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Has anyone had any experience with the iRS regarding recoveries of withholding overpayments made by a pension plan or is aware of any guidance? For example, assume that a pension plan continues to pay benefits to a deceased retiree's bank account and the joint holder of the account retains the funds or the funds are returned to the plan by the bank. An IRS letter dated May 15, 2003 from the Office of Chief Counsel entitled "IRS Letter on Recovery of Erroneous Withholding" states that the plan can file Forms 843 and 941c (apparently Form 941c was replaced by Form 941-X). The guidance contained in this May 15, 2003 letter appears out of date. And it would appear that IRS Form 945x is more appropriate. IRS Letter May 15, 2003 re withholding recovery.pdf

We represent Buyer in a carve-out transaction. The subsidiary that we are buying is the legal employer of its employees, but HR functions are centralized at parent level. Several employees of sub who are coming to buyer will receive retention bonuses post-closing, paid by the Seller. The legal question is whether, where the services are not provided (and have not been provided) directly to seller but to PHS and the consolidated group is being split by the transaction, which is the proper entity to conduct payroll withholding on payments made after the closing?

Hey Y'all! Quick question for my fellow practitioners. I am studying the DC-2 book to eventually get my QKA and I came across a sentence saying that corrective distributions (ADP & ACP corrections) are subject to 10% withholding unless the participant completes a Form W-4P. I was wondering who all was practicing this? I don't recall ever seeing a corrective distribution with any withholding applied in my short tenure. Thanks in advance!!

Is 20% withholding required on distributions to qualified trusts who are beneficiaries of a qualified plan (e.g., a 401(k) plan) ? IRS Notice 2007-7 Q&A 16 states: A plan may make a direct rollover to an IRA on behalf of a trust where the trust is the named beneficiary of a decedent, provided the beneficiaries of the trust meet the requirements to be designated beneficiaries within the meaning of § 401(a)(9)(E). The IRA must be established in accordance with the rules in Q&A-13 of this notice, with the trust identified as the beneficiary. In such a case, the beneficiaries of the trust are treated as having been designated as beneficiaries of the decedent for purposes of determining the distribution period under § 401(a)(9), if the trust meets the requirements set forth in § 1.401(a)(9)-4, Q&A-5, with respect to the IRA. https://www.irs.gov/pub/irs-drop/n-07-07.pdf I know that qualified trusts can be directly rolled over to IRA - so they are eligible rollover distributions. I also found reference in 402(c)(11)(A), which states, in part: (11)Distributions to inherited individual retirement plan of nonspouse beneficiary (A)In general If, with respect to any portion of a distribution from an eligible retirement plan described in paragraph (8)(B)(iii) of a deceased employee, a direct trustee-to-trustee transfer is made to an individual retirement plan described in clause (i) or (ii) of paragraph (8)(B) established for the purposes of receiving the distribution on behalf of an individual who is a designated beneficiary (as defined by section 401(a)(9)(E)) of the employee and who is not the surviving spouse of the employee...the transfer shall be treated as an eligible rollover distribution. IRC Sec. 3405(c)(1)(B) subjects eligible rollover distributions to 20% federal withholding and ties back to IRC 402(f)(2)(A). 402(f)(2)(A) uses the same meaning as used in 402(c)(11). I am just wondering if the result in Q&A 16 conflicts at all with the language in 402(c)(11) which would change the result. If the qualified trust is subject to 20% withholding, is the answer different if the trust is not considered "qualified" - and, in those cases is the distribution subject to 10% waivable withholding? Any additional guidance or sources you can point me to are appreciated. Thank you.

Hi: Wondering if any firms will take Participant's 20% Mandatory withholding amount and electronically transmit the payment in excess of $2,500 to the IRS. Thanks DPSRich

Hello All, Quick question on a scenario: We have a participant who is taking a hardship from the plan. For argument sake, say the plan allows only hardship withdrawals from Employee money. She has 10,000 in employee money available for hardship (after all necessary calculations), and 10,000 in employer match money NOT available for hardship. If she elects to take out 9,000 (backup permitting) AND gross up 20% for taxes, are we able to take out 11,250 so she nets out to 9,000 or are we limited to 10,000 - leaving her with a net check of $8,000? I believe we are able to take fee's past the limit (for example a $10,000 withdrawal and then a $100 fee from the Employer Money) but this seems like a different scenario My feelings and around the office is that you are limited to $10,000, with a net check of $8,000. The logic being that if there is not that limit then you could have scenarios where someone elects 10,000 withdrawn and then another 10,000 "withheld for taxes" to skirt around the Employer money limitation. Could not find much on this in research. Thank you in advance for the help!

A pension plan pays the benefit due each month on the last day of the month. When a retiree dies, his last check is issued instead to his beneficiary. Plan benefits include after-tax contributions. Is the retiree or the beneficiary taxed? How should the plan handle 1099-R reporting and withholding? Thank you.