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Definition of Compensation When Safe Harbor Match Eliminated Mid Year

“The company is a safe harbor 401(k) match plan and they pay the match in a lump sum after the plan year.  The company amended the plan to remove the safe harbor matching contribution mid-year. What definition of compensation should the plan use to determine the amount of match to make—full year or partial year?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Ohio is representative of a common inquiry related to the definition of compensation.

Highlights of the Discussion

The IRS has provided guidance in treasury regulations  as follows.

“A plan that is amended during the plan year to reduce or suspend safe harbor contributions (whether nonelective contributions or matching contributions) must pro rate the otherwise applicable compensation limit under section 401(a)(17) in accordance with the requirements of § 1.401(a)(17)–1(b)(3)(iii)(A).”

Consequently, when a safe harbor 401(k) reduces or suspends the matching contribution mid-year via amendment, the plan would use prorated compensation to determine the amount of match to make for the shortened period of time the match is given.

However, because the plan is no longer a safe harbor plan, it must be amended to provide that the actual deferral percentage (ADP) test and actual contribution percentage (ACP) tests will be satisfied for the entire plan year in which the reduction or suspension occurs using the current year testing method described in §1.401(k)–2(a)(2)(ii).  Therefore, the plan would be required to use full year compensation to run the ADP and ACP tests [see Treas. Reg. Sections 1.401(k)-3(g)(1)(iv) ].

Conclusion

Using the correct definition of compensation for plan purposes is one of the top compliance concerns of the IRS. This hurdle is confounded even further when plans realize more than one definition of compensation may apply depending on the circumstance.

 

 

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Lump Sum Distribution Triggers and NUA

“I recently took on a client who has stock of his employer in his retirement plan. Before he came to me, he took an in-service distribution of a portion of his account balance because he had turned age 59½. He continues to work. Does that early distribution eliminate his ability to take a lump sum distribution that includes the employer stock and take advantage of the net unrealized appreciation (NUA) tax strategy?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from California is representative of a common inquiry related to NUA in employer securities.

Highlights of the Discussion

The answer to this question hinges on the definition of lump sum.  A distribution made from a qualified plan is eligible for lump-sum treatment if it meets all three of the following requirements.

  1. The distribution(s) is/are made within one taxable year.
  2. The above distribution(s) represent(s) the “balance to the credit,” of the participant. In other words, the participant must receive the entire account balance (or balances of combined like plans of the same employer) in one taxable year. For this purpose, the IRS treats all pension plans maintained by the same employer as a single (like) plan.  Similarly, all profit-sharing plans maintained by the same employer would be considered a single (like) plan, and all stock bonus plans maintained by the same employer would be considered a single (like) plan [IRC Sec. 402(e)(4)(D)(ii)(I)].
  3. Finally, the distribution(s) is/are made because of
  • The participant’s death,
  • Attainment of age 59 ½,
  • Separation from service (not applicable for a self-employed participant), OR
  • Total and permanent disability (only applicable for a self-employed participant).

In this case, despite using up the “age 59 ½” distribution trigger, your client could still apply the separation from service distribution trigger to qualify for a lump sum if he leaves employment and is not self-employed. Or, if he is self-employed, the total and permanent disability trigger may apply, if he meets the definition. And, his beneficiaries could, potentially, receive a lump sum distribution upon the participant’s death, if the other requirements are met.

Conclusion

A plan participant who is interested in the special tax rules surrounding NUA should discussion his or her situation with a trusted tax professional because the rules are multifaceted. For example, as was discussed here, there are several nuances to the definition of lump sum for purposes of qualifying for NUA tax treatment. Having expert guidance is essential.

 

 

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PPP Loan and Deductible Employer Contributions

“My client received a PPP loan for his small business to help cover payroll expenses. He maintains a safe harbor 401(k) plan, and is wondering whether the business can use some of the PPP loan to make the contribution and deduct the full amount of the 401(k) employer safe harbor contribution?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Massachusetts is representative of a common inquiry related to the Paycheck Protection Program (PPP) loan.

Highlights of the Discussion

This question can only be fully answered by your client’s tax professional and/or CPA.  The following response provides some general information on the topic based on the guidance issued to date. It’s for informational purposes only and cannot be relied upon as tax advice.

