Larry Starr

Peter, I don't see how a plan that does not plan to adopt CRD option has a choice on the 20% withholding. It will require (eventually) an amendment to the plan to match what is being done. I don't see this as a "courtesy"; it is a significant plan change and it affects all participants during this period of time. I wouldn't suggest my client do it.

The participant does not have the right to waive the 10%, because the mandatory 20% applies if the plan is not "doing" CRDs. It's 20% because that is the law. What was done is correct; no one will listen to your complaint, except for a lawyer who will be happy to charge you large sums (much greater than your 20% withholding) and then tell you that you have no valid complaint.

That's what you get when you go for cheap with people who are less knowledgeable than most of the professionals occupying these halls. You need to hire someone locally who knows what they are doing and can make happen what is actually best for the employer. Maybe keeping the simple makes sense, maybe not. If this came to us, I guarantee we would figure out what is the RIGHT thing to do for the employer and then make that happen, whether it is keeping the 401(k) or the SIMPLE. But we get paid for our expertise; you need to decide if paying for competence is in your budget. Go find a good admin firm with technical expertise to be your advisor; you will never get the right answers on anything from Fidelity. Strong statement to follow!?

Look, you put "retired" in scare quotes in your original posting. Why? BECAUSE SHE IS NOT RETIRED, and you knew that. All that happened is she reduced the number of hours she works; she is still an employee. She is neither retired nor terminated. Your question is really whether at her age she can get an inservice distribution which can then be rolled over; that depends on the plan provisions, but most likely (statistically) that plan doesn't provide for a distribution while still employed at age 56.

Why complicate your life? Determine how much IN DOLLARS you want contributed by year end. Subtract how much you have contributed so far. That is what you have left to contribute this year. Determine how many paychecks are left until year end where you can modify your deferral election. Divide the amount left to contribute (calculated above) by the number of paychecks left. That is your amount per paycheck until the end of the year that you want to defer. Fill out a new election with that dollar amount. Remember to change it for the beginning of next year for a full year calculation. If you really want a percentage, you can determine what percentage that is of your regular check, but if your check changes, your results at year end may or may not be what you want, so a dollar amount avoids all that.

This is one that I wouldn't even bother with trying to answer. We would not let a client do this; the plan TERMINATED as of last month and they want to add CRD's. Nope. To quote Nancy Reagan: Just Say NO! Now, I recognize that we seem to have more control over our clients than most, and for those of you who might have less control, you have my condolences!?

Thanks Bill. Good to see you on here.

The plan sponsor is not required to adopt any part of the CRD scheme. However, let's reiterate: that doesn't mean the participant can't claim CRD treatment on their own tax form. You have identified the "glitch", which is that the 20% withholding WILL apply (participant has no right to waive it). Payee has to live with those results.

I've considered everything, and committed to nothing! We simply do not know what they are going to allow and how they are going to calculate it. At this point, our opinion is that they are going to count contributions to the plan made in the eight week period, with no limitations. So, a one man DB plan with no employees is limited to $100k for comp, but his $220k DB contribution in the 8 weeks will completely meet his obligation to be entitled to the full 100% forgiveness. Is that fair? Doesn't matter. What matters is what the law is and how they defined the reimbursement rules. Will end of year allocation matter? Nope. If all they will look at is contributions, then that does not matter. And, they clearly are NOT going to have to look at actual allocations to certify the forgiveness. But, I am telling clients to wait (for now) until we have some more guidance; but meanwhile I am deferring putting in our own company contributions (normally made with each payroll date) until our 8 week period starts and suggesting that clients do likewise. We have been approved for our PPP amount (before the funds ran out - I guess it does help to be a corporator of the bank I deal with!) and now just waiting for the paperwork and the disbursement, all expected next week. If the guidance isn't out and the 8 weeks is running out, I'll suggest clients go ahead and make the contribution within the 8 weeks anyway; it can't hurt and probably will be the rule. But if it isn't, the money was going to be contributed anyway so no harm no foul.

I don't think the failure to provide a notice to the employer will eliminate the ability to declare you are eligible and treat the distribution on your personal return as a CRD. Also, I don't believe there will be a special code now (there wasn't for Katrina). I had previously suggested a separate code but I don't think we will get it OR that it is necessary. There will be some sort of identification process with the personal return in order to treat it as a CRD and get the spreading of the taxation benefit. Of course, we might all be surprised by whatever they ultimately tell us to do, so keep an open mind on this stuff.

