DTH

Plan excludes participants who do not elect to make 403(b) deferral of more than $200 for the plan year. There are no exclusions for purposes of employer contributions. Do you count these excluded employees as $0.00 for the ACP test? I have gotten two different answers. Yes, because they could have contributed more if they wanted to and No because they were excluded from making deferrals.

Are these payments subject to federal income tax withholding?

Are monthly installments payments over a period of 10 years or more paid to the participant from a 401(k) plan's trust considered an annuity? A question came up that if a participant is under age 59-1/2 (under 55 if separated from service) s/he should get a Code 2 on Form 1099-R as this type of installment payment is an annuity. Many recordkeepers tax report these as Code 1. If you consider these annuities, please provide the applicable cites. Thank you.

Are monthly installments payments over a period of 10 years or more paid to the participant from a 401(k) plan's trust considered an annuity? A question came up that if a participant is under age 59-1/2 (under 55 if separated from service) s/he should get a Code 2 on Form 1099-R as this type of installment payment is an annuity. Many recordkeepers tax report these as Code 1. If you consider these annuities, please provide the applicable cites. Thank you.

A non-owner participant age 72 working on a full-time basis died in November 2013 before his required beginning date. The only designated beneficiary is the participant's spouse. The spouse wants to directly rollover the entire accunt balance in 2013. The plan allows the beneficiary to elect either the 5-year rule or life expectancy rule. If the beneficicary elects the life expectant rule, the beneficairy's RMDs would begin in 2014. Is a 2013 RMD due? Had the participant lived and retired in July , and requested a direct rollover in 2013, the RMD would have to be paid before the rollover could occur even though he could have deferred his first payment until his required beginning date (i.e., 4/1/2014). An arguement could be made that to the extent the participant died before he retired and before his required beginning date, there is no participant RMD due for 2013. The spouse may directly rollover the entire account without taking a 2013 RMD. Please let me know what your thoughts are. Thanks.

A 401(k) plan permits age 59-1/2 withdrawals from all sources of money. A full-time actively employed non-5% owner age 75 directly rolls over his entire account balance of $50,000 to an IRA on 6/30/13. He continues to contribute to the plan. On 11/15/2013 he decides to retire on 12/15/2013. At the time of the rollover, the employee had not decided to retire. His account balance on 12/15/2013 is $250.00. His 12/31/2012 account balance was $48,000 and his 2013 RMD would be $1,965.07. Does the plan distribute the $250.00 as his 2013 RMD and tax report it as such? OR Does the plan need to report $1,965.07 as the RMD, adjust the tax reporting (i.e., $1,965.07 Code 7 and $48,284.93 as the direct rollover) and inform the IRA and participant that $1,715.07 ($1,965.07 - $250) was not eligible for rollover. My gut says to adjust the tax reporting.. Thanks!!

Hi Sieve, I had the same question come up. I have a participant who is age 73 and still working (not a >5% owner). He rolled over his tradition IRA last year. His IRA RMD was paid to him before the rollover occurred. He wants proof that he does not need to take an RMD from his "IRA" rollover contribution. I'm looking for some sort of IRS cite, published guidance that states that an IRA rollover contribution takes on the characteristics of the retirement plan and no RMD is due from the rollover account that houses the old IRA money. Thanks!!

A plan accepted a rolled over loan note from an unrelated plan. The participant wants to take another loan. Do you take into consideration the rolled over loan note when determining the maximum loan amount the participant can take? IRC 72(p)(2) says ... (A) GENERAL RULE. --Paragraph (1) shall not apply to any loan to the extent that such loan "(when added to the outstanding balance of all other loans from such plan" whether made on, before, or after August 13, 1982), does not exceed the lesser of – If you take "from such plan" literally, you could make a case I doesn't since the original loan was modeled in a different employer's plan. Has anyone had any experince with this? Do you have any cites? Thanks.

Thanks Guru. What is the plan has a separate QDIA Notice or the default investment is not a QDIA. Thanks!!

Does the annual auto enroll notice need to actually name the default investment?

Hi, If an alternate payee is a spouse or former spouse, the QDRO distribution is included in the alternate payee’s income. If the alternate payee is a nonspouse, it is included in the participant's income. How are you tax reporting these distributions for nongovernmental 457(b) plans? I have looked all over for any guidance and have found none. If the alternate payee is a nonspouse, I assume that the distribution is reported on IRS Form W-2 since it is taxable to the participant. If the alternate payee is a spouse or former spouse, I assume the distribution is reported on IRS Form 1099-MISC. Can anyone confirm. Thanks!!

A participant died in 1999, his son is his sole designated beneficiary. I am doing an EPCRS calculation back to 2000. When I do the 2001 RMD what life expectancy factor do I use since this was during the re-proposed RMD regulation transition rule period. The beneficairy was born in 1960. For 2001: Do I use the new Single Life Table looking at his age in 2000 minus 1 (i.e., 43.6 - 1 = 42.6 for 2001 LE) Do I use the new Single Life Table looking at his age in 2001? (i.e., 42.7) This has downstream impacts as I reduce 1 for subsequent life expectancy factors. Thank You!!