As to the first question, we have confirmation (from IRS Q&A 7 of the General Loan Forgiveness FAQs and Line 7 of the PPP Schedule A of the revised loan forgiveness application that the employer-provided portion of retirement contributions (either defined contribution or defined benefit) are considered “eligible payroll costs,” and can count toward loan forgiveness if they are incurred or paid during the Covered Period or the Alternative Payroll Covered Period, and meet certain other criteria. Employee salary deferrals are excluded for this purpose. Note that payroll costs that were incurred during the Covered Period or the Alternative Payroll Covered Period that are paid after the Covered Period or the Alternative Payroll Covered Period still may count toward loan forgiveness if they are paid on or before the next regular payroll date after the Covered Period or Alternative Payroll Covered Period.

For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the Covered Period. Be aware of the special cap on business owner (i.e., owner-employee or self-employed individual/general partner) compensation that applies for determining loan forgiveness (i.e., $20,833 per individual in total across all businesses in which he or she has an ownership stake during the 24-week period, or $15,385 if an 8-week period is elected).  Also, the treatment of retirement plan contributions made on behalf of such business owners depends on the type of business entity (e.g., C-Corp, S-Corp, Self-Employed, LLC, etc. Please see IRS Q&A 8 of the General Loan Forgiveness FAQs for more details).

As to the issue of deductibility, prior to the Consolidated Appropriations Act of 2021 (the Act), the IRS took the position (in Notice 2020-32 and Revenue Ruling 2020-27) that if a business uses a PPP loan for eligible expenses that would otherwise be deductible, the business could not also take the tax deduction. That would be double dipping because the PPP loan, once forgiven, is not taxable income to the business.

That stance has changed under the Act. Forgiven PPP loans will not be included as taxable income; and expenses paid with the proceeds of a PPP loan that is forgiven are tax-deductible. For example, employer contributions to a retirement plan that are used for PPP loan forgiveness are also deductible by the business. The change covers not only new loans but also existing and prior PPP loans, reversing previous guidance from the IRS, which did not allow deductions on expenses paid for with PPP proceeds. In addition, any income tax basis increase that results from the borrower’s PPP loan will remain even if the PPP loan is forgiven.

Conclusion

The PPP loan story for small business owners who receive them continues to evolve, making regular contact with a tax advisor essential. A new change under the Act affects the deductibility of employer contributions to retirement plans that are applied towards PPP loan forgiveness.

 

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California and Oregon State-Sponsored Retirement Plans

“I have several clients who are employers based in California and Oregon. Can you provide an update on the registration requirements for the CalSavers and the OregonSaves retirement savings programs? Are there any deadlines approaching?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from California is representative of a common inquiry related to state-sponsored retirement plans for private-sector workers.

As we reported in a prior Case of the Week:  State-sponsored retirement plans for private-sector workers, to date 12 states and one city have enacted laws that, generally, require certain employers without their own retirement plans to make the state-sponsored plan available to their employees. Each state has different rules so it is imperative to confer with state authorities and reference state websites for guidance. Note that some of the states’ plans have an employer registration requirement that is time sensitive. California and Oregon are examples of two such states.

California
CalSavers
 is a retirement savings program for private sector workers in California whose employers do not offer a retirement plan. Employers with five or more employees must participate in CalSavers if they do not already have a workplace retirement plan. Employers that do sponsor their own retirement plan must register their exemption from the state mandate. The following deadlines to register or claim an exemption are based on the size of the business.

Size of Business                 Deadline

Over 100 employees           September 30, 2020 (but see potential for year-end extension)[1]

Over 50 employees             June 30, 2021

5 or more employees          June 30, 2022

To register, visit www.CalSavers.com, call CalSavers Client Services at 855-650-6916 or email them at Clientservices@calsavers.com to certify an exemption. For businesses that missed the deadline and need to get caught up, please engage with the CalSavers support team immediately as they want to help. There is unofficial word that the deadline for registering as a California exempt employer has been extended to December 29, 2020. 

Oregon

Oregon has a similar employer registration requirement for its state-sponsored retirement program covering private sector workers− OregonSaves. Businesses with employees that do not offer a qualified retirement plan and are currently issuing payroll are required to implement the OregonSaves program. Most of the deadlines for registration/exemption have passed[2], but the state has indicated that its expectation at this time, given the impact of Covid-19, is for business owners to facilitate the program “as soon as you are reasonably able to do so.” Oregonian employers that sponsor a qualified retirement plan don’t have to participate in the program but must certify their exemption and renew it every three years.

Businesses can register or certify their exemption online at www.oregonsaves.com. Alternatively, they can contact the OregonSaves Client Service Team by phone at (844) 661-1256 or by email at clientservices@oregonsaves.com for assistance.

