January 2020 RMD Distribution

My apologies if I missed this.

Has there been any rollover relief offered for participants who took their 2020 RMD in January and would like to roll back into the plan (or IRA)? 

I know they missed the 60 day rollover window, and don't fall under the April 1 to July 14 extension to July 15, but was wondering if I missed any further guidance on the January distributions.

Thanks very much.

The HEROES Act contains this relief. It waives the 60-day requirement for rollovers of distributions which would have been RMDs if not for CARES/HEROES until December 1, 2020.

The bill was passed by the House but is still pending in the Senate.

1 hour ago, Gilmore said:

My apologies if I missed this.

Has there been any rollover relief offered for participants who took their 2020 RMD in January and would like to roll back into the plan (or IRA)? 

I know they missed the 60 day rollover window, and don't fall under the April 1 to July 14 extension to July 15, but was wondering if I missed any further guidance on the January distributions.

Thanks very much.

You haven't missed anything; nothing has been done about the January distributions at this point.  There is a solution.  Have the participant self-certify that it is a coronavirus related distribution and they have 3 years to put it back.  This can be done even if the plan itself does not adopt CRD provisions.  

11 hours ago, Larry Starr said:

You haven't missed anything; nothing has been done about the January distributions at this point.  There is a solution.  Have the participant self-certify that it is a coronavirus related distribution and they have 3 years to put it back.  This can be done even if the plan itself does not adopt CRD provisions.  

uh, just stating the obvious here (especially since the OP said it was an RMD when made) - have them self-certify *IF* they are a qualified individual - else this would be fraud.....

Thank you.

7 hours ago, MoJo said:

uh, just stating the obvious here (especially since the OP said it was an RMD when made) - have them self-certify *IF* they are a qualified individual - else this would be fraud.....

As I stated in another thread (edited for continuity):   The PA can ask that the participant re-examine his situation, give him a CRD form that shows the conditions (as of now) that are necessary, and then asks the participant to self-certify, which only requires a statement that says "I certify that I am eligible for a CRD"; no reason is required.  The employee can certainly have a change in his situation that now would qualify him.  And again, all he has to do is self-certify.  Understand?

Just now, Larry Starr said:

As I stated in another thread (edited for continuity):   The PA can ask that the participant re-examine his situation, give him a CRD form that shows the conditions (as of now) that are necessary, and then asks the participant to self-certify, which only requires a statement that says "I certify that I am eligible for a CRD"; no reason is required.  The employee can certainly have a change in his situation that now would qualify him.  And again, all he has to do is self-certify.  Understand?

I understand - and that's what we are doing.  What the post I was replying to suggested was that there was a "workaround" to the problem of the lack of rolloverability for a distribution taken in January.  When one says "workaround" to a problem that doesn't relate to the issue, it "screams" inappropriateness.  We cannot "suggest" fraud as a "workaround."  If someone is a qualified individual (and no, I'm not making that determination), then the solution (not "workaround") is to reclassify as a CRD with all bells and whistles of that.  But a "workaround?"

It's about "ethics."  Understand?

2 minutes ago, MoJo said:

I understand - and that's what we are doing.  What the post I was replying to suggested was that there was a "workaround" to the problem of the lack of rolloverability for a distribution taken in January.  When one says "workaround" to a problem that doesn't relate to the issue, it "screams" inappropriateness.  We cannot "suggest" fraud as a "workaround."  If someone is a qualified individual (and no, I'm not making that determination), then the solution (not "workaround") is to reclassify as a CRD with all bells and whistles of that.  But a "workaround?"

It's about "ethics."  Understand?

There is absolutely NOTHING unethical about the workaround.  IF the participant can claim it as a CRD, then it is a "workaround" to the problem that the distribution was made as an RMD, which doesn't exist in 2020.  You may think "workaround" SCREAMS inappropriateness; it simply does not.  Assuming a 3% ADP for NHCEs in a new 401(k) plan set up in November of 2019 is a "workaround", perfectly legitimate, of the normal ADP test. The HCEs can defer 5% even if no one else defers a penny in a non safe harbor plan.  This is nothing more than pointing out the workaround in this situation, which is perfectly legal.