A participant's account in a 403(b) plan contains only Roth contributions and wants a plan-to-plan transfer to purchase service credits in a DB plan. I can't find anything in the regs. stating that this is not permitted. Unless the distributing or accepting plan does not permit the transfer of the Roth portion of a participant's account balance, I assume this is okay. If the DB plan provides that it will only accepts transfers of taxable money, I assume only the earnings from the Roth account can be transferred. Has anyone had this scenario come up? Thanks!!

If a plan is distributing an excess deferral or excess contribution that has a related match should earnings/losses be calculated on the forfeited match? The regs don't seem clear so it appears that the plan document would control. Thanks!

Thanks 30Rock. When would the plan amendment needed to be adopted for differential pay? Thanks.

When does a tax-exempt 457(b) plan need to adopt legislative amendments (e.g., WRERA, HEART)?

Thank you. Distributions from a tax-exempt 457(b) plan are tax reported on a W-2. For earnings, I assume these are tax reported on a current year W-2. How are you tax reporting an excess deferral contributions? As these are included in income in the tax year contributed, does the corrective distribution of the excess deferral contribution amount need to be reported at all? Whether it is a plan excess or an individual excess, the W-2 for the year of contribution will indicate the amount deferred. If that amount is over the deferral limit, the IRS 1040 indicates the excess in included in the individual's income. The rule of thumb for a payor is tax report all plan distributions. So I assume that the excess contribution is tax reported too. And it will be up to the taxpayer to reconcile with the IRS.

Hi, If a participant in a 457(b) went over the "individual limitation" for 2009 (i.e., contributed to two unrelated employer 457(b) plans) and the plan allows participants to request this type of distribution, how does this get tax reported? I assume that the excess contributions are not tax reported at all since the taxpayer would have included the excess amount in their 2009 1040. If the excess has earnings, I assume the employer will include that amount in W-2 for the year distributed? I have looked every where for earnings tax reporting instructions and have come up dry. Thanks!!!

Hi. ERISA supersedes state payroll withholding laws with respect to plans that add an automatic enrollment arrangement. Governmental 457(b) plans are not subject to ERISA, so the ERISA preemption rule does not apply. If a 457(b) plan adds an EACA under the Internal Revenue Code, does this preempt them from the state payroll withholding laws? Thanks!

Please note that in the preamble of the final regs., the IRS states that IRC 3405(a) wage withholding applies. If the participant does not elect out of federal withholding, the payor must withhold as if the participant is married with 3 allowances.

The IRS has only provided guidance re: 5498 reporting requirements. Has anyone heard if they are coming out with any more guidance for other issues (e.g., protected benefits, withholding)? Thanks!

If an existing plan is adding a new EACA feature effective 1/1/2009, are you providing an "annual notice" to all "existing" eligible participants by 12/2/2008 for the 2009 plan year (like you would for an annual safe harbor notice) or does the annual notice for existing eligibles begin for the 2010 plan year. For plans that added the feature as of 1/1/2008, we only gave a "pre-participation" notice to all eligible EEs who did not make an affirmative election to participate in the plan and newly eligibles. We are now giving the "annual notice" to all existing eligibles for the 2009 plan year. My gut tells me this was not correct. Thank goodness we are still under proposed regulations. Thanks!

It is my understanding that you can't add an EACA mid-year. I have a profit sharing only plan that is adding a CODA mid-year. Since the EACA is tied to deferrals, I assume that the EACA can be added at the same time as the CODA. Any thoughts?

When a Roth IRA accepts a rollover of non-Roth money from a 401(k) plan is there any special recordkeeping requirements (e.g., special source to house the non-Roth 401(k) plan rollover)? Are there any special rules for the non-exclusion period? It is my understanding if designated Roth 401(k) contributions are directly rolled over to a Roth IRA that has not met the 5-year non-exclusion period, the non-exclusion periods is redetermined. Example 1: Roth IRA opened in 2003 (end of 5-year period is 12/31/2007) Roth 401(k) rolled over to Roth IRA in 2008. Roth IRA owner is age 59-1/2 or older, can take a qualified distribution anytime Example 2: Roth IRA opened in 2006 (end of 5-year period is 12/31/2010 Roth 401(k) rolled over in 2008 (end of 5-year period is 12/31/2012) Roth IRA owner is age 59-1/2 or older, can take a qualified distribution beginning in 2013 Are my examples correct? Do these same rules apply to the rollover of non-Roth 401(k) money? Thanks!

A plan has a QACA feature with a minimum 1% default deferral percentage and a maximum of 6%. If an employee is automatically enrolled into a plan on 7/1/2008, under the regulations the participant must be increased to 2% on 1/1/2010 (unless elects otherwise). Can the plan be drafted to increase the participant on 1/1/2009? Thanks!