Larry Starr

You got it! It is a discretionary employer contribution and the plan document has not direct connection via written provisions to the external reason (student loan payment) for the employer contribution.

This will be my last response to you (possibly forever). Tiresome???? Really? I'll leave out my actual thoughts.... Anyway, the document more than likely has language that allows valuations at other times than just the last day of the prior year, as all of ours do. So, the "last valuation" can readily be a current date reflecting the change in values. If you fail to understand that, that's your problem. I'm sorry you "don't care enough" to possibly have the right answer!

From the original posting: QDRO is defined as a cash value at a certain date, to be adjusted through current for g/l. I'd say that clearly is an adjustment for earnings. In addition, original posting had this: Participant has asked if dollar amount as defined in QDRO can be converted to equivalent shares for distribution. That certainly seems like a question about in-kind distributions, so I think the discussion in the thread is appropriate. It doesn't matter, but the participant thinks that if he can get a distribution of assets, he would get assets CURRENTLY VALUED at the number in his QDRO. That is most likely the reason for his "oh so clever" request. What he doesn't recognize is that the actual dollar amount WILL BE REVALUED so that even if he gets assets, it will be worth only the adjusted value.

Maureen: I gave you a link. Please check it out.

Of course you have to look at the actual QDRO language; I don't think anyone said otherwise. And the original posting does include language about adjustment for changes in value. If it's a fixed amount (I just did one a month ago for a fixed $450,000) which doesn't exceed the total value of the account, then the fixed amount is paid. If the fixed amount is a very large percentage of the account, an interim val may be needed to make sure you are not violating the 100% of the account rule (my $450k was out of just over $1m so no problem).

You can try these folks; I can vouch for them: https://pinnacle-plan.com/third-party-administrator-las-vegas/ What it will cost you is dependent on a bunch of things, but it certainly won't be "cheap". Hourly rates could easily be many hundreds of dollars. Good luck.

Of course it's gray; it's a legally undefined term. But go back to the original posting: no way that is going to ever be a mistake of fact. Do you disagree? Also, I should have said only the IRS can determine that an amount is non-deductible; it's not up to the accountant or admin firm to determine that for purposes of the withdrawal of the funds. You need a ruling from IRS. Try and get it!

Why you should never allow in-kind distributions I assume is your question? Because every employee has the right to demand in kind, and that means figuring out how much of each holding in the plan goes to that individual. So, if there is just one mutual fund, no problem. If there are multiple mutual funds, or multiple individual holdings, you are going to have to make pro rata distributions of each one of them. You are talking about a royal PIA.

First, the participant ALWAYS has the right to demand NOT IN KIND. So he can surely demand cash. The only thing is he thinks that means he gets the 12/31/19 value, and the plan SHOULD be revaluing distributions to a more current date anyway, which will eliminate what he thought was such a clever demand! YOU LOSE!

I agree with the other responses. It is possible that the 1099 is the right way. He might be a CEO for hire. He has a company that provides assistance to other companies that need help in the executive office suite, and that is often "loaning" someone to provide those services until the company gets straightened out. So, while not the usual, certainly possible. But the key is, as mentioned, the facts and circumstances of the individual engagement. And it is not your call; the employer and the other advisors are the ones to make the call. Now luckily, he is almost definitely an HCE (if actually an employee) so leaving him out is going to do nothing to hurt your testing.

Where do you live? And recognize, you will be hiring someone to help you and there is a cost for that.

Being told by whom? Make a note of their name and then make sure you never give credence to anything they ever say again! It requires specific plan language, and the plan can be amended to add that provision (every one of our plans allows for distributions at NRA even if still employed).

While all that is true, you are best advised to find someone who can walk you through this. I am NOT volunteering, but we occasionally get called into situations (usually by lawyers or accountants) like this to help the participant and then WE do all the hard work to figure out what went wrong and get it fixed if that is the right call. FWIW.

Right as rain!

Blush!

Plans should NEVER allow for in-kind distributions if there are employees other than the owner in the plan. But ok, you are stuck with what you have. And yes, payee is entitled to in-kind if the plan so provides. Amend plan to eliminate in-kind: § 1.411(d)-4 Section 411(d)(6) protected benefits. See Q2 (b)(2)(iii)(A): (iii) In-kind distributions - (A) In-kind distributions payable under defined contribution plans in the form of marketable securities other than employer securities. If a defined contribution plan includes an optional form of benefit under which benefits are distributed in the form of marketable securities, other than securities of the employer, that optional form of benefit may be modified by a plan amendment that substitutes cash for the marketable securities as the medium of distribution. For purposes of this paragraph (b)(2)(iii)(A) and paragraph (b)(2)(iii)(B) of this Q&A-2, the term marketable securities means marketable securities as defined in section 731(c)(2), and the term securities of the employer means securities of the employer as defined in section 402(e)(4)(E)(ii).

You need a local person you can work with to pursue this issue. You are not going to get what you need from this board. You don't necessarily need an attorney, but that might be one route. What you need is a competent plan administration firm who, for a fee no doubt, would guide you through this by reviewing your actual plan documents to figure out what you are entitled to and then communicating with whoever is the right party to implement the desired process as permitted by the plan. Good luck.

Yes.