The CARES Act provides that a Plan Administrator may rely on the participant's certification that they are a qualified individual in determining if any distribution is a CRD. Therefore, the participant may certify that they are a qualified individual, and the plan may treat the distribution made in January as a CRD, and accept it as a rollover.

The CARES Act does not require the IRS to rely on a self-certification; the individual must in fact be a qualified individual in order to exclude the amount of the rolled over distribution from their income on their tax return.

In this situation, my advice would be:

1. If the participant is a qualified individual (as defined in CARES), and has not otherwise used up their $100,000 CRD limit, then proceed as Larry suggests.
2. If they are not a qualified individual, then wait and see if the HEROES Act passes, since it will allow the rollover to be done without any workarounds.
3. If HEROES goes nowhere, sit tight. The IRS may announce new qualifying factors which could make the participant a qualifying individual. Failing that, there is no time limit on when the participant may make the certification as a qualified individual; if circumstances change any time before the end of 2022 they can still certify and roll the amount of the distribution back into the plan or IRA.

28 minutes ago, Larry Starr said:

There is absolutely NOTHING unethical about the workaround.  IF the participant can claim it as a CRD, then it is a "workaround" to the problem that the distribution was made as an RMD, which doesn't exist in 2020.  You may think "workaround" SCREAMS inappropriateness; it simply does not.  Assuming a 3% ADP for NHCEs in a new 401(k) plan set up in November of 2019 is a "workaround", perfectly legitimate, of the normal ADP test. The HCEs can defer 5% even if no one else defers a penny in a non safe harbor plan.  This is nothing more than pointing out the workaround in this situation, which is perfectly legal.

NOw you are playing semantics, Larry, and that itself is unseemly.  Read my posts.  I CLEARLY indicate that based on the post I was responding to, that it would be inappropriate to suggest something as a way to "get around" an issue.  If someone is entitled to a CRD, then that approach is a "solution" and not a "workaround."   We as professionals can't simply "suggest" that someone do this in order to avoid that restriction.  We can offer, "if you qualify" then here is a solution - but only if..."  There is an art to this, and we have to be cognitive of the effect of our words on others - and here as well.   Alternative solutions.  Fine.  "Workarounds" because you can't do a 60 day rollover?  Depends - but my caution still stands.  Get over it.

18 minutes ago, MoJo said:

NOw you are playing semantics, Larry, and that itself is unseemly.  Read my posts.  I CLEARLY indicate that based on the post I was responding to, that it would be inappropriate to suggest something as a way to "get around" an issue.  If someone is entitled to a CRD, then that approach is a "solution" and not a "workaround."   We as professionals can't simply "suggest" that someone do this in order to avoid that restriction.  We can offer, "if you qualify" then here is a solution - but only if..."  There is an art to this, and we have to be cognitive of the effect of our words on others - and here as well.   Alternative solutions.  Fine.  "Workarounds" because you can't do a 60 day rollover?  Depends - but my caution still stands.  Get over it.

I don't hold caution against anyone; that is your absolute freedom.  Semantics?  I'd say arguing that solution and workaround are not close enough to have the same effect in this case is where semantics are being applied.  I have no problem using "solution" instead of workaround if that would make you happy!  We can agree there.  The suggestion is to give the participant the necessary information for the participant to make a decision as to what he can do.  Once given to the participant, it is no longer an issue for the employer as the employer does not need to make CRDs available, this January payment won't be one from the plan standpoint, but the participant now has the info to decide if he's going to claim it as a CRD.  That's all that's going on here.

45 minutes ago, C. B. Zeller said:

The CARES Act provides that a Plan Administrator may rely on the participant's certification that they are a qualified individual in determining if any distribution is a CRD. Therefore, the participant may certify that they are a qualified individual, and the plan may treat the distribution made in January as a CRD, and accept it as a rollover.

