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  1. Our Mom passed away just after receiving two 401k rollover checks made out to a new IRA account FBO her name. My sister and I are named beneficiaries on both accounts. We have the checks in hand. One plan is adamant that because it's a qualified distribution a new check can only be made out to the estate. The other plan is considering reclaiming the check and issuing out proper beneficiary distributions to us but remains to be seen. It's my understanding that the distribution is a plan asset and ERISA, DOL, IRS would urge fiduciaries to work in our favor? I hope there's some more legal guidance on this that I've missed in researching. These aren't uncashed checks because we're missing or mailed to the wrong address. I know there's been a ruling and chatter from the agencies about taxes on uncashed checks and what to do with them if they stay unclaimed but... This should in theory be straightforward to fix and honor. Any thoughts to change their mind?
  2. 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(14) Special rules relating to hardship withdrawals For purposes of paragraph (2)(B)(i)(IV)- (A) Amounts which may be withdrawn The following amounts may be distributed upon hardship of the employee: (i) Contributions to a profit-sharing or stock bonus plan to which section 402(e)(3)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.
  3. Good Morning. Looking for some direction. I have a Cash Balance plan that is terminating. I have a participant that wants to roll his cash balance money to a Roth IRA. I believe this is allowed, but i have several questions,. Do i withhold the 20% and report it as taxable on the 1099R and how would i code the 1099R? I appreciate any help. Thanks!
  4. Company A, a C-Corp, was formed as a shell, started a 401(k), and the one employee of A rolled over his 401(k) account balance from a former employer. The 401(k) then bought all of the stock of A, and A bought a fast-food franchise with the proceeds. Some years went by, business grew, and A (still wholly owned by the 401(k)) wants to adopt a DB plan for the benefit of all its employees. Any reason this can't be done? It seems to me that A is run as any other business, and in fact already sponsors a qualified plan (the 401(k) plan that owns A), so I don't see any reason why not. Would the answer be any different if the franchise were its own entity, and instead of owning it outright, A and the other entity were a controlled group?
  5. Good afternoon to all, Our client's document says that unrelated rollover money can be withdrawn at any time, while for all other sources, the participant must be 59.5. A participant in the plan with 6 figure unrelated rollover balance wants to withdraw money immediately for the downpayment on a new home. She is literally a month away from turning 59.5. I say that she needs to wait until her date of attainment of 59.5 to avoid the 10% penalty on her withdrawal. However, a colleague is speculating that because the funds originated in the retirement plan of a previous employer, she no longer works for that employer, and she left that employer after turning age 55, she shouldn't have to pay the 10% penalty. I think that could be true if she had left the money in the old employer's plan, but once she rolled it into her current employer's plan, she's subject to the penalty if she doesn't wait until she is literally 59.5. I am never dead sure of anything, though, so I am asking........... What say all of you? Thank you as always for your input.
  6. Has anyone else had a problem with the IRS issuing letters stating that an IRA rollover is taxable income? Five different participants rolled traditional IRA money into their 401(k) plans (4 separate plans, all different employers) in 2016. the 1099-Rs appear to have been issued correctly, showing a code G since they were all direct transfers, and zero taxable amount. These five individuals all received letters in the last few months stating the amounts rolled over were taxable and listed the amount of tax and interest due. In at least one instance the letter even mentioned that the 1099 had a code G on it. I'm not sure, but I think the common denominator may be that none of these individuals reported the rollover on their personal tax returns. Rather than reporting the rollover with zero listed as taxable, I think it was left off the return completely. I can't confirm for all of them, but for at least one this is the case. I do know the IRS sends out letters if things are reported to them by employers / financial institutions / etc and don't match up with what some reports on their personal return. But ultimately, the amounts aren't taxable, so saying the rollover IS taxable seems ridiculous. We see our clients do a lot of rollovers, usually without a blip from the IRS, so to have several this year with inquiries feels like a lot, but maybe it is typical for the IRS.
  7. Are you able to roll money out of a qualified 457 plan into an IRA , even if the 457 plan is not related to a goverment but to a non-profit? I found some language that rollovers are only permitted for 457 plans under a state or local govemnment but not a non-profit.
  8. We have several small DB plans here that have had balances from terminated DC plans rolled into them (prior to my time here). The plans do have provisions to accept rollovers. There does not appear to be any specific language regarding the eventual distribution of the rollover money, aside from an election to exclude it from amounts considered for purposes of small automatic cash-outs. The rollover money has always been treated as an account balance unrelated to the DB calculations, and RMDs from the rollover have been based on the account balance method (correct according to a 2009 thread here). I have two questions: 1) Absent any plan language about in-service withdrawals, may the participants access their rollover money without terminating, retiring, or receiving RMDs? 2) Is there any advantage to this over simply rolling the DC balance directly into an IRA? I understand this might be desirable if someone wants to use their DC money to increase their annuity from a DB plan (assuming the DB plan provides for this), but I don’t see the advantage to attaching it to the DB plan if it’s just going to remain an account balance.
