Larry Starr

Well, I have to say it: anyone who used a standardized prototype document has done their client a disservice. It's like tying one arm behind you back in a knife fight! Having said my piece..... then, yes, you can still amend it. However, it will take it out of the standardized prototype status. Better to restate it to a regular volume submitter that allows fine tuning of the document and doesn't give away the store like a standardized prototype document does. Frankly, I believe (and you can argue) that those documents were created for those who don't really know what they are doing. We are custom tailors; that is an off the shelf K-Mart special suit!

Here it is for the research challenged ? : SEC. 114. INCREASE IN AGE FOR REQUIRED BEGINNING DATE FOR MANDATORY DISTRIBUTIONS. (a) IN GENERAL.—Section 401(a)(9)(C)(i)(I) of the Internal Revenue Code of 1986 is amended by striking ‘‘age 701⁄2’’ and inserting ‘‘age 72’’. Effective dates are always in a separate section, and here that is (Sec 114(d)): (d) EFFECTIVE DATE.—The amendments made by this section shall apply to distributions required to be made after December 31, 2019, with respect to individuals who attain age 701⁄2 after such date. I've attached the complete PDF of the SECURE act for those who would like to have an easy copy. Secure Act Language.pdf

The dates are important, and while I think you can figure out your answer from the other responses (look at RatherBeGolfing's response for the easiest rule to apply), it's not completely clear the dating applicable in this situation. Did he turn 70.5 in 2019 or 2020? That will give you the applicable rule. 2019, he has to start RMDs now. 2020, he goes to 72.

Depends is correct. It depends on how the beneficiary form is filled out. If the contingent beneficiaries are listed as "per stirpes", the the deceased contingent's 50% share would go to his/her heirs. If it is "per capita", it will go 100% to the remaining contingent beneficiary.

Exactly correct! I'm teaching a quick overview for the Boston Tax Institute (I'm on the faculty) next week as part of our annual 2 day Federal Tax course, and putting together a 3 1/2 hour/half day seminar for early February with additional presentations later in the year.

You need to ask your employer, and I suggest you do so in writing. It appears you are asking about the 2019 year contribution made in 2020. Since it appears you were still employed on 12/31/19, there is no reason to expect you should not be treated just the same as any other employee who was there on 12/31. The fact that you terminate in 2020 should NOT affect the employer contribution due to you for 2019. We have absolutely no idea what you are talking about when you say "they are using the monthly disbursements and a work around in case someone leaves".

I believe you are screwed. YOU were responsible for making sure the payments were made. When the first (or second) payment in 2019 was missed, it was YOUR responsibility to follow up. Ignorance is just no excuse. You did default (under the law) and I would guess their "research" (for what it is worth) will come up with the answer that you are SOL. Sorry.

Be more specific about what is actually going on. Has the judge approved QDRO been provided to and accepted by the plan? What is the problem?

Have her sign it; why not? Yes, theoretically the authority to sign documents can be given to other people, but why bother. If this was my client, she would be the one who signs.

Direct answers to your questions: Yes, the DB RMD will be in 2021. NRA less than 62? No change there yet; IRS rules have not changed. Here is a nice piece from Prudential back in 2015 the explained the "new rules", which won't change until IRS changes them specifically. =============================================================================== Pension plan sponsors must justify the reasonableness of normal retirement ages under age 62 Plan sponsors that have submitted determination letter requests using the most recent version of Form 5300 (Rev. December 2013) may have noticed a new line item 5 that relates to the plan’s normal retirement age (NRA). If the plan is • Any type of defined benefit plan, including a cash balance or pension equity plan (PEP); or • A defined contribution money purchase plan or target benefit plan, it must indicate if the plan’s NRA has been below age 62 at any time after May 22, 2007. If the answer is “yes”, the next question is whether the employer (or trustees in the case of multiemployer plan) has made a good faith determination that this NRA reasonably represents the typical retirement age for the industry in which the covered workforce is employed. If such a determination has been made, a special statement must be attached to the Form 5300 submission. Governmental plans are exempt from this requirement. The Form 5300 Instructions require the attached statement to be “a signed statement that this is a good faith determination of the typical retirement age for the industry in which the covered workforce is employed.” Acceptable NRAs In 2007, the IRS published final rules confirming that defined benefit and defined contribution pension plans may make payments to participants who have reached NRA and have not separated from service with the employer. These rules were generally effective May 22, 2007. They also provided that an NRA of age 62 or later is always acceptable. Originally, the IRS indicated that if a plan sets the NRA between age 55 and age 62, the plan sponsor must simply apply a good faith analysis to determine if that age is reasonable under the specific facts and circumstances. However, an NRA that is lower than age 55 was generally presumed to be unreasonable, unless the plan sponsor could demonstrate otherwise. Two years later, the IRS took a more conservative position, requiring independent data to justify all NRAs below age 62. This position was reinforced in 2012 when the IRS announced that effective May 1, 2012, any pension plan with an NRA earlier than age 62 that uses a master and prototype document or a volume submitter document, may not rely on the related opinion or advisory letter. To obtain approval of that NRA, the sponsoring employer must request a determination letter using Form 5300. Determining and documenting a pre-age-62 NRA While the Form 5300 Instructions do not provide specific guidelines for making the good faith determination that supports the signed statement that must be attached when a non-governmental pension plan provides a pre-age-62 NRA, IRS Notice 2007-69 did require private letter ruling requests for the approval of pre-age-55 NRAs to include the following information: • A description of the industry in which the covered workforce is generally employed; • Identification of the source and date of compilation of data that was used to determine the typical retirement age in the industry; • A presentation and analysis of the data the plan sponsor used to determine the typical retirement age; and • A description of any other relevant information.

