Luke Bailey

30Rock, I thought I said the opposite, but maybe I'm not understanding you. I think you would only issue one 1099-R, you would show the entire amount as taxable, you would not withhold, and you would use Code E.

Agree with Lou S., but effectively the employer is paying higher compensation (which the employee can elect to put in plan, or not) if the employee makes elective deferrals. I think this would violate the anti-conditioning rule of 1.403(b)-5(b)(2).

We have used this type of vesting, which before ERISA was permissible and referred to as "class year" vesting, in governmental plans for high level employees. Typically, state law will not prohibit.

Agree with all of the above, but think that the business owner wearing his/her plan sponsor hat is not prohibited from using his/her knowledge of the distribution and its timing to assist in collection efforts. However, if the employee is smart, he/she will do direct rollover to IRA, which will take the money out of the realm of collection.

Check what your service provider agreement says as to responsibility. You may want to resign from this client.

I would read 6.06 as requiring only one 1099-R, showing the overpayment not eligible. It's up to the participant to correct the excess IRA contribution to avoid the excise tax on that. Can't see how any other reporting would make sense.

From this and prior exchanges dealing with Q&A T-32, I think it's safe to say that reg writer did not conceive of every possible path that money coming out of one plan might take, and how long it might take, to get back into a plan of the same employer. I would read the IRS's rule literally. In this case, seems there is a good argument that the money's sojourn in the IRA takes it out of the category of a related rollover, but depending on the facts of an actual case, chiefly the length of the sojourn, that may or may not seem to make sense from a policy perspective.

JackS, you probably skate out because the SIMPLE IRA is not a "plan" under 1.416-1, Q&A G-1. Otherwise, it would seem to me that the mere passage of time would not prevent the rollover from being "related" under 1.416-1, Q&A T-32, second parenthetical phrase of first sentence, which is presumably the rule you were concerned with.

I think that there is large risk (putting aside audit lottery issues) that the IRS would say that the individuals who receive paychecks from PEO are actually still employees of A. Of course, depends on facts and circumstances. I think most PEO arrangements assume that and just put the owners in the same PEO plan. PEOs used to be marketed as ways for family-owned businesses to avoid having employees for 410(b) purposes, but I haven't really seen them marketed in that way for quite a while.

OK, thanks very much, Chaz. Appreciate it. That was my assumption.

Chaz, I think what America wants to know is whether they let your client off the hook with anything less than filing the delinquent filings.

I don't recall any formal or informal guidance from IRS directly saying you have to permit pre-tax if you also do Roth, but at least arguably what is proposed here would be inconsistent with the phrase "in lieu of all or a portion" in 402A(b)(1). Also, the IRS's Q&A's on its website have the following Q&A: Can I make both pre-tax elective and designated Roth contributions in the same year? Yes, you can contribute to both a designated Roth account and a traditional, pre-tax account in the same year in any proportion you choose. Unless the LRMs allow this as an option (and I doubt they do), I would be very leery of doing it. Since you're on an ASC doc, why don't you contact them and ask whether this is a "special rule" that they think you can add.

Good luck, Mumen-Rider.

Rereading your question, Mumen-Rider, I think to accurately assess how tardy these payments are one would need to know how recently the two-year earnout period ended.

From page 5 of 1099-R Instructions: For a direct rollover of a distribution from a section 401(k) plan, a section 403(b) plan, or a governmental section 457(b) plan to a designated Roth account in the same plan, enter the amount rolled over in box 1, the taxable amount in box 2a, and any basis recovery amount in box 5. Use Code G in box 7. I think this applies whether pre- or after-tax. Taxable amount in Box 2a would be only the accumulated earnings, if any, on the after-tax contributions.

Mariemonroe, you have not provided a lot of facts, and I'm speaking off the top of my head, but I think what you're hung up on is something that 409A and its regs don't care much about, and that is the payor. With what you have described, the money will be compensation for services peformed by a "service provider," there is clearly a "service recipient," and if the compensation is deferred, you need to comply with 409A. The issue of why the seller is going to pay this, who issues the w-2 or 1099-MISC, who gets the deduction, what type of deduction, etc., are personal and/or corporate tax issues for the seller and acquired company.

I think it's good income for 415. See Treas. reg. sec. 1.415(c)-2(g)(5).

By definition as a QNEC the amounts are not distributable until death, disability, or separation from service.

If this is an eligible rollover distribution (and it sounds like it is), the withholding rate is 20%. Of course, it could be rolled over, even by a U.S. person currently residing outside U.S., and then no withholding. But the 20% rate applies if an ERD. See 3405(c). And if it was not an ERD, the withholding rate would be determined using the information supplied by the U.S. citizen on Form W-4P. The paragraph in instructions you are referring to, Flyboyjohn is only saying that a U.S. citizen receiving a period payment outside U.S. cannot make the "no withholding" election using W-4P.

Agreed, Kevin C.

I do agree that had he rolled to a different plan, not included. I also agree that the policy rationale for the result I am arguing for is arguable. As to the rest, I think I'm just applying the regs as they are written. The guy is a key employee, now, and he rolled the amount back into a plan of the employer that sponsored the plan from which the distribution was made. So it counts as the benefit of a key employee. Just what it says.

Thanks for the update, Carol. Good to know.

Maybe one way to look at this is, suppose that there had been no distribution or rollover, because the plan and RMD rules had not required (e.g., plan permits installments to beneficiary and W would not have attained 70-1/2 for 10 years). So we get to 2018 and now, in addition to his own account, H is the sole beneficiary for the account of W. Do you have a definite textual basis in Code or regs for arguing that the portion of H's total 2018 plan benefit attributable to W's account would be excluded from consideration? Note that H is clearly a key employee and the first sentence of Q&A-T-24 refers to the accrued benefit of an "individual."

Kevin C, T-12 says that after the relevant period has elapsed, the "individual" who was a key (in this case, W) is no longer a key. H, here, who is still a key, is a different "individual" who has made what T-32 classifies as a "related" rollover. Anyway, that's my reading. Has the virtue (for me!) of being easier to explain. My fingers are wearing out on this one. :)

At the end of the SPD there will be a canned statement describing your rights as a participant and contact info for U.S. Employee Benefits Security Administration.