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Found 15 results

  1. I inquire if hardship distributions may occur from rollover accounts and/or Roth rollover accounts. Also, I inquire if hardship distributions may proceed from discretionary contributions. § 401(k)(14): 26 USC 401: Qualified pension, profit-sharing, and stock bonus plans (house.gov) (14) Special rules relating to hardship withdrawals For purposes of paragraph (2)(B)(i)(IV)- (A) Amounts which may be withdrawn The following amounts may be distributed upon hardship of the employee: (i) Contributions to a profit-sharing or stock bonus plan to which section 402(e)(3) applies. (ii) Qualified nonelective contributions (as defined in subsection (m)(4)(C)). (iii) Qualified matching contributions described in paragraph (3)(D)(ii)(I). (iv) Earnings on any contributions described in clause (i), (ii), or (iii). § 402(e)(3) https://uscode.house.gov/view.xhtml?req=(title:26 section:402 edition:prelim) OR (granuleid:USC-prelim-title26-section402)&f=treesort&edition=prelim&num=0&jumpTo=true#substructure-location_e_3 (3) Cash or deferred arrangements For purposes of this title, contributions made by an employer on behalf of an employee to a trust which is a part of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) or which is part of a salary reduction agreement under section 403(b) shall not be treated as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contribution will be made to the trust or received by the employee in cash.
  2. Hello, new here (to the site and the retirement industry in general). Could anyone please help me understand in what circumstances it is permissible to amend to remove an optional benefit? We have a client who purchased two companies via stock purchase and need to merge both subsidiary plans into theirs (messy, I know). There are partial and installment withdrawals in one of the subsidiaries, but we would like the surviving plan to have lump-sum only (with partial and installment only available for RMDs as is standard). It seems like the Code is pretty clear, but I'm just not understand the regs on this matter. Any help you can provide would be much appreciated!
  3. Question #1 - Under the provisions and requirements enacted by the Secure Act for 2020 and beyond, if an IRA owner dies in 2020 or after, and was past their RBD at the time of their death, must a designated beneficiary (who does not qualify as an eligible designated beneficiary) continue to take an annual RMD beginning by 12/31 of the year following the death of the owner, but then also deplete the account by the end of the 10th year after the death of the owner? Internal discussions in my workplace differ, some saying the RMDs are suspended at the owners death, and that the beneficiary can let the balance sit untouched for the 10 year period. Others, believe RMDs must continue but account must be depleted at 10 years. Question #2 - If an eligible designated beneficiary or designated beneficiary (if the answer to #1 above is yes) fails to take a RMD, by the required date after the owner's death, is it merely a failed RMD subject to the 50% excise tax/penalty for the shortfall, or do their payout options default to something else, like the 10 year rule?
  4. We are having a discussion in our office about how distributions are or should be processed. Just for simplicity take a termination distribution. Say that the participant has $10,000 and he's fully vested, to make it easy. He doesn't want a rollover, he wants a taxable distribution. The form he filled out calls for 20% federal withholding taxes and no state withholding taxes. The recordkeeper charges $100 to process the distribution, and our office charges $70. One of us thinks that the 20% federal withholding applies to the full $10,000. The participant has $8,000 after taxes, out of which he pays the fees, and ends up with $7,830 in his pocket. Another of us thinks that the fees come off the top, and the taxable distribution is $9,830. The participant ends up with 80% of $9,830, or $7,864. It matters because we are trying to develop a consistent way of "grossing up" when requesting in-service or hardship distributions. The amount we should request depends upon how the taxes are applied. Thanks in advance for any help you can give!
  5. We have a partial plan termination of a pooled profit sharing plan where 69 our of 76 participants have balances under $5,000. 13 of them have less than $200. Our office uses a popular distribution company that charges $35 per person to prepare a distribution and they do the 1099-R at the end of the year. We also charge a fee on a sliding scale for processing distributions, although for balances under $200, we usually do not charge. In this case, we may need to charge something if we have to invest a lot of time in hunting missing people. That issue aside, for 8 of the 13 people, there isn't even enough money to pay the processor's $35 fee. My question is this: are these little balances considered "de minimis" amounts and can they simply be forfeited? Or must the employer pay the $35 per person so the distribution company can cut a check for as little as $4.26 up to $179.02? Any advice based upon what you and your firm do in such circumstances will be greatly appreciated. Thank you!
  6. A participant owns 50% of the company and recently retired. The participant wants to take a full distribution. Per the most recent annual report, the account balance is about 44% of the total plan assets. I'm concerned that a full distribution from the pooled account might affect the rest of the participants’ account balances negatively. Any concerns or issues with allowing the distribution? Thanks in advance.
