MDCPA

I think whether a correction is needed will depend upon why the high FICA person has $1,000 required to be treated as catch-up contributions. Technically, the Roth catch-up requirement applies only to those contributions treated as catch-up due to deferrals in excess of the 402(g) limit. If a correction is needed, the W-2 and in-plan Roth conversion corrections are only available if the plan has implemented the "deemed Roth" provisions found in the regulations.

From a statutory perspective, you'll want to ask about blackout dates as there will likely be a need for SOX Blackout notice at least 30 days in advance. Also consider the investment lineup in each plan. Will investments map to the same vehicles, or will these be changing? If changing, will there be a new default investment possibly triggering a QDIA notice. I usually see a 60-90 day lead time for informational notices to participants. These may not be required but certainly lead to a better participant experience, especially if there are significant changes. If this is a 401k plan, will deferral and/or investment allocation elections transfer or will new elections be required? Plan design will drive a lot of what an employer will want to communicate.

I agree. Only pre-tax amounts are eligible for rollover from a qualified plan to a traditional IRA, i.e. pre-tax IRA. After-tax amounts can be converted to Roth by rolling over to a Roth IRA. But under no circumstances are after-tax amounts in a qualified plan eligible for rollover to a traditional IRA.

It has always been my understanding that the ADP test is the sole means of satisfying nondiscrimination requirements for deferrals. Compensation for the ADP test must satisfy 414(s). So a failing 414(s) test in a deferral only plan simply means you can't use the plan's definition of compensation for deferral purposes when performing the ADP test.

Thanks John. I have my own spreadsheet I've maintained for years and I came up with the same results, rounded and unrounded.

So you're suggesting to act counter to published guidance regarding excess deferrals, and have the employer alter payroll records to hide what actually happened to fix an employee's issue? I wouldn't do it, but you have fun with that.

I understand that an in-plan rollover to a designated Roth account of employer securities is treated as a distribution for the net unrealized appreciation (NUA). What are the implciations of that treatment? I think it goes to determining at a later date whether a distribution is eligible for NUA treatment. In order to be eligible for NUA rules, a participant must take a lump sum distribution on or after a "triggering event", typically age 59 1/2 if the plan allows withdrawals at that time, or severance of employment. A lump sum distribution for this purpose is defined as a distribution of all of the participant's benefit under the plan in a single tax year. So if a participant does an in-plan Roth rollover upon attaining age 59 1/2, the in-plan Roth rollover counts as a distribution for NUA eligibility. If the participant in a later tax year takes a distribution from the plan of their entire balance, the earlier in-plan Roth conversion counts as a distribution and thus the full account distribution isn't a "lump sum" distribution. If the participant waits until a new "triggering event", such as severance of employment, then a full distribution could meet the requirement of a "lump sum" distribution. Notice 2010-84 Q&A 7 specifically states that NUA is included in the taxable amount of an in-plan Roth rollover. So there is no ability to get NUA treatment of an in-plan Roth rollover and basis would be the market value of the stock, less any after-tax basis. "Q-7. What are the tax consequences of an in-plan Roth rollover? A-7. The taxable amount of the in-plan Roth rollover must be included in the participant’s gross income. The taxable amount of an in-plan Roth rollover is the amount that would be includible in a participant’s gross income if the rollover were made to a Roth IRA. This amount is equal to the fair market value of the distribution reduced by any basis the participant has in the distribution. (See Notice 2009-75, 2009-35 I.R.B. 436.) Thus, if the distribution includes employer securities attributable to employee contributions, the fair market value includes any net unrealized appreciation within the meaning of § 402(e)(4). If an outstanding loan is rolled over in an in-plan Roth rollover, the amount includible in gross income is the balance of the loan."

I "approach" this by directing the client to approach qualified ERISA counsel to prepare the VCP filing. I'm not an attorney and I'm not touching a filing that might later require a response from legal counsel.

Agree

Well, this is on the right track but technically there is not 6,500 in catch-up. That's the limit but not in this scenario the amount to be treated as catch-up. Assuming the W-2 salary of $27,500 is also compensation for 415(c) purposes under the terms of the document, then the breakdown is: regular deferrals of 26,400, match of 1,100 for a total of 27,500 included in the annual additions testing, and 600 treated as catch-up.

Absolutely, there is an indemnification clause in all our service agreements.

CuseFan - good to know. thanks!

If taxpayer had constructive receipt of the funds in 2021 but repays in 2022, is there some guidance allowing you to adjust the 2021 Form 1099-R to reflect the repayment? I always thought repayment in a subsequent tax year requires the taxpayer to claim the income in year of receipt and claim an itemized deduction in the year of repayment.

I'm not aware the Hacienda has a preapproval process. It is my understanding that any plan intended to qualify under Puerto Rico Code must submit for it's own determination letter.

I'm still struggling with this and will use the CBZ example to illustrate how I am reading these provisions. 2202(b)(2)(A) indicates payments occurring during the period ending 12/31/2020 are delayed for 1 year. So in the example, I would think it is only the payments due April 1, 2020 through 12/31/2020 are delayed for 1 year. The scheduled payments for January 1, 2021 through March 31, 2021 are not delayed and due as scheduled. Then April 1, 2021 the loan amortization schedule is recalculated after the interest accrued from April 1, 2020 through December 31, 2020 is added to the outstanding balance as of April 1, 2021, and the loan term is extended by 9 months (as (C) disregards the "period" described in (A) not the "delay" ). While this seems reasonable to me, I am happy to be redirected if I'm not headed in the right direction. Thank you!

Thanks for the citation C. B. I stand corrected.

I don't normally post anything on this board, but I disagree so strongly with the responses thus far that I felt compelled. The OP indicates the excesses occurred within multiple plans under the same controlled group. So not only is this a 402(g) violation, but also a 401(a)(30) violation. The 401(a) violation should be corrected under EPCRS, see https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-elective-deferrals-exceeded-code-402g-limits-for-the-calendar-year-and-excesses-were-not-distributed for guidance. The ADP test should then be run without considering the 401(a)(30) excesses, and if failing, addressed appropriately.