K2: thanks for handling the explanation. Save me the effort. Take care.

That quote, while correct, ABSOLUTELY does NOTapply to you. It applies to what are known (legally) as Highly Compensated Employees, and you are not one. My guess is someone just screwed up by limiting you. You can DEMAND an explanation of why you can't defer more than 20% from your employer; then see what happens when they figure out that they can't limit you. Best of luck.

Yup!

The last day of the first plan year of the plan's existence is the determination date for both the first and second years. This is determined on an accrued basis for the first year. Anything allocated to the account as of that determination date is included in the calc.

They figured out what "penalties" they wanted all by themselves; we also didn't champion the elimination of the stretch IRA, even though I suggested many years ago that Congress would eventually eliminate it and with on grandfathering.

Having been involved with shepherding this piece of legislation (I am on ASPPAs Govt Affairs Committee as Senior Advisor), I assure you that provision is correct. No more safe harbor notices for the 3% non-elective. Here's a note I sent to my staff last week: Just a couple of pertinent new rules that will apply starting next year: SECURE also makes a number of changes to the 401(k) plan rules, effective for plan years beginning after December 31, 2019. They include: The annual safe harbor notice would no longer be required for plans using the non-elective contribution approach. Traditional 401(k) plans can now be amended mid-year to become a non-elective contribution type safe harbor plan. (This option is not available for matching contribution safe harbor plans.) If the mid-year amendment is adopted fewer than 31 days before the end of the plan year, the non-elective safe harbor contribution must equal at least 4% of compensation and the actual amendment must be adopted no later than the end of the next plan year. And of course, this is the BIG ONE: Permit a new plan to be treated as effective for the prior tax year if adopted no later than the due date of the prior year’s tax return (effective for tax years beginning after December 31, 2019); I believe you will find it in Section 103a of the act.

Life insurance is NOT a 411(d)6 protected benefit; it can be eliminated. However, in this merge situation, they can also elect to keep the pre-existing insurance and just not allow any more purchases. So the first thing to confirm is that there is no desire to keep the existing insurance in the merged plan. Assuming that to be the case, then the contracts will be removed from the plan. This can happen in several ways: First, the participants should be offered the option to BUY the insurance from the plan for the net cash surrender value. If they can't afford that payment, then the policies can be first "maximum loaned" by the plan so that a big chunk of the cash value is moved out of the contract and into the investment fund. Now, the contract can be offered to the participant to buy for a much lower cost (the remaining cash value, most likely less than 10% of the total cash value prior to the loan). Of course, the contract that is now transferred has the outstanding loan against it. Lastly, if the participant doesn't want to continue the contracts outside of the plan, then they should just be surrendered.

No, this would never be a MEP. It is a single plan of a controlled group; we would have one business as the sponsor as the other as the additional adopter. But only one plan.

Super! Scouting was a very important part of my life early on. Was he in the Order of the Arrow? I was Vice Chief of the Lodge for Nassau County Long Island at the end of the '60s. Worked at scout camp for two seasons, and am now part of the camp staff "alumni organization" that raises money to help keep the camp going (very successfully reopened our closed camp a number of years ago).

Cub Scout Feldt gave you the correct answer in both responses.

The question that led me astray was the one that said "Since they are self employed, do they file a Schedule C?" because by definition, self-employed HAVE TO FILE a schedule C. Your confusion is in paying any attention to 1099s. Basically, you ignore them. The client/accountant has to reflect all the earned income on the Schedule C (or K-1 if it's a partnership) and that will include anything reflected in 1099s that the client may get. But it is the Schedule C that matters; ignore 1099s. Does that help?

The questions you are asking show little knowledge of the important things we deal with and the tax system generally. What is your position? These are fundamental questions; depending on your role in this, it sounds like you need professional assistance. I take it you are neither an accounting firm nor a retirement admin firm. Fill us in on where this is coming from and we might be able to suggest your next steps to gain understanding of what is needed.

Statutory employee is a very specific definition and I would doubt that it applies to a doctor. What do you mean by statutory employee? Who said he is a statutory employee? And what do you mean when you say there is no 1099 or W-2? I understand that there is no W-2 since he is not an employee of anyone else. Where does his income come from? And does he have another business where he has other income and employees? We need to know a lot more than you have included, and I question whether the facts presented are correct.

If they have 1099 income for providing their services, then they are self-employed individuals and are absolutely allowed to set up the same retirement plans as anyone else who has a corporation. You could even set up one plan that covered both sole proprietorships. Yes, they can have a DB plan. The limits would be the same as any other plan. Hope this makes it clear.

Right on point; thanks.