  7. For top heavy account balance determination in a DC plan, are unvested amounts that are forfeited included when adding back distributions for participants who terminated during the year? For example, a participant with a total account balance of $10K, of which $9K is vested, terminates during 2017 and takes a distribution during 2017. Would you add back $10K or $9K? EOB gives an example that says, "the former employee's account balance must be included in the top heavy ratio" [my emphasis added]. I can't seem to find anything definitive in the Regs., but logically, it seems like you would add back what would have been the full value of the account (unvested portion included) since that's the amount you would include for someone who wasn't terminated.
  8. Can a governmental plan mandate that participants may only select a lump sum (in lieu of a month annuity) if the value of their accrued benefit does not exceed $5,000? If so, can this be done without consent?
  9. Assume a NQDC participant works in a state with income taxes and retires to a tax-free state. She has two accounts within her deferred comp plan: a 10-year account, paying her $100k per year beginning in the year after retirement. The second account is a lump-sum account, paying out $50k in the year after retirement. She'll receive all the payments while residing in the no-tax state. My question...is there state income tax liability on the $50k lump sum from the source state? Instead of a lump sum, what if she had a 5-year installment of $50k per year. Would that be treated separately from the 10-year payment stream as well? Asked differently, is the 10-year rule interpreted to mean only specific accounts with at least a 10-year stream (or longer) within an employer's NQDC plan are taxed at the retirement state's income tax rate? Or, is the rule interpreted more broadly. Meaning as long as a combination of accounts within an employers' NQDC plan payout for 10 years or more, then all the payments are exempt from source state income taxation?
  10. We brought in a new plan in April 2016 and found out in March 2017 that the 2015 ADP refunds were not distributed. In lieu of QNEC, I think the one-to-one correction method (refunding excess contributions too) is going to be the cheapest route for fixing. I cannot find the in the EPCRS language or in the EOB books that this is also a QNEC deposit. The EOB just says "corrected with a contribution". This correcting contribution is a QNEC, right? Thanks
  11. Hello, Hoping someone can help me figure this out. In June 2014, the plan changed TPAs and there was an error in the transfer of loan balances from the old TPA to the new one, causing certain loan payment schedules and balances to be wrong. In July 2015, the new TPA corrected the payment schedules and the loan balances for the loans affected, however the way they did those adjustments have cause the 2015 loan report to be inaccurate. 1- the beginning loan balances per the 2015 loan report do not agree to the 2014 ending balances. The beginning balances actually seem to be exactly the balances as of the TPA transfer date in June 2014. These balances also appear in the participant's account in the annual activity report under a "converted value" column 2- there are two loans that were offset in 2014 and zeroed out in 2014 when they were deemed distributions. In 2015, because of the issue explained in #1 above, the loans appear to have a beginning balance and are then offset again, causing yet another deemed distribution. This distribution appears in the participant's account in the annual activity report and was therefore included in Form 5500 line 2e(1) when prepared. This is merely a reporting issue since the taxable event occurred only once in 2014, when the 1099s were distributed. In order to correct the 2015 form 5500, I would think distributions line 2e(1) needs to be reduced by the amount of the double counted deemed distributions. Question is, what other line in Schedule H should be adjusted to make it balance? I would think Plan assets needs to be increased, but is that correct? I asked the TPA, since I don't know their system, when the loans were put back on in 2015, what was the other side that was affected so I know how to correct the problem. However, they are not understanding what I mean. As an accountant, we tend to think in terms of debit and credits. Thanks in advance!
  12. Client has an Employer Sponsored Individual Retirement Account plan - adopted in 1978. The employer withholds the participants' IRA contributions (all are after tax) and the participant's match is also taxed, and makes the deposit to an omnibus IRA trust. Now it's up to each participant to claim the deduction (annually) to convert this contribution to a pretax benefit. What happens, however, when a participant doesn't claim the deduction? Maybe due to the fact that the participant couldn't take the IRA deduction for that year and/or subsequent years? The plan now terminates and the trust holds after-tax IRA money? Where can it be rolled? Is it treated like a ROTH? The Plan doesn't allow ROTH. Any ideas?
  13. The recordkeeper charges distribution fees to participants that is deducted before taxes are withheld. If the recordkeeper is charging an ACH or overnight delivery fee, shouldn't that fee also be deducted before taxes are withheld? Is there a citing I can refer to?
  14. We have a client who has inquired about amending the Plan to require a participant with an outstanding loan, who then requests a hardship distribution, to pay back the loan before they can take the hardship. Is this allowed?
  15. If a participant made a distribution request from their 401(k) account on 12/27/12 but the distribution was not processed and paid until 1/3/13 is it correct to record it as a payable on the plan's financial statements or should distributions only be recorded when paid?
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