The CARES Act does not require the IRS to rely on a self-certification; the individual must in fact be a qualified individual in order to exclude the amount of the rolled over distribution from their income on their tax return.

In this situation, my advice would be:

1. If the participant is a qualified individual (as defined in CARES), and has not otherwise used up their $100,000 CRD limit, then proceed as Larry suggests.
2. If they are not a qualified individual, then wait and see if the HEROES Act passes, since it will allow the rollover to be done without any workarounds.
3. If HEROES goes nowhere, sit tight. The IRS may announce new qualifying factors which could make the participant a qualifying individual. Failing that, there is no time limit on when the participant may make the certification as a qualified individual; if circumstances change any time before the end of 2022 they can still certify and roll the amount of the distribution back into the plan or IRA.

 

Nothing in your items 1, 2 or 3 that I would disagree with, except that I would say for number 2 "If they DO NOT APPEAR to be a qualified individual", since I don't think you can prove a negative, which is what would be required to state he is NOT a qualified individual.

In this case the participant is not eligible under the CARES Act.  Having said that, I do not mind at all being reminded of the different options that are available since it is difficult to keep up with the many recent changes and still work on 5500s.

3 minutes ago, Gilmore said:

In this case the participant is not eligible under the CARES Act.  Having said that, I do not mind at all being reminded of the different options that are available since it is difficult to keep up with the many recent changes and still work on 5500s.

There is no way you can know that they are NOT eligible unless they determine they are not (currently) eligible and tell you.  And that status can change five minutes later to eligible,  which is why you throw it back to them and give them the information they need to deal with it.  Separately: we can discover NO REASON for why they extended the payback for all RMDs that occured AFTER January; I think the IRS has something against January!

Hi Larry.  The participant is one of the owners, so I'm pretty good with them not being eligible because they said so, but I do understand what you are driving at and appreciate the information as always.

14 hours ago, Larry Starr said:

I don't hold caution against anyone; that is your absolute freedom.  Semantics?  I'd say arguing that solution and workaround are not close enough to have the same effect in this case is where semantics are being applied.  I have no problem using "solution" instead of workaround if that would make you happy!  We can agree there.  The suggestion is to give the participant the necessary information for the participant to make a decision as to what he can do.  Once given to the participant, it is no longer an issue for the employer as the employer does not need to make CRDs available, this January payment won't be one from the plan standpoint, but the participant now has the info to decide if he's going to claim it as a CRD.  That's all that's going on here.

Like I said, words have effect.  Precise words have precise effect.  "Workaround means something very different than solution.  I'll stand by being "precise" every time.  And as far as it is no longer the concern of the employer, I would disagree.  The IRS guidance on the issue includes an "unless the employer knows otherwise" condition.  

4 hours ago, MoJo said:

Like I said, words have effect.  Precise words have precise effect.  "Workaround means something very different than solution.  I'll stand by being "precise" every time.  And as far as it is no longer the concern of the employer, I would disagree.  The IRS guidance on the issue includes an "unless the employer knows otherwise" condition.  

That's fine if you would like to claim that difference; I'll work around it! ? But as to the employer, I'll say it one last time, it is IMPOSSIBLE to prove a negative, and what has to be PROVEN is that he KNOWS that the individual is NOT eligible.  

"Mr. PA, you can state without a doubt that you KNOW Mr. Participant does not meet any conditions for a CRD determination?"  I suggest the answer can NEVER be yes.  I'd be happy to be the PAs expert witness on this.

11 minutes ago, Larry Starr said:

That's fine if you would like to claim that difference; I'll work around it! ? But as to the employer, I'll say it one last time, it is IMPOSSIBLE to prove a negative, and what has to be PROVEN is that he KNOWS that the individual is NOT eligible.  

"Mr. PA, you can state without a doubt that you KNOW Mr. Participant does not meet any conditions for a CRD determination?"  I suggest the answer can NEVER be yes.  I'd be happy to be the PAs expert witness on this.