  9. 403b is terminating Sept. 2018 and starting 401k same year 2018. Plan wants move away from universal eligibility for ED on 403b and add age 21 and 6 mth service. - 403b is 001 so use 002 for 401k? - use original effective date as 1/1/2018? - rollover of loans allowed? Does it need to be stated in AA or no? - does excluding vesting prior to effective date of the plan need to be addressed? - any employee can in 403b plan rollover balance to 401k even if they would not be eligible to enter under 401k plan under new eligiblity rules? - employees years of service and vesting still can continue If all the participants chose to rollover to 401k plan? - any other considerations on plan document creation or processing/logistics? I appreciate your help!!!
  10. I have a deceased participant, no designated beneficiary, and no spouse/child/parent. We have been making RMD payments to the Estate for several years, and the participant’s brother is the executor (and plan trustee), so he gets the RMD checks and deposits to an estate account. I should probably say this is for a qualified retirement plan, not an IRA. The Plan is now terminating, so the financial advisor is looking to help him roll over the full balance , but is having trouble with what type of rollover account is acceptable (his own firm is questioning). Most literature indicates that non-spousal beneficiaries may only roll to inherited IRA. How does one establish an "inherited" IRA when no designated beneficiaries exist in the first place? Thanks for any input!
  11. A former participant had his account balance distributed in February 2017. The distribution was processed as a direct rollover to his new company's 401k. The check was deposited in February by the rollover institution, Empower. The plan administrator never gave the authorization to Empower so Empower issued a check payable to our Trust, FBO the former participant, as a refund. The check was issued and mailed to the former participant in April 2017. The former participant sent us the refund check this week. He has held on to the check for almost a year. Do we need to accept the funds back? The form 1099R was already issued. Also, we couldn't accept the check as we have since changed Custodians and the check is made payable to our old bank. What options does the former participant have? Thank you
  12. I recently came across the ISAR or In-Service Alternative Rollover. It seems there is an investment management company and another company offering to "certify" advisors to walk clients through this process, apparently involving hiring an attorney to facilitate an in-service distribution of 100% of assets with no adverse tax consequence and continued participation in the plan while employed. Must be married and is a one-time event. According to their marketing material, "This additional legislation expanded the ERISA recognition of a plan participant’s marital estate and made the ISAR transaction possible. The ISAR has technically been allowed since 1984 for plans subject to ERISA, and was first used successfully in California in the mid 1980’s." Has anyone heard of this or have experience with it, or know what they are actually doing to facilitate this kind of event? I'm not asking because I would recommend it...frankly it sounds sketchy to me and would introduce at least a perception of an inherent conflict of interest for any advisor or insurance agent recommending it to a client. However, I try to stay current on industry trends and this is one I've never heard of before today. Thanks.
  13. It has been my understanding that the new fiduciary rule issued by the DOL applies only to ERISA plans and IRAs (if and when it actually goes into effect). As such, governmental plans and church plans would generally be exempt. However, I recently came across the assertion (here) that money rolled over from an ERISA plan into a governmental plan would continue to be subject to the new fiduciary rules. Has anyone else seen this interpretation of the new rules? I can't find anything else to support the author's position. (By the way, I do understand that advice regarding whether to roll funds between a governmental plan and an ERISA plan or IRA would be advice subject to these rules. The article raises a separate issue by suggesting that the rolled funds would be subject to the new rules while in the hands of the governmental plan.)
  14. Quick question: Can a SIMPLE IRA balance be rolled into a 401(k) balance?
  15. I divorced 20+ years ago and we had a QDRO filed for my no ex-husbands retirement. He cannot retire until he is 62. However with my job, I am eligible to retire at 55. In our original QDRO, it states that I can only receive funds if my EX, retires, dies, or quits his job. What I want to know is: Can I request that the QDRO be amended, so that I can roll it over into my own CALPERS retirement? It has now sat in an account for 20 years and continues to sit there drawing NO INTEREST at all. Please let me know if anyone has challenged this issue and won, how did you do it? Any and all input would be greatly appreciated.
  16. I am considering taking over administration for a plan into which one of the doctors rolled his nonqualified IRA balance in a prior year. Is a rollover from nonqualified (not 457) accounts permissible in any 401(k) Plan (or any qualified plan)? I believe the answer is no, in which case, the next question would be - what to do about it? I don't want to recordkeep these assets, so should I just suggest the doctor roll the money back out as soon as possible? Thanks!