For information on state-sponsored retirement savings plans, please refer to the table below.

State/City Plan Name
1.    California California Secure Choice Retirement Savings Program
2.    Colorado Colorado Secure Savings Program
3.    Connecticut Connecticut Retirement Security Program
4.    Illinois Illinois Secure Choice Savings Program
5.    Maryland Maryland Small Business Retirement Savings Program
6.    Massachusetts Massachusetts Defined Contribution CORE Plan

 

7.    New Jersey New Jersey Small Business Retirement Marketplace

 

8.    New Mexico The New Mexico Work and Save Act

 

9.    New York New York State Secure Choice Savings Program
10. Oregon OregonSaves

 

11. Vermont Vermont Green Mountain Secure Retirement Plan

 

12. Washington Washington’s Small Business Retirement Marketplace

 

13. Seattle, WA Seattle Retirement Savings Plan

 

 

[1] Employers who missed this deadline should contact CalSavers and register as soon as possible to avoid penalties. There is unofficial word that the deadline for registering as a California exempt employer has been extended to December 29, 2020.

[2] Oregonian businesses with four or fewer employees have until January 15, 2021, to register or record their exemption.

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Coronavirus-Related Distributions and State Tax Withholding

“I know that CRDs are not subject to federal income tax withholding of 20 percent for qualified plan distributions, but what about state income tax withholding?  My client is a resident of Connecticut.”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Connecticut is representative of a common inquiry related to Coronavirus-Related Distributions (CRDs).

Highlights of the Discussion

This is an important tax question. Your client should seek guidance from his or her tax advisor. What is presented here is for informational purposes only and cannot be relied upon as tax advice.

To be clear, a CRD is not subject to the federal mandatory 20 percent withholding requirement as required under Internal Revenue Code (IRC) § 3405(c)(1) if such an amount is paid from a qualified retirement plan. However, a CRD, whether paid from a qualified retirement plan or an IRA, remains subject to the federal voluntary 10 percent withholding rules of IRC 3405(b)—unless waived by the recipient (Notice 2020-50).

The application of state tax withholding on CRDs is dependent on each state’s tax laws. Here is a list of state government websites  that may be helpful for research.  For example, the state of Connecticut addresses the issue in Question 3 of a CRD Q&A posted on their state’s tax website.

“Are coronavirus-related distributions from a qualified retirement account, as allowed under the CARES Act, subject to Connecticut income tax withholding? Generally, yes. The payer is required to withhold 6.99% from the distribution unless the recipient submits a Form CT-W4P to the payer requesting that no or a lesser amount of Connecticut income tax be withheld.”

For state tax withholding rules it is important to consult a tax advisor who is well-versed in state tax issues.

Conclusion

For any tax issue, seek the guidance of a tax professional. The federal tax withholding rules for CRDs are explained in IRS Notice 2020-50. State tax withholding rules are state dependent, making the guidance of a state tax expert even more necessary.

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Qualified Charitable Distributions in 2020

“I have a client who consistently has made Qualified Charitable Distributions (QCDs) for the last several years and wants to make another for 2020.  Are they still available even though required minimum distributions (RMDs) are suspended for 2020?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from South Dakota is representative of a common inquiry related to charitable giving.

