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May 16, 2025

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KaJay created a topic in Retirement Plans in General

Reporting 402(g) Excess of Designated Roth Deferrals After April 15

"Plan Type: 403(b)(9) Non-electing Church Plan

"Background: Participant (under age 59.5) contacted the plan in May 2025 because his tax professional told him he did not have enough includible compensation to support the amount of Designated Roth 403(b) deferrals he made in 2024. For purposes of my question, he only made Roth deferrals to the plan and these excess deferrals totaled $5000, and there were $100 in earnings on that excess.

"Questions: Since the distribution will occur after April 15, 2025, there is some confusion as to how it is to be reported on the 2025 1099R. IRC Section 402A(d)(3) seems to instruct the payer to tax the participant on the full distribution, not just the earnings portion, when distributed after April 15 (which seems counter intuitive). 

"IRC Section 402A(d)(3) states the following: (3) Treatment of distributions of certain excess deferrals Notwithstanding section 72, if any excess deferral under section 402(g)(2) attributable to a designated Roth contribution is not distributed on or before the 1st April 15 following the close of the taxable year in which such excess deferral is made, the amount of such excess deferral shall -- (A) not be treated as investment in the contract, and (B) be included in gross income for the taxable year in which such excess is distributed.

"Q1: Referring to the highlighted text, does this mean that the 1099R should be written as follows: Box 1: $5100 Box 2a: $5100 Box 5: (blank) Box 7: 1, 8 (assuming no known exception to early distribution)

"Q2: Does withholding apply to this distribution?"

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HCE created a topic in Nonqualified Deferred Compensation

NQDC Payouts Reported on 1099 Instead of W-2 for Prior Years

"A client has been paying out employee deferrals from a NQDC Plan and reporting them on Form 1099 for years. The client will correct this going forward and start reporting on W-[2] However, do we need to go back an correct for previous years when they used 1099? If so, how far back do we need to go? Unfortunately, I don't know at this time if FICA was ever accounted for."

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52626 created a topic in 401(k) Plans

Extend Vesting at Layoff That Doesn't Create Partial Termination

"Employer sponsors a QACA with discretionary match. There will be some layoffs at the end of the month. The layoffs will NOT result in a partial termination. Client wants to vest this group 100% regardless of their current vesting%. Question: Can the plan draft an amendment that will allow the participants in this layoff group to vest 100%?"

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Kent Allard created a topic in Retirement Plans in General

Years of Service for Amended Vesting Schedule

"Periods of service seem barred for the metric of service provided to allow participants to retain the antecedent schedule.

"Per [26 CFR 1.411(a)-8(b)(3)(b)], when amendment of vesting schedules occurs, the emendations must allow for the apt extant participants to retain the vesting schedule as if unaffected by the amendment, at least perhaps for balances already accrued. The salient participants entail the participants who had provided suitable amounts of service, the excerpt herein lacks adjustment for subsequent amendments reducing the anticipated service favorably for the participants. 

"Seemingly periods of service remain barred for this situation. To describe the garbled jargon, while 29 CFR Part 2530 features the term 'period of service', the illocution/intent therein seems inconsistent with the use of said term to indicate the reckoning of service lacking logging of provided hours, rather as long as the employment relationship remains intact, service accrues. This situation has disadvantages to individuals who provide 1K hours to the endorsing entity during a plan year while departing prior to the conclusion of the plan year. Citation 26 CFR 1.410(a)-7(a)"

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