FPGuy

Try "Tax Facts on Insurance and Employee Benefits 2026" published by National Underwriter. Updated annually.

Not sure if Bill Presson was implying that seasoned money used to pay LI premiums is a deemed taxable distribution, but my understanding is only that it results in Table 2001 (nee PS 58 Table) imputed income based on the net insurance amount at risk. And not sure where ErnieG is going. RPU, if available (and it isn't for a UL or VUL policy) obviously reduces the death benefit, probably quite substantially, and still results in Table 2001 imputed income based on the reduced net amount at risk; but don't see how additional contributions to the plan result in the potential for incidental benefit testing. But maybe I'm misinterpreting his comment. I do agree that whether continuing to hold the insurance in the transferee plan rather transferring it by distribution or purchase to/by the insured participant is a good idea is inherently questionable.

Been a while, but believe there is a 2 year rule and a 5 year relative to using "seasoned" profit sharing money to pay life insurance premiums. The 2 year rule allows 100% of employer contributions (not earnings and not employee deferrals) held in the plan for 2 years or more to be applied to LI premiums; the 5 year rule allows 100% of employer contributions and attributable earnings (but not deferrals and not sure of deferral attributable earnings) to be so applied. Threshold question - following a rollover is money seasoned in the distributing plan considered seasoned in the transferor plan? Query - can an argument be made that until money is considered seasoned in transferor plan (if not by virtue of rollover) you could use the policy's own cash values (at least up to basis) to support the policy irrespective of seasoning?

Does the proposed insurance serve a purpose other than a sop of account value?

As a side note, now that Secure Act 2.0 allows the employee to designate employer contributions as Roth, there are at least two new potential buckets to consider. As a further side note, if the employee has a seasoned Roth account are new Roth employer contributions seasoned by association or require independent seasoning?

Seems to me the cleanest solution is to sell real estate prior to making the distribution and adjust distribution accordingly, unless plan valuation procedures would have any loss relative to appraisal value inure to the detriment of remaining participants. Other than that not sure why this isn't being considered. If there's no or depressed market for the real estate then appraisal is bunk (although that becomes problem for decedent's wife, who may or may not welcome it, if either of the two properties can be successfully distributed in-kind).

Presumably you are addressing need to take decedent's 2024 RMD, which must be taken by 12/31/25. And presumably you could request the RMD figure from whoever had been providing it for prior years. Government not particularly fussy about which IRA(s) the RMD comes from. Believe that per Secure Act 2.0 when beneficiaries inherit equally, iRS will only go after an inheritor who doesn't pony up her/her pro-rata share. Once decedent's RMD taken each IRA is on its own based on respective beneficiary's age, as you indicated.

Was unaware of the nuance in determination of 5% owner status. Fascinating. Could an individual who, say, turned RMD age in 2023 start a new business in 2024, roll in her QP accounts, and be free from RMDs until retirement? And just as an aside, using the cash basis of accounting in which year is the contribution deductible, year made or year in respect of which it was made?

Question states that plan in question was a "SoloK" which can only include owners and spouses of same who are owners by attribution, so RMD cannot be postponed until termination of employment. Business had to have been in existence in 2023 or plan could not have been adopted retroactively. Question in my mind is whether the participant owner's account had a zero balance as of 12/31/23. Assuming a contribution deduction was taken in respect of 2023 could it be argued that account had an indeterminate 12/31/23 balance until contribution was made, and then was the value of the contribution? Seems to me that we have a conflict between being able to adopt a plan retroactive to the beginning of the prior year and a participant's RMD in respect of that prior year if the plan is funded in the subsequent year.

Question states that plan in question was a "SoloK" which can only include owners and spouses of same who are owners by attribution, so RMD cannot be postponed until termination of employment. Business had to have been in existence in 2023 or plan could not have been adopted retroactively. Question in my mind is whether the participant owner's account had a zero balance as of 12/31/23. Assuming a contribution deduction was taken in respect of 2023 could it be argued that account had an indeterminate 12/31/23 balance until contribution was made, and then was the value of the contribution? Seems to me that we have a conflict between being able to adopt a plan retroactive to the beginning of the prior year and a participant's RMD in respect of that prior year if the plan is not funded until the subsequent year. But following David Rigby's suggestion, if the contribution wasn't vested...My understanding is that the RMD is based on total account balance but payment limited to vested balance with difference, if any, rolled into the following year.

I would expect that the owner rolled over the money into an IRA and purchased the annuity therein. Do not believe distributions from the IRA can be applied to satisfy the QP RMD or vis-versa. Have to be separately accounted for. Prospectively, if he rolls over the remaining QP money (after first taking his 2024 QP RMD) he can, courtesy of Secure Act 2.0, aggregate, i.e. count the annuity distributions against the RMD for the combined value of the two IRAs. Again, I am assuming that he purchased an IRA annuity. As an aside, rolling over the QP balance would moot the issue raised about how a QDRO would be constructed.

As backstop to proposed sale/merger, has client considered trying to "absorb" excess through Plan purchase of life insurance?

Have personal experience (family member) with SSDI. Monthly income limits based on wages (exclusive of sick pay, paid time off, bonuses and perhaps other categories as well). Contribution to a 401(k) not reducing wages has no bearing. It is my understanding (not experience) that retirement plan distribution are considered unearned and if so would not count. But again, that's SSDI. SSI's definition of income much broader: “...any item an individual receives in cash or in-kind that can be used to meet his or her need for food or shelter {with some limited exceptions}.” Don't think contributions to a 401(k) affect SSI but pensions (presumably QP distributions) do. Having said that, can only agree with other commentators that subject individual should seek guidance from SS. Maybe employer can help by suggesting questions for him/her to ask.

"May be a REIT"? Figuring out what it is, its liquidity (note that a publicly traded fund could be an interval fund which has limited liquidity), its current and ongoing valuation, and UBTI would seem to me to be primary concerns in probably that order. And the more it represents as a percentage of plan assets the more pressing the answers.

Not sure I agree with, but maybe don't follow, Paul I's contention that the Jan 1 distribution as described is not a RMD but a rollover eligible distribution. My understanding is that first money out in any year for which a RMD is due is the RMD and not rollover eligible. Similarly a subsequent distribution in the same calendar year would be the RMD for that year to the extent thereof. Am also curious about comment regarding obviation of RMDs by mandatory account plan payouts at age 65. Are employees mandatorily retired at 65? If not, are they excluded from plan participation if they work past 65?