Highlights of the Discussion

  • Yes, if your client is an “eligible IRA owner or beneficiary,” s/he can still make a QCD for 2020 if s/he does so by December 31, 2020. Although the gift will not have the added benefit of counting towards an RMD for the year (since none are due pursuant to the CARES Act), s/he’ll still be able to exclude the QCD from taxable income and have the satisfaction of supporting a good cause. Because the QCD reduces taxable income, other potential benefits may result, for example, a person may be able to avoid paying higher Medicare premiums because of the reduced income. Note that for those who make both QCDs and deductible IRA contributions in the same year, new rules as a result of the SECURE Act may limit the portion of a QCD that is excluded from income.
  • An eligible IRA owner or beneficiary for QCD purposes is a person who has actually attained age 70 ½ or older, and has assets in traditional IRAs, Roth IRAs, or “inactiveSEP IRAs or savings incentive match plans for employees (SIMPLE) IRAs. Inactive means there are no ongoing employer contributions to the SEP IRA or SIMPLE IRA. A SEP IRA or a SIMPLE IRA is treated as ongoing if the sponsoring employer makes an employer contribution for the plan year ending with or within the IRA owner’s taxable year in which the charitable contribution would be made (see IRS Notice 2007-7, Q&A 36).
  • A QCD is any otherwise taxable distribution (up to $100,000 per year) that an eligible person directly transfers to a “qualifying charitable organization.” QCDs were a temporary provision in the Pension Protection Act of 2006.  After years of provisional annual extensions, the Protecting Americans from Tax Hikes Act of 2015 reinstated and made permanent QCDs for 2015 and beyond.
  • Generally, qualifying charitable organizations include those described in §170(b)(1)(A) of the Internal Revenue Code (IRC) (e.g., churches, educational organizations, hospitals and medical facilities, foundations, etc.) other than supporting organizations described in IRC § 509(a)(3) or donor advised funds that are described in IRC § 4966(d)(2). The IRS has a handy online tool Tax Exempt Organization Search, which can help taxpayers identify organizations eligible to receive tax-deductible charitable contributions. Note that s/he would not be entitled to an additional itemized tax deduction for a charitable contribution when making a QCD.
  • Changes under the Coronavirus Aid, Relief, and Economic Security (CARES) Act made the decisions related to charitable giving more complicated in 2020. In addition to the above information on QCDs, the CARES Act created a new above-the-line deduction of $300 for charitable contributions, and allows for cash gifts to most public charities of up to 100 percent of adjusted gross income in 2020.  Because of the added complexity, seeking the advice of a tax professional regarding charitable giving would be the best course of action. IRS Publication 526, Charitable Contributions, provides good basic information on the topic.
  • Where an individual has made nondeductible contributions to his or her traditional IRAs, a special rule treats amounts distributed to charities as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions.
  • Be aware there are special IRS Form 1040 reporting instructions that apply to QCDs.
  • Section IX of IRS Notice 2007-7 contains additional compliance details regarding QCDs. For example, QCDs are not subject to federal tax withholding because an IRA owner that requests such a distribution is deemed to have elected out of withholding under IRC § 3405(a)(2) (see IRS Notice 2007-7 , Q&A 40).

 Conclusion

Eligible IRA owners and beneficiaries, including those with inactive SEP or SIMPLE IRAs, should be aware of the benefits of directing QCDs to their favorite charitable organizations.  Law changes have enhanced other giving options, making professional tax advice essential when making a gifting decision.

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Suspending Social Security retirement benefits

My client, who is 62 years old, just lost his job. He wants to file for Social Security retirement benefits and look for new employment. A friend told him he could suspend his Social Security benefits at a future date if he found new employment and, by suspending his benefits, he would not need to repay Social Security benefits already received. Is that correct?

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Ohio is representative of a common inquiry related to Social Security benefits.

Highlights of the Discussion

No, that is not correct. “The friend,” although well-meaning, is mixing up a couple of key Social Security concepts.

Social Security retirement benefits can be stopped in two ways. The first method is referred to as the “withdrawal of application” and the second is “suspension of benefits.” Each has unique rules as noted below.

Withdrawal of Application

  • Must occur within 12 months of filing for benefits
  • The individual may elect this one time only
  • All benefits received must be repaid
  • Future benefits will be calculated as though the initial filing never occurred

Suspension of Benefits

  • Can occur only after reaching full retirement age and before age 70
  • No repayment is required
  • Delayed retirement credits are available prospectively until age 70

Thus, for a 62-year-old, because the individual has not reached full retirement age the only way to stop Social Security retirement benefits is through a withdrawal of application, which requires the repayment of benefits.

Conclusion

The rules related to Social Security withdrawal of application and suspension of benefits are complex, and other issues such as family benefits and Medicare considerations may come into play. Anyone contemplating theses decisions should seek expert advice from a tax and/or legal advisor.

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Retirement Plans for Statutory Employees

“One of my business-owner clients employs ‘statutory employees.’ Does the owner have to cover these workers under a retirement plan established for the business?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from New York is representative of a common inquiry related types of employees and retirement plans.

