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Showing results for tags 'gross up'.
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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!
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This isn't a 409A question, but I can't find anywhere else to post a more general executive compensation question. What type of service providers typically perform 280g calculations? Accountants? Attorneys?
