a PA to SWEAR/Certify that they know everything about the individual so that they can conclude the individual is not CRD eligible.  Just not possible to prove a negative.

2 hours ago, austin3515 said:

From the IRS Q&A released today.

I actually think the standard has now been shifted to the plan administrator “must know for sure they qualify.”  The person either has a personal financial hardship that the Employer would 100% have first-hand knowledge of, or they or their spouse had COVID which an employer presumably would need to know for purposes of notifying co-workers about the need to quarantine, etc.  The Employer would presumably at least be obligated to ask WHEN they had COVID for that reason (was it long enough ago that others are at risk? Are you back to work and you should be at home?). 

Does anyone agree with me?

Nope; you are reading too much into it. Self certification will avoid any issues for the PA.  There is no way the PA can KNOW with certainty that an individual does NOT meet any of the qualifications for certification.  And when we get additional guidance from IRS/Treasury (which we will, and I venture soon), it will be even more clear that there is no way a PA can deny a claim when the participant certifies it.

5 hours ago, Kevin C said:

Do you have access to the 2012 IRS DC Q&A handout from the ASPPA annual conference? Question 41 was about voiding a mid-year amendment to eliminate the SH contribution.  Your timing may not be the same, but you may find it interesting.

Kevin, I probably chaired that session and wrote the Q&As, but I don't have it handy.  If you saw it, why didn't you just copy it into your response; that would have been helpful I would bet.  FWIW.

2 hours ago, MoJo said:

Yes - if it isn't "allocated" it is by definition a "suspense" account - or in other words, "unallocated."

You are getting hung up on semantics.  Money put into a trustee directed plan early in the year is not yet allocated since allocations are only done on the last day of the plan year.  If it is not allocated (yet), then it's unallocated. That is NOT a suspense account or a forfeiture account; it's just part of the natural order of things for a trustee directed pooled account. I would suggest this is not a situation where we can agree to disagree; your statement above is simply wrong, whether you recognize the difference or not, and no matter how many plans "you have".  FWIW.

9 hours ago, MoJo said:

I think you misunderstand a "pooled" account.  It's still "allocated" to participants even though they don't control the investments.  What is being discussed here is a suspense account that is unallocated, much like a forfeiture account - which is unallocated (i.e. no participant knows what their interest is at any given time).  Forfeitures are allowed because of vesting schedules - and the plan document.  Other unallocated suspense accounts generally are NOT in the plan document.  If the plan has a pooled account - you can still "definitely determine" the benefits of each and every participant from the moment it is contributed to the plan.  With an :unallocated" account, you can't.  BIG difference.

MoJo, safe to say you misunderstand our discussion.  A pooled plan is where the participants have no control over the investments; trustees make the decisions for all the money and all participants have the same rate of return. The whole plan is pooled, not just one pooled account in a participant directed account.  And of course, you CANNOT "definitely determine" the benefits of each and every participant from the moment it is contributed to the plan, because the allocation to participant accounts takes place at year end.  And, the allocation almost always includes funds not yet contributed, because a pooled, trustee directed plan is almost always reported on an accrued basis, so contributions that are made after the plan year FOR the plan year are shown in the year end balances (even though the money might not even be in the plan yet).  The plan as an "accrued contribution" on the books.  Hope that helps.

1 hour ago, Jakyasar said:

Hi

Looking at a takeover PS plan. The formula is cross-tested and has 3 groupings (no everyone in their own group option), each identified for a specific job category. Sponsor adopts a resolution each year on how to allocate the contribution.

Sponsor hired a 4th category employee, became eligible for 2019 but does not fit in any of the categories. It is not an excluded class job category.

How to allocate for this new job category, may be 11-g?? 

Thank you

The problem is with whoever designed the plan. When you set up groups that are NOT each person in their own group, you MUST have a final group that is "anyone who isn't in one of the other groups".  To leave that out is to have a failure by the plan designer to consider the very issue you have.  Yes, solve it by doing a -11g and amending to add a catch all group.

16 minutes ago, MoJo said:

Larry, we are cut from the same cloth.  My standard response is the same as yours (why do you want to do that?).  What my team does is work to fashion what the client "needs," rather than simply provide them what they "want."  Others think the easier solution is to cave to client wants - and then it doesn't produce what the client expected (because it wasn't what they needed), my team has to swoop in and fix it (but by that time the relationship has suffered).  My team often jokes about setting up our own shop.  It's only a joke as we all like the paycheck, like the company, and love the work - despite some challenges, and most of the people we deal with (including senior management) have come to trust and rely on us.

Bless you my son!

But, "it's good to be the king" (LS for MB).

3 hours ago, MoJo said:

The amount ALLOCATED is the 415 amount.  The participant doesn't have it until then, so the $105k is what counts for 415 purpose.

We (a large, well known recordkeeper) STRONGLY discourage this for that reason, and about 60 others, including 1) the plan probably doesn't contain a provision for it; 2) the IRS wouldn't qualify a plan that contains such a provision (according to them, there are limited uses for "unallocated suspense accounts" and the client's budget isn't one of them; and 3) what happens if you have allocation conditions not met....

BTW, this has become a big issue right now, as employers are trying to shelter PPP money to qualify for loan forgiveness.  No opinion on if that works or it's "fraud," but not our call.

And it all goes away with a trustee directed pooled plan; we have lots of clients who put their money in during the year, sometimes in January, to be allocated at year end.  The earnings are just earnings of the assets,  never 415 allocations.

55 minutes ago, Towanda said:

The plan is most definitely Top Heavy, and only the plan was terminated.  The business is continuing.