Highlights of the Discussion

  • If the workers have been properly classified as statutory employees [IRC §3121(d)(3)], then your client would not have to cover them under a retirement plan established for the business—as long as the business is not selling life insurance.
  • Generally, statutory employees are independent contractors who meet certain conditions related to Social Security and Medicare taxes, and are
  1. Agent-drivers or commission-drivers,
  2. Full-time life insurance salespersons,
  3. Home workers, and
  4. Traveling or city salespersons.
  • Statutory employees remain independent contractors for employee benefit purposes in the eyes of the IRS. As such, they are not eligible to participate in an employee benefit plan sponsored by the business owner for employees. However, as statutory employees, because the IRS views them as independent contractors, they could establish and maintain their own retirement plans based on their self-employment earnings.
  • The one exception to the above rule is for full-time life insurance salespersons. They are treated as employees not only for Federal Insurance Contribution Act (FICA) tax withholding purposes, but also for certain employee benefit programs maintained by the business [IRC 7701(a)(20)]. As a result, they may participate in the business owner’s qualified deferred compensation or retirement plans under IRC §401(a).  They are also entitled to other employee benefits such as group term life insurance, accident and health plans and cafeteria plans. Note that a full-time life insurance salesperson may not base contributions to a self-employed retirement plan on the compensation received from the insurance business (Part 4, Chapter 23, Section 5 of the Internal Revenue Manual Technical Guidelines for Employment Tax Issues).

Conclusion

An individual who performs services for a business may be classified as 1) an independent contractor, 2) a common law-employee, 3) a statutory employee or 4) a statutory nonemployee. Proper employee classification is critical for tax and employee benefit purposes. Therefore, it is prudent for business owners to seek competent tax guidance when making these determinations. The IRS explains each classification in more detail in Publication 15-A, Employer’s Supplemental Tax Guide.

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Still Time for a 2020 Nonelective Safe Harbor Plan?

“Although it is already November, can my client amend her traditional 401(k) plan to be a safe harbor plan for 2020?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Illinois is representative of a common inquiry related to safe harbor plans.

Highlights of the Discussion

Yes, but she must hurry. The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 relaxed the deadline for amending a 401(k) plan to add a safe harbor nonelective contribution for the current year.

Under Section 103 of the SECURE Act, plan sponsors may amend their plans to add a three percent safe harbor nonelective contribution at any time before the 30th day before the close of the plan year. The SECURE Act also did away with the mandatory participant notice requirement for this type of amendment.

Furthermore, amendments after that time would be allowed if the amendment provides

1) a nonelective contribution of at least four percent of compensation for all eligible employees for that plan year,

and

2) the plan is amended no later than the close of the following plan year.

EXAMPLE:

Safety First, Inc., maintains a calendar-year 401(k) plan. Based on the plan’s preliminary actual deferral percentage (ADP) test (which the plan is failing), Safety First decides a safe harbor plan is a good idea for 2020. It’s too late to add a safe harbor matching contribution for 2020. However, the business could add a three percent safe harbor nonelective contribution for the 2020 plan year (without prior participant notice) as long as Safety First amends its plan document prior to December 1, 2020. While Safety First still could add a nonelective safe harbor contribution to the plan for 2020 after that date, the minimum contribution would have to be at least four percent of compensation, and the company would have to amend its plan document no later than December 31, 2021.

Conclusion

Thanks to the SECURE Act, 401(k) plan sponsors have more flexibility to amend their plans for “safe harbor” status. Plan sponsors who are failing their ADP tests for the year may find this type of plan amendment attractive as a correction measure.

 

 

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401(k) Plan and Embezzlement

“If a former employee embezzled money from his employer (who sponsors a 401(k) plan), can the employer/plan sponsor use the terminated employee’s 401(k) plan balance to help offset the financial loss to the business?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Georgia is representative of a common inquiry related to the anti-alienation rules under the Employee Retirement Income Security Act of 1974 (ERISA).

Highlights of the Discussion

No, the anti-alienation provisions of ERISA protect the former employee’s 401(k) account balance in this case, and prohibit the plan sponsor from using plan assets as an offset for the stolen funds, unless one of the following exceptions applies.

ERISA provides for only four narrow exceptions to its strict anti-alienation rules:

  1. For payments to alternate payees pursuant to qualified domestic relations orders (QDROs) in cases of divorce or legal separation [ERISA Sec. 206(d)(3)];
  2. For payments of IRS tax levies [Treasury Regulation 1.401(a)-13];
  3. For payments of federal court garnishments stemming from the imposition of criminal fines and orders of restitution [Mandatory Victim Restitution Act of 1996 and United States v. Novak, 476 F.3d 1041 (9th Cir. 2007)] ; and
  4. To satisfy liabilities of the participant to the plan due to criminal convictions, civil judgments, or administrative settlements involving the participant’s misconduct with respect to the plan [Taxpayer Relief Act of 1997, ERISA Sec. 206(d)(4) and IRC Sec. 401(a)(13)].

Conclusion

The anti-alienation rules of ERISA make it difficult for anyone except the plan participant to lay claim to qualified retirement plan assets, although there are a few exceptions.

 

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