C. B. Zeller

Yes, as long as you are a qualified individual within the meaning of the CARES Act. Code 4 means you are the beneficiary of a death benefit. Notice 2020-50 section 1.C states that "any distribution received by a qualified individual as a beneficiary can be treated as a coronavirus-related distribution."

To address the original question of "How does the CARES Act RMD waiver affect a participant who would have been required to commence distributions by 4/1/2021," this is addressed in Notice 2020-51.

An individual born after June 30, 1949 and before January 1, 1950 would turn 70½ in 2020 and 72 in 2021. An individual born after December 31, 1949 and before July 1, 1950 would turn 70½ in 2020 and 72 in 2022.

If the employee turned 70.5 in 2020, then their RBD is 4/1 following the year they turn 72, under the SECURE Act.

Typically a 401(k) election that is expressed as a percentage will be applied to gross pay (before taxes, medical premiums, or other deductions or withholdings). That is a general trend, but not a rule, so you should confirm with your wife's employer. Most 401(k) plans will allow you to make an election as a dollar amount per pay period, instead of a percentage of pay. If your goal is to defer the annual maximum it might be more practical to do it that way, so you would not have to worry about periodic fluctuations in her pay. You will also need to ask them what they do if her gross pay is not enough to support her elected 401(k) amount after tax withholding, medical premiums, and any other deductions. They might do the maximum, they might do nothing, or they might have some other procedure. Again there is no universal rule on this, but they should have an established procedure in place.

If there are no accruals under the DB plan, then there should be no need to aggregate it with the DC plan for nondiscrimination testing.

Rev Proc 2019-19 6.02(4)(a) (emphasis added)

Sound to me like they have either a significant operational failure which is uncorrected for more than 2 years, or a demographic failure; either way, the correction is VCP. Earnings should be calculated at the plan's actual rate of return.

If an ASG exists, then both companies are treated as a single employer for most purposes. 1. No. He can't contribute to the SEP while part of an ASG (unless he wants to provide SEP contributions to all the employees of the ASG). In addition there is a single 415 limit which applies across all plans sponsored by all members of the ASG. 2. Yes. Since A's only comp is his W-2 comp from the S-corp, the S-corp needs to adopt the 401(k) plan in order for him to make 401(k) deferrals. 3. Yes.

Since both businesses are in the field of law, they are automatically service organizations, and you have to consider whether an affiliated service group exists. The answers to your questions will depend heavily upon whether or not there is an ASG (or controlled group, but that seems less likely to me). Based on the way you worded question #4, it seems likely that an ASG does exist, but ASG determinations are highly fact-dependent. Is Attorney A an employee of partnership B (does he receive a paycheck and a W-2, in addition to the partner's distributions paid to his S-corp)?

If you exceeded the deduction limit, then the excess can't be removed from the plan. Since it was deposited in 2020, it can't be counted as a 2021 contribution either. What will happen is that the amount in excess of 25% of net earned income is not deductible for 2020, and it will have to be carried forward and deducted in 2021, and will count against your 2021 deduction limit. There is also an excise tax of 10% on the non-deductible contribution.

I am thinking that at this point, for a completed 2020 valuation, the options are: Obtain an executed election from the plan sponsor to use the pre-ARPA segment rates for the 2020 plan year, or Prepare a new 2020 valuation using the ARPA segment rates.

Sure, you're allowed to have an earlier NRA than the latest allowed by law. But we're contemplating making the latest age later, which would only be of interest to plans that want to use the latest possible NRA. I don't know about the employee thing. This is what IRC 411(a) says: and 411(a)(8) Says nothing about being an employee on the date they attain normal retirement age. I also don't see anything to that effect in the 411 regs. I would be happy to be proven wrong though. The way I read this, a participant who defers their distribution (and is eligible to do so, i.e. not subject to mandatory cash-out) until NRA becomes 100% vested. Interestingly, though, our plan document (FT William cycle 3 401(k)) only says that "a Participant shall become fully (100%) vested upon his attainment of Normal Retirement Age while an Employee."