I believe that would be payable to the estate.

Got it! Yeah, I'm not willing to make that call at this point; maybe Derrin will have wise words! If it is determined that it is NOT a distribution, just a taxable event (and I'm not quite sure that those aren't definitions without distinction in this situation), what's to stop the employee from still treating it as a CRD and handling their 1040 appropriately, including the ability to pay it back into, say, his IRA over the three years?

Why wouldn't they be? Do you see something that would avoid treatment as any other employer payment?

Need to know if the distribution is being made in the year of death or a subsequent year.

OK; that's the reason I asked. If it's not a governmental plan, you need to know what it is, since I think you can't have one of those "FICA Alternative" plans UNLESS the employees are exempt from SS, and a non-governmental plan doesn't fit. Now, lots of universities have these, because they are state entities and can be exempt from SS. Private colleges do not. I haven't looked at these plans in 100 years (maybe more) so there could be some changes that I am not aware of and with all the PPP stuff going on (I GOT MY APPROVAL AT NOON TODAY, just before they are supposed to run out of money by close of business!!!! YEA!) I just don't have the time to dig back into it. Let's start with "what kind of employer is it?".

The taxes are gone; the feds have them and will keep them until a personal tax return is filed and the true up of taxes owed or to be refunded is determined. However, he can return 1) part of the distribution (the 80% he still has) or 2) 100% IF he can come up with the other 20% from his pocket. And, he could use up to the 3 years to come up with that other 20%. If he ends up with a taxable amount (effectively, the tax would be on the 20% not returned in the first year), he could split it over 3 years and still pay it back before the 3 years are over and that would eliminate the tax retroactively and most likely require filing amended returns to get the money back.

Some assumptions are being made here; for example, my plans all have J&S provision to avoid disinheriting children from a prior marriage. That said, what exactly is the administrative nightmare? Assuming the participant has been properly notified and distribution forms provided, if he/she doesn't respond, he/she is told what will happen, and then it happens. How is this an administrative nightmare? What do you see as complicating the situation, other than the possible unhappiness of the ex-partner, but that is not an administrative issue.

I love what you guys have analyzed. However, I'm not sure that I agree with this response, but I have to admit I haven't absorbed all the rules yet and we have VERY FEW loans in our plans (yeah, I know.... you all wish you could do that!!!?). Here's the issue. While the plan might not treat that distribution as a CRD, the participant is, I think, free to treat it as such on his tax return. We clearly are allowed to have different plan treatment and 1040 tax treatment with these distributions. Am I wrong?

Trailing question answer: yes. ANY plan is allowed for repaying the distribution, including IRAs. Last question: if it's a CVD distribution, then yes, they can put it back if the plan allows rollover contributions. Or they can put it in another plan (like a personal IRA).

Before I get too deep into it, is it a governmental plan not subject to ERISA that you are referring to?

I've never heard of this program, but the answer is easy. Since deferrals, by definition, HAVE TO BE deferrals, there is no way he can ever write a personal check for any deferral. Whether he is even eligible is a separate question, and I would tend to doubt it. Sounds alot like a temp employee from an agency for that first 90 day period.

If the plan is allowing for the payout, it can be a CVD (Corona Virus Distribution) regardless of the reason. As to the distribution taken, treat it as a CVD and it can be put back (there is that 3 year rule that now applies to his distribution). It can't be an RMD because those (legally) don't exist for 2020. I don't understand your third question. There are no RMDs this year AND the rule is now 72; what are you asking?

Doesn't matter what the employer calls it. He meets the plan requirements for retirement and is entitled to the benefits provided by the plan in such circumstance. I'm sure it doesn't have any language requiring him to wait for two breaks in service. If the employer balks, participant calls DOL and that will solve the problem quick!

Scam is a perfect definition. There is NO SUCH DOL REQUIREMENT. We have had clients get calls from them; our clients are educated to know these kind of calls need to be reviewed with us. This group calls to "disturb" the client, to get the meeting, to convince them they are doing wrong things, and ultimately to get the assets under the control of the person who is buying the leads.

I have no doubt that "spouse being terminated due to COVID" will qualify. I would proceed on that basis without hesitation.