First, let's make clear that the original posting provides no viable reason to treat the contribution made in the given situation as anything other than a contribution for the year contributed. The mistake they made was NOT a mistake of fact. By the way, the IRS said that only THEY can determine if there is a mistake of fact, so that makes the concept even more "unhelpful". In this situation you are changing the facts (which is fine) so we might have a different result. Do the facts you propose make it a mistake of fact? Maybe. It is of course a very fact specific determination. In this case, we would have to know HOW the extra money got in, and if all the paperwork you mention clearly provides for something else, what happened to cause this contribution MIGHT be a mistake of fact and maybe you can take it back (within the year). However, if you have to get IRS ruling on that, it might be moot because it could take longer than a year and then you have the problem of administering the plan in the meantime. While it might actually be a MOF, it might not be practical to try to make that case. Tough situation for sure. HOWEVER..... I see no justification to your suspension of erroneous contributions argument. If the money was contributed during the year, the plan provisions apply if you are not going to try to prove a MOF and that means that participants in the plan for that year are ENTITLED to their allocable share of those funds. I don't see any other way around it.

Here is a reasonable discussion of mistake of fact for those who are not intimately familiar with the term. I am including two separate sources. I will address the question separately in a separate response. Here is the first commentary: A Mistake of Fact The Employee Retirement Income Security Act of 1974 (ERISA) and its regulations, which regulate 401(k) plans, forbid the use of plan assets for anything except the exclusive benefit of plan participants and severely restrict the ability to revert plan assets to an employer. Normally, this prohibits money deposited into a plan account from being returned to a plan sponsor or participant. A “mistake of fact” error is considered an exception to this rule. The IRS has determined mistakes of fact to include mathematical and typographical errors occurring during the contribution process. For example, adding an extra zero to the amount remitted to the trust account for a payroll deferral or including a participant multiple times on the same report would potentially be characterized as a mistake of fact. Conversely, the IRS has found that there is no mistake of fact where an employer or a participant unintentionally contributes an amount that causes the plan to fail annual testing. This would include exceeding IRS contribution limits for Participant deferrals, Compensation limits, Average Deferral Percentage testing failures, Average Contribution Percentage testing failures, Top Heavy testing failures, or Deductibility limits. Further, the IRS has found no mistake of fact where a participant selects an unintended deferral rate, contributions are made on ineligible compensation or an ineligible employee is allowed to participate. As they will not allow distributions as a form of correction for testing failures, the IRS has created an alternate system to allow correction for these operational errors as outlined here. Here is the second source of commentary: Focusing on the meaning of mistake of fact, neither the Internal Revenue Code nor ERISA (or regulations thereunder) define “mistake of fact” for purposes of qualified retirement plans. Through private letter rulings the IRS has revealed it views this exception as “fairly limited.” Consider the following excerpt from IRS Private Letter Ruling (PLR) 9144041: Mistake of fact is fairly limited. In general, a misplaced decimal point, an incorrectly written check, or an error in doing a calculation are examples of situations that could be construed as constituting a mistake of fact. What an employer presumed or assumed is not a mistake of fact. Plan sponsors have attempted to zero in on the meaning of mistake of fact through the request of private letter rulings. For example, in PLR 201424032, the IRS concluded that an excess contribution made to the plan based on the incorrect asset value was made because of a mistake of fact. An “erroneous actuarial computation” was a mistake of fact in PLR 201228055. A “mistaken belief about the number of participants and beneficiaries” in the plan constituted a mistake of fact in PLR 201839010. Conclusion While it may be permissible to return an excess employer contribution as a result of a mistake of fact, bear in mind, such mistakes are very narrowly defined by the IRS.

I would suggest you become aware (I would call it knowledgeable) about how a SEP work. A couple of things; first, you will need a customized SEP document (don't use the IRS model). Here's that rule: If I have a SEP, can I also have other retirement plans? You can maintain both a SEP and another plan. However, unless the other plan is also a SEP, you cannot use Form 5305-SEP; you must adopt either a prototype SEP or an individually designed SEP. And this rule applies: Must I contribute the same percentage of salary for all participants? Most SEPs, including the IRS model Form 5305-SEP, require you to make allocations proportional to your employees' salary/wages. This means that everyone’s contribution is the same percentage of salary. If you haven’t made contributions to participants’ SEP-IRAs equal to the same percentage of each participant’s compensation, find out how you can correct this mistake. Where do you find the 25% deduction limit applicable to SEPs? Here is the actual rule: How much can I contribute to my SEP? The contributions you make to each employee’s SEP-IRA each year cannot exceed the lesser of: 1. 25% of compensation, or 2. $57,000 for 2020 ($56,000 for 2019 and subject to annual cost-of-living adjustments for later years).

Are you asking if the EOB answer is correct? Well, it is. For daily valued, I would check the value on the day of the signing of the loan documents and apply the 50% max to that value. And that's what EOB suggests as well.

You don't worry about it! Permanency is mostly a bogey man. It rarely comes up in the real world because the permanency requirement can be easily rebutted with any good business reason for termination. Setting up a 403(b) instead is, in my view, one of the thousands of perfectly good excuses we can come up with!

First, there is no transition. You are either under the old rules or the new rules. If you turned 70 1/2 in 2019 (or earlier), you are under the old rules. If not, you are under the new rules. Example 1: old rules. Example 2: old rules. Neither of these have access to the change in rules. There are NO transition rules; it's black and white (if that's still politically acceptable).

I will take door number 2, Monty! Yes, I'm sure!