Absolutely, the employees would receive a Profit Sharing contribution . . . but that's only if the owner's deferrals are considered an Annual Addition . . . which it sounds like they may not be if the deferrals were ineligible. 

Getting "facts" is a near impossibility with this client by the way.  She's a slippery one, and that's a whole 'nother story . . .

Time to walk away from this client; we don't allow "slippery" clients and we demand the facts.  Otherwise, find someone else to be your advisor. NEVER LIE TO US either; that's a sure way to get fired.  Now, I question why anyone would terminate this plan mid year instead of as of year end, but that's a whole other thread of discussion that I have no desire to get into with the facts of this situation.

5 hours ago, Belgarath said:

So, a Safe Harbor 401(k) plan amended out of Safe Harbor (match) a couple of weeks ago. Now they got a PPP loan and want to amend back in, for the next 8 weeks, then will probably want to amend out again.

I say no, but this stuff has been changing so fast that I wanted to make sure I haven't missed anything. 

Before even trying to figure out the logistics, I would ask them WHY do they want to do that?  Probably no good reason and they don't understand the ramifications of what they are considering.  Your job is to find out what they think they are going to accomplish, and then advise them the best, legal way to do that, which may not be what they have asked. FWIW.

15 minutes ago, shERPA said:

Yes, it does defeat the explicit provision in the law that the PPP forgiveness is not income, unlike other debt forgiveness.  And I think Grassley was quoted in today's WSJ article saying exactly this.  Although it's not really a surprise that there are glitches in a hastily drafted piece of legislation.  

So Congress may or may not act to fix it, we will see.  Could end up being cannon fodder for other political agendas.

As Frank Zappa said:  "The United States is a nation of laws, badly written and randomly enforced."

 

 

I have every one of his albums and had the wonderful experience of seeing him live at least twice (with the MOI) in the '70s.  Billie The Mountain is still a favorite, but there's lots of others.....  He really was a genius and most people don't know him well enough to know what he was capable of.  If anyone is interested:  https://en.wikipedia.org/wiki/Frank_Zappa

9 hours ago, Kevin C said:

I think this counter-productive argument is more a matter of context.  Our VS document and every other document I've seen calls it an RMD.  The CARES Act added a provision that 401(a)(9) doesn't apply for 2020.  That eliminates the Code requirement for 2020 RMDs, but it doesn't automatically change the provisions in our plans. If a plan doesn't implement the law change, the plan document requires the distribution to be paid in 2020 and calls it an RMD, then, under the terms of the plan, it's an RMD in 2020.

 

 

The law says it's NOT an RMD.  You can call an elephant a horse, but it's still an elephant (this year).

3 minutes ago, MoJo said:

This is EXACTLY the approach my team determined was the best course of action (a team of 10, seven of whom are ERISA attorneys and the other three being the bright ones, whose sole purpose is to function as subject matter experts to the business, our clients and their advisors).  Unfortunately others (notably sales) always come to the table with "everyone of our competitors can do this, why can't we" and undermine the authority my team usually has.  Despite the fact that we can show that not all (or even many) of our competitors are doing it, sales drives "product" and the mere hint of "product" causes RMs to promote it - even if it doesn't exist.

Just griping - but I've been doing this for 35 years, and for larger organizations, control gets diffused. I'll put my team (part of the line of business - not part of "legal") against any other service provider, and most ERISA law firms any day of the week.  Cooperation is still essential, and with too many voices in the client's ear, controlling the message is nearly impossible.  If my team gets in front of the client, it's done.  If not, its pandemonium.

Sorry to hear that; I left big company in 1983 because, even though I was the top technical wiz, there were Peter Principal folks above me who didn't have a clue.  So, we went out on our own when THEY went out of business!  *I* am the sales AND the technical, so I rarely have a conflict with myself (it does happen; just not very often!). And with a client who asks for this, it is never an issue of "others can do it, why can't we" it's "here's how to accomplish what you want in a way that makes sense".

Almost all business owners prefer that way, which is why we deal with business owners and not HR departments. It's also why we never answer a question when a client asks a question.  Instead we ask "why do you want to do that" and you would be surprised what stupid answers we get that we can then show the client the better way to accomplish their objective.

On 4/30/2020 at 12:06 PM, Santo Gold said:

I wanted to confirm that I researched this correctly.  in 401k plans, self-employed individuals can make employee contributions up to the due date of their personal tax return, including extensions, which could mean a 2019 calendar year 401k contribution can be deposited as late as 10/15/20.

But if the same employee/employer has a SIMPLE IRA, the employee contribution deadline is 30 days after PYE?  From the IRS website is below.  So my conclusion is that different timing deadlines apply whether a SIMPLE or not?

Also, does the coronavirus relief change anything for SIMPLE IRA employee contributions?

Thank you

 

When must I deposit the salary reduction contributions?

You must deposit employees’ salary reduction contributions to their SIMPLE IRAs within 30 days after the end of the month in which the amounts would otherwise have been payable to the employees in cash, according to IRS rules (IRC section 408(p)(5)(A)(i)). For self-employed persons with no common-law employees, the latest date for depositing salary reduction contributions for a calendar year is 30 days after the end of the year, or January 30th.

The Department of Labor rule for deposit of the salary reduction contributions may be stricter. They do have a 7 business day safe harbor rule.

 

The sole prop has to 1) determine what his contribution will be prior to 12/31 and 2) make the contribution as soon as his profit has been determined.  If his accountant does his return on 1/15, he has to make the employee deferral part at that point; he does not have legally until the extended due date.  This is something that most everyone gets wrong.  Will the IRS challenge it? They have.