  17. Would a plan that does not otherwise allow loans be able to accept loan rollovers in connection with an acquisition (assuming the accepting plan's rollover language does not prohibit a rollover in the form of a loan and assuming that all those with rolled over loans are non-highly compensated)? On the one hand, it seems that allowing a loan rollover is distinct from allowing the issuance of an original loan under the plan. But I am wondering if it runs afoul of the prohibited transaction exemption for loans, which requires that loans be made available to all participants on a reasonably equivalent basis. Is anyone aware of any authority or guidance on this issue or have any experience or thoughts on it?
  18. An investment provider received a rollover check and allocated it to the wrong plan and thus to the wrong participant. The lucky individual had no plan balance otherwise. After the rollover was allocated to their plan account, they took out a loan. Some repayments have been made on that loan. 1. The person whose money was actually rolled in to the plan needs to be made whole, probably by the investment provider? I assuming the paperwork was in order but just not properly handled on their end. 2. The person who got the funds, via the loan, needs to pay back the loaned amount to the investment provider, not to their plan account? 3. The investment provider needs to empty out the account from the wrong person so it can be used for the correct person's account? Or is this an excess loan that is taxable and still needs to be repaid - but how can it be repaid as a "loan" when there was no balance to actually loan out anyway? Other ideas?
  19. The plan does not allow in-service withdrawals at any time. The plan does allow in-plan Roth rollovers. The plan also allows distribution from in-plan Roth rollover accounts at any time. The plan would like to change that so the in-service distribution options for the in-plan Roth rollover account are the same as the rest of the plan (withdrawals from rollover accounts are not permitted at any time). Is the distribution from in-Plan Roth rollover accounts a protected benefit? Can it be completely eliminated so that the in-plan Roth distributions are the same as the in-service distributions?
  20. Can IRA owner rollover error be repaired during current tax year cycle? In February, 60 year old IRA owner takes $8,000 distribution. In March, replaces funds as a “Rollover Contribution”. In December, changes IRA custodians, UNFORTUNATELY, Original custodian sends check made out to IRA owner’s name (e.g. a rollover) instead of new Custodian’s name (e.g. a custodian-to-custodian transfer). IRA owner deposits check in new IRA with Custodian B. Since IRA owner has not completed tax forms for the year, can he remedy through re-characterization? For example: Re-characterize $6,500 of the $8,000 March Rollover Contribution as a Regular Contribution, Withdraw the extra $1,500 as an excess contribution, Deposit the extra $1,500 as a regular contribution to spouse IRA to mitigate the income tax? Or are other remedies available, given that this is within the current tax year cycle?
  21. Is it still so that a plan, while making a direct-rollover distribution payable to the receiving eligible retirement plan, may mail the check to the participant's address?
  22. How to rollover inherited401k. Is it true the partner get special benefits from internal revenue services while they inherit retirement account including 401K plans.
  23. Prudential administers our physician office's 401(k) plan. However, we have some physicians who have “self-directed” accounts which are an off-shoot of the company 401(k) plan and those funds are held at another brokerage firm such as Charles Schwab. We have a physician who is retired and wants to roll over his 401(k) to an IRA, but Prudential is telling us that this physician must first move his money from his self-directed account back into Prudential in order for Prudential to process the roll-over. The physician is questioning whether that is a legal requirement as he prefers not to move his money from Charles Schwab back to Prudential because the physician will not be able to replicate his Bond portfolio with Prudential. The physician would prefer to move his money directly from Charles Schwab to his IRA. Can anyone shed light on this? Is it possible to rollover directly from the self-directed 401(k) account to an IRA? Or must the self-directed account first be moved back to Prudential before the rollover can be processed? Thanks.
  24. Can a participant rollover funds from a 403(b)(7) into a 401(k)? Any other helpful information on 403(b)(7) would be appreciated!
  25. I have a potential client that has a 401k profit sharing plan (Company A). The owner’s wife owned her own company (Company B) with a Simple plan (no kids so no controlled group issues). The wife died and now the husband owns Company B and so now they are part of a controlled group. The husband merged the plans and the money from the Simple plan was rolled into the 401k plan of Company A. Here are my questions: What is the way to correct the rollover – simply distribute the funds out back to the participants? What if the Simple is disqualified? Does this “taint” the 401k profit sharing plan and cause it to be disqualified? How can you correct Simple money that are rolled into a 401k plan? Can Simple money ever be rolled into a 401k?
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