IHC

Of course, after-tax contributions are subject to ACP testing and if you allow them to be rolled into a Roth before that testing is done, you may find that ineligible contributions have been rolled over. This shouldn't affect an owner-only plan.

C.B. Zeller. Thank you!

Larry, while your answer makes sense and is always what I believed to be true, what is the authority for your answer?

Code Section 401(d) provides that contributions on behalf of an owner-employee (someone who owns 10% or more of a business) must be made with respect to his/her earned income from the employer that sponsors the plan. Do contributions on behalf of a self-employed individual who is not an owner employee (i.e., who owns less than 10% of the business) also have to be limited to earned income from the employer that sponsors the plan? Under Code Section 415(c)(3)(A), compensation for 415 purposes is "compensation of the participant from the employer" but under 415(c)(3)(B), compensation of a self-employed individual is determined by substituting the participant's earned income for "compensation of the participant from the employer". 415(c)(3)(B) doesn't say earned income "from the employer", and I can't find anything else suggesting earned income of a self-employed individual must be only from the employer that sponsors the plan. Any thoughts?

Just looked at this again recently. The statutory language in my view seems to limit non-enforcement to mortgages and similar documents -- not to a loan of this type. So, I don't believe there is an enforcement issue, which in turn means there isn't really a plan qualification issue. Florida made clear back in 1997 that it did not believe ERISA plans were exempt from the tax. But even if plans are exempt, the statute provides the non-exempt party would then be responsible for the tax (i.e., the participant). We landed on the same page as most of the other commenters -- we'll make sure the documentation makes residents of Florida aware that they may owe stamp taxes on the value of the note, and that payment is the participant's responsibility.

Most employers are permitted an administratively feasible time in which to implement a deferral election. The IRS article presumes that the deferral election has not been implemented within a reasonable period. The employer may at least argue that it was simply administratively unable to implement the deferral until early 2019, and that no "correction" is needed. I am not taking a position either way, just throwing this out there.

Just a clarification . . . if the loans are being offset due to a failure to pay the loan in full upon termination of employment, then that is treated as an actual distribution under the Code and a 402(f) tax notice would be needed. If the loans are being treated as a deemed distribution rather than being offset from the participant's account, then I agree with the above.

Would appreciate thoughts on whether a trust company could have one custodial account agreement for a 403b plan that holds both 403b1 annuity contracts and 403b7 custodial accounts. My thought is that the annuity contract has to be held in a separate custodial account (or in no custodial account at all) or the tax-exempt status of the 403b7 custodial account is at risk. Is there anything I am missing? Any nuance in the regulations I've overlooked? 1.403(b)-8(d) seems very clear on this point. Would a master custodial account that holds the b7 assets in a subaccount separate from the b1 annuity contract work? Also, I'd appreciate thoughts on whether a 403(b)(7) custodial account agreement must have what I call "quasi-plan language" in it, i.e., language that states deferrals won't exceed 402g, distributions won't be made at impermissible times, etc. The large 403b vendor agreements seem to all contain this language, but is it absolutely necessary if the plan document has the requisite language? Does it depend on whether the custodial account agreement incorporates the provisions of the plan? Thanks in advance for any insights/feedback.

ESOP guy, Treasury Regulation Section 1.401(a)(9)-7, Q&A-1 states "f an amount is distributed by one plan and is rolled over to another plan, the amount distributed is still treated as a distribution by the distributing plan for purposes of section 401(a)(9), notwithstanding the rollover." I agree with you that the first dollars out are the RMD amount, and that the RMD amount is not eligible for rollover. But I also believe if an RMD amount is rolled over by a plan, the plan is treated as having distributed the RMD. Would still love to here thoughts on my other questions . . .

Curious what everyone's thoughts are on the following twist: Let's say the 401k RK processed a rollover of this individual's entire account balance during the 2018 DCY. The regulations state that the plan is treated as having satisfied its duty to make the RMD even if the RMD amount is rolled over. And the participant has an excess contribution to the IRA (unless by chance he/she is eligible to make nondeductible contributions to the IRA for that year). Do you agree that, despite the rollover of the entire account balance, the 401k RK must prepare two 1099-R's for 2018 -- one showing the taxable RMD amount and another showing the nontaxable balance? See the General Instructions for Form 1099-R that appear to require this. And, if the above is required (and two 1099-Rs are prepared), do you agree the participant has taken his RMD (because he gets a 1099-R showing the RMD amount as a taxable distribution), and so is not exposed to a 50% excise tax? Finally, if you agree two 1099-Rs must be produced, do you agree the 401k RK could be exposed to penalties for failure to file the second 1099-R and/or for failure to include accurate information on the 1099-R?