Stop taking this to the extreme, Larry.  That's simply stupid.  The OP said this WAS an RMD.  The participant DID NOT NEED IT and wanted to roll it over.  Hmmm.  Interesting facts that a prudent fiduciary would consider.

Caution is what I advocate when talking about "workarounds" that may not be indicative of reality - especially when the IRS says "unless the employer has actual knowledge."  That is the standard.  Implementing it?  Well, we're working with our clients on a "prudent fiduciary process" to ensure they have done what they can to avoid the IRS' ire.  Just as we have done with hardships to buy a boat (I swear, I'm going to live on it!), or have medical expenses (but the employer knows insurance covered most if not all of it).

21 minutes ago, MoJo said:

Stop taking this to the extreme, Larry.  That's simply stupid.  The OP said this WAS an RMD.  The participant DID NOT NEED IT and wanted to roll it over.  Hmmm.  Interesting facts that a prudent fiduciary would consider.

Caution is what I advocate when talking about "workarounds" that may not be indicative of reality - especially when the IRS says "unless the employer has actual knowledge."  That is the standard.  Implementing it?  Well, we're working with our clients on a "prudent fiduciary process" to ensure they have done what they can to avoid the IRS' ire.  Just as we have done with hardships to buy a boat (I swear, I'm going to live on it!), or have medical expenses (but the employer knows insurance covered most if not all of it).

1) There was no CRD when the anaticipanted RMD was made;  now, there is no RMD so what is this thing?  Participant is free to determine he has received a CRD; no way the employer can say otherwise.  "Are you eligible for a CRD?  Yes I am". fini

2) Hardship is factual for which there is documentation: is there a purchase and sale agreement for the home?  Medical expenses runs into HIPAA issues, but nonetheless, there is an insurance company statement to prove how much was reimbursed.  Proof exists, but not for a negative.

3) Why am I taking it to the extreme and you are not?  We have a difference of opinion; I won't call you stupid for your stubborn insistence that this solution is not available to the participant when it absolutely is. 

Just now, Larry Starr said:

1) There was no CRD when the anaticipanted RMD was made;  now, there is no RMD so what is this thing?  Participant is free to determine he has received a CRD; no way the employer can say otherwise.  "Are you eligible for a CRD?  Yes I am". fini

2) Hardship is factual for which there is documentation: is there a purchase and sale agreement for the home?  Medical expenses runs into HIPAA issues, but nonetheless, there is an insurance company statement to prove how much was reimbursed.  Proof exists, but not for a negative.

3) Why am I taking it to the extreme and you are not?  We have a difference of opinion; I won't call you stupid for your stubborn insistence that this solution is not available to the participant when it absolutely is. 

Larry:  They DON'T need the money per the OP.  'nuff said.  Give it a rest.  CAUTION is all I'm advocating.

11 minutes ago, MoJo said:

Larry:  They DON'T need the money per the OP.  'nuff said.  Give it a rest.  CAUTION is all I'm advocating.

One last try: I'm saying the OP CAN'T make that statement because it is impossible to know. You are hanging your hat on that. That's our difference.  

Just now, Larry Starr said:

One last try: I'm saying the OP CAN'T make that statement because it is impossible to know. You are hanging your hat on that. That's our difference.  

Yes I can say it.  The OP said the issue is the inability to roll it over due to the 60 day rule.  One doesn't roll over money they need. 

I'm hanging my hat on prudent fiduciary process and 37 years of preaching it. 

This is not that complicated. P either meets the CRD requirements, which at this point (without IRS "gloss" by way of a Notice or other guidance) are about as near to computer code as you can get (P diagnosed w/Covid or Dep diagnosed with Covid or P has [loss of job or hours] because of Covid) as you can get. And that little bit of logic is between P and his or her tax return. The employer's role is simply "If P certifies and ER has no contrary knowledge, then OK." In this case, depending on the employer's and plan's governance, P and ER may be one and same, so the retirement adviser needs to make clear what the requirements are and then stand back.