What caused the excess? Was it a 415 (annual additions) excess, meaning that the sum of all contributions to your account was greater than your net earned income? Or did the total employer contributions exceed 25% of your net earned income, exceeding the deduction limit? Or was it something else?

Sometimes it works out that way. Of course, sometimes the owner is paying their spouse $20,000 and they are deferring $19,500 of it, so it works both ways.

Apparently your formula is known as the "Simple Dietz Method" https://en.wikipedia.org/wiki/Simple_Dietz_method

The only type of DC plan that I can think of that would be impacted by a change in the NRA would be a target benefit plan, and those types of designs are quite rare. In a typical profit sharing plan, the plan's definition of NRA really only ever comes into play when a participant who is less than fully vested in employer contributions attains normal retirement age and becomes fully vested as a result. Since NRA can be defined as the later of age 65 and 5 years of plan participation, and the longest permissible vesting schedule in a DC plan is 6 years, it is rare for this to occur. But it does happen sometimes, usually either because a participant failed to work enough hours each year to earn a year of vesting service, or because a participant who terminated employment delayed their distribution until NRA.

The failsafe is never your only hope. You can do an -11(g) amendment to correct a failed coverage test. However if the plan document says that a coverage failure will be corrected under the failsafe then you have to follow the terms of the plan document and apply the failsafe. This is a big reason why I advise against the use of the failsafe is most cases; once it's in the document you are stuck with it. You have a lot more flexibility with an -11(g) amendment to correct the failure in the way you want.

Yes. If they employee had any deferrals under a 125 plan, don't forget to subtract those out as well.

That would be an extremely poorly designed fail-safe if it could bring in HCEs who were not benefiting. Can the plan pass coverage on the average benefits test? Hopefully its use is not precluded by the plan document.

This would require a change in the law, as age 65 comes out of IRC 401(a)(14). Since you posted this on the 401(k) forum, what would be the practical effect of the change for a 401(k) plan? Normal retirement age doesn't really mean much in a 401(k) plan.

I assume you're talking about the actual rate of return (used to adjust the credit balances)? The effective interest rate is based on the funding target and has nothing to do with plan assets. Let's simplify your formula a little. Ending balance B = Beginning Balance A + contributions - distributions + gain/loss I. I am also going to use r for rate of return because it's confusing to have two different "I"s in the formula, and I am easily confused! r = 2 * I / (A + (A + contribs - distribs + I) - I) r = 2 * I / (2 * A + contribs - distribs) r = I / (A + 1/2(contribs - distribs)) This is just the formula for a dollar-weighted rate of return using simple interest and assuming that all contributions and distributions are made exactly in the middle of the year. Personally I would not use this unless it would be reasonable under the circumstances to assume that all contributions and distributions happened in the middle of the year (or were made evenly throughout the year). But even then, it's easy to use actual dates and get a more accurate value. I will point out that if you are currently using this formula, changing it would likely constitute a change in funding method, which would require IRS approval. However it might be eligible for automatic approval under Rev Proc 2017-56.

Is the participant otherwise excludable? If not then they must get the gateway minimum. Read your plan document carefully and make sure it provides a waiver of the last day/1000 hour rule for a participant who needs to receive the gateway minimum under 1.401(a)(4)-9. If it does not then you will need an -11(g) amendment to grant them the additional PS.

Just because the plan document says new comp does not mean you have to cross-test. The allocation you're describing would pass the general test on allocation rates but you can't do it if your plan document doesn't allow allocations by individual groups.

Mike and ESOP Guy are correct of course. They must follow the terms of the plan document as written. The best way to get them where they want to be, assuming we are talking about 2020, is to make no contribution under the plan (assuming the amount is completely discretionary) and adopt a new plan retroactive to 1/1/2020 with an individual groups (a.k.a. "new comp") allocation formula. They can then merge the original plan into the new one later on so they are not stuck maintaining two plans forever.