"How does the 5-year clock work upon a surviving spouse (sole beneficiary) inheriting a Roth IRA? For example:

• Husband-participant, 74, died earlier this year (2022).
• Wife-non-participant, 66, is the 100% primary beneficiary.

The surviving spouse has the following options, I believe. (I'm trying to wrap my head around the 5-year clock in regarding to each of these options.)

[1] She can roll it into her current Roth IRA (treat it as her own). Does the surviving spouse get the longer of (i) clock in her own (previously established Roth) or (ii) the inherited Roth?

[2] She can create a new inherited Roth IRA. Does she continue the 5-year clock? Or does it start anew because its now an inherited IRA?

[3] She can treat the inherited Roth as as her own. Again, how does the 5-year clock work? Does she get the benefit of the years her husband held the account?

Unrelated to the Roth clock: Is there a situation where a surviving spouse would be subject to RMDs from an inherited Roth IRA?"

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"Cash Balance Plan freezes all contribution credits and new entrants into the Plan. The Plan is top-heavy. The Plan is covered by the PBGC.

When is it considered underfunded for the exception to 401(a)(26) to apply? Does the AFTAP have to be less then 100%? If the AFTAP is greater than 100% but assets are less than the sum of the notional accounts is that sufficient to be considered underfunded? If the assets are less than what is required for the Plan to complete a Standard Termination under the PBGC rules is that sufficient?

To throw out some hypothetical numbers, assume:

• Plan Funding Target (@95% corridor of ARP stabilized rates) $510K
• Plan Funding Target (@105%corridor of ARP stabilized rates) $490K
• Plan Assets (MV @ valuation date) $500K
• Sum of Participant Account Balances $530K
• PVAB for PBGC Premiums $600K"

"Since 2007 the company has matched the owner's deferrals in a SIMPLE IRA, violating the 3% compensation cap on matches. With earnings, the excess employer contributions cumulate to $300,000.

EPCRS states that the excess should be returned to the employer and should not be deducted. (The employee, the 100% shareholder, will then get a 1099-R for the $300,000 showing zero as taxable.) The employer, a Sub-S, will report the $300,000 refund as income in 2022, the year of receipt, and it will be taxed to the 100% shareholder of the Sub-S as ordinary income in 2022.

All good, so far, but what does it mean in EPCRS that the employer shall take no deduction? Does that mean that corporate returns that claimed a deduction for the excess employer contributions since2007 should be amended? That's impossible.

It seems too good to be true that the excess just gets returned to the Sub-S with taxes due in 2022 on the $300,000 refund and no other penalty or sanction.

Another possibility, when returns cannot be amended to disallow deductions for 15 years of excess contributions, may be to leave the excess employer contributions and associated earnings in the SIMPLE IRA and to pay the 10% sanction in EPCRS. This is listed as an alternate correction, but may be the only available one in these circumstances. I may ask for a no-names conference with IRS under the new procedures.

Anybody have experience with excess contributions to a SIMPLE going back this far?"

"Say an individual's self-directed IRA owns a business, and the individual is curious which (if any) services he can provide to the business (e.g., offer consulting services). Does that run afoul of the prohibited transaction rules?

I'm thinking yes, per Code Sec. 4975(c)(1)(C) -- because it would involve a disqualified person furnishing services to a plan asset (akin to the individual being prohibited from providing free labor/repairs to an investment property owned by the self directed IRS). Agree?"

"I have a potential new client where all of the employees (owners and non-owners) are paid via a K-1 (or so I've been told). [1] Can this be included as income for a retirement plan? [2] If yes, the fact that it's a K-1 income doesn't change the requirement that all employees must be included, correct? (A colleague is making the argument that, because it's K-1, we could set up a plan just for the owners. I disagree.)"

"All our plans with discretionary match are 'rigid'. Now a client wants to apply different match formulas to different employee groups.

HCEs will get the lowest or no match, so testing is likely not a problem. So we will amend the plan to include a Flexible Discretionary Match. The BPD (FIS-PPD) essentially says for the Flexible Discretionary Match that the Employer retains discretion over the formula(s) including the rate, the limit on deferrals subject to match, the match limit, the categories of employees who will receive the match, and the matching time period... except as otherwise elected in the Adoption Agreement. (Sounds like including specific provisions is optional.)

I know about the notification requirement. This client employer will declare and fund the match after the end of the year. My question is, does the plan document require a description of the employee allocation groups, or are the groups totally flexible and discretionary from year to year? (I realize ACP, discrimination and coverage testing must pass.) It seems the plan document does not have to say anything specific-- there is no limit on deferrals matched, no match rate, no period and no mention of employee group descriptions.

Sound right?"

"I have a long-time friend / financial mentor who has asked me to be the administrator for a charitable trust he's setting up. Upon his death he plans to initiate a $5+ million charitable trust to benefit a local university to provide scholarships for students-athletes of non-revenue sports. He doesn't want the university to control the assets. Instead, he wants me to 'have total control of the asset investments and annual distributions to the school' and I would be responsible for filing taxes, etc. for the trust. He's told me that I should draw a modest compensation from the trust for my administration efforts. Does anyone know how much compensation is appropriate for providing this administration?"