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Message Boards Digest

June 30, 2020

Here are the most recently added topics on the BenefitsLink Message Boards:

RatherBeGolfing created a topic in 401(k) Plans

COVID-19 Safe Harbor Relief Notice 2020-52

"n-20-52.pdf Hot off the IRS press...."
0 replies   |    53 views   |    Add Reply

ldr created a topic in 401(k) Plans

Waiver of 10% Early Withdrawal Penalty

"Good morning to all, Is it your understanding that the 10% early withdrawal on distributions made from a 401(k) plan has been waived for all withdrawals across the board for anyone making a withdrawal in 2020, or is it your understanding that this break on the 10% penalty is only available for CARES Act related distributions (CRDs), which in turn is only available if the employer has chosen to adopt the CARES Act distribution provisions for the plan? Your advice is always greatly appreciated."
5 replies   |    68 views   |    Add Reply

DKE created a topic in 401(k) Plans

SECURE Act, RMDs to a Designed Beneficary, and Term Certain Annuities Under a DC Plan

"The SECURE Act requires full distribution of a 401(k) account balance within 10 years for a designed beneficiary (i.e., a beneficiary that is not an eligible designated beneficiary). However, it doesn't appear that the SECURE Act amends Section 1.401(a)(9)-5 regarding RMDs from DC plans.

Item A-1(e) of 1.401(a)(9)-5, which covers annuity contracts, specifically refers to 1.401(a)(9)-6 (relating to 401(a)(9)) being satisfied through an annuity contract purchased through an insurance company.

My question concerns a joint and survivor annuity, such as a 20-year period certain, under which the beneficiary is not an eligible designed beneficiary as defined under the SECURE Act. If such a participant dies after 6 years, with 14 years remaining in the period certain, can payments continue for the full 14 years or must the full death benefit be paid to the beneficiary within 10 years per the SECURE Act?

It appears the full 14 years would still apply since the SECURE Act does not appear to have amended the provisions relating to an annuity purchased within a DC plan."

0 replies   |    32 views   |    Add Reply

Belgarath created a topic in 401(k) Plans

Safe Harbor Match Mid-Year Suspension - SMM to Serve as Required Notice?

"Any reason why the SMM can't function as the notice, so long as it's given at least 30 days in advance, and the procedures for changing a deferral election are included?"

1 reply   |    57 views   |    Add Reply

Gruegen created a topic in Distributions and Loans, Other than QDROs

Notice 2020-51 as Applied to Roth Accounts

"Treasury Regulation 1.402A-1, Q&A-5(a) states that distributions attributable to designated Roth contributions that include amounts that would not be taxable if they were distributed to the participant must be made via direct rollover if rolled to a designated Roth account of qualified Plan.

Essentially, this Treasury Regulation requires that designated Roth rollovers between qualified plans be facilitated via direct trustee-to-trustee rollover, not via the indirect 60-day rollover process.

IRS Notice 2020-51, Q&A-8 states that RMD distributions from a plan may be rolled back into the same plan, provided the plan permits rollovers and the rollover satisfies the requirements of IRC 402(c).

If a participant receives an RMD from a qualified plan in January, 2020, and such RMD includes designated Roth contributions that would not be taxable, can this individual make an indirect rollover back into the qualified plan from which it was distributed, notwithstanding Treasury Regulation 1.402A-1, Q&A-5 which generally requires Roth accounts to be rolled over via direct rollover? IRS Notice 2020-51 did not address this Roth rollover issue. In fact, the word Roth never appears in Notice 2020-51."

0 replies   |    27 views   |    Add Reply

Christopher Wilson created a topic in Defined Benefit Plans, Including Cash Balance

Computing Deductions in a DB Plan Sponsored by a Sole Proprietor

"For a sole proprietor who sponsors a defined benefit plan, how does one determine how much of the contribution gets deducted on Schedule C for the employees and how much gets deducted on Form 1040 for the sole proprietor?"

3 replies   |    61 views   |    Add Reply

K-t-F created a topic in Distributions and Loans, Other than QDROs

Plan Terminating; Non COVID-Related; 10% Early Distribution Tax on Payout to Participants?

"If a plan is terminating and the termination is not related to the COVID virus, will those who take a cash lump sum be subject to the 10% early distribution excise tax? I would think so, because the payout was not instigated as a COVID distribution. Or should we offer a COVID distribution option?"

2 replies   |    33 views   |    Add Reply

Catch22PGM created a topic in 401(k) Plans

ACP Test for Discretionary Contribution Plus Safe Harbor Match

"401(k) plan has 100%/4% enhanced safe harbor match. They added a discretionary match of 100%/15% for NHCEs only in 2019. Because the discretionary match exceeds 4%, ACP testing applies. If I test all of the matching contributions together the ACP test fails -- many NHCEs didn't participate even with the extra generous match. But I believe 1.401(m)-2(a)(5)(iv) allows us to exclude employees who are receiving only the 100%/4% enhanced safe harbor match from the ACP testing. Because that group to be excluded includes all of the HCEs, the ACP testing automatically passes. Is that correct? In other words, as long as the HCEs are excluded from the discretionary match, will ACP be automatically satisfied regardless of the discretionary match formula being used for the NHCEs?"

3 replies   |    35 views   |    Add Reply
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