IRS Eases Rules for Making “Late” 60-Day Rollover Contributions

 

On August 24, 2016 the IRS released Rev. Proc. 2016-47 providing a new “self-correction” program for taxpayers who miss the 60-day window for rolling over a distribution from an IRA or qualified retirement plan. Prior to this guidance, a taxpayer who was unable to complete a rollover within the required time frame could only qualify for a tax-free rollover after the 60-day period by seeking IRS approval.

This new guidance allows plan administrators, IRA custodians and IRA trustees to accept “late” rollover contributions from individuals who certify that they meet the requirements to qualify for a waiver of the 60-day rollover window.

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In-Service Distributions

When can a participant receive a distribution from a retirement plan while still working?

It depends. A plan may (but is not required to) allow participants to receive in-service distributions. In addition, certain conditions must be satisfied which are set forth under the Internal Revenue Code, regulations and IRS guidance.

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Mid-Year Changes to Safe Harbor 401(k) Plans

In January 2016, the IRS issued Notice 2016-16 providing long-awaited guidance on when changes can be made to safe harbor 401(k) plans mid-year. Previous IRS guidance (formal and informal) seemed to indicate there were only limited circumstances under which a safe harbor plan could be amended prior to the first day of the following plan year. Thankfully, this notice reflects an apparent shift in the IRS’s position and provides sponsors of safe harbor 401(k) plans with much greater flexibility throughout the year. The notice does contain a short list of changes that are specifically prohibited, but many changes are permissible provided certain conditions are satisfied.

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Fidelity Bond FAQs

What is a fidelity bond?

A fidelity bond is a special type of insurance that protects plan participants from the risk of loss due to acts of fraud or dishonesty by plan officials.

Is a fidelity bond required for my plan?

Generally, yes. With limited exceptions, all qualified plans (i.e. 401(k) plans, profit sharing plans, ESOPs, certain 403(b) plans, etc.) are required by law to be covered by a fidelity bond.

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Deposit Rules for 401(k) Plans

Deposit Rules for 401(k) Plans

One of the most common mistakes made by 401(k) plan sponsors is failure to deposit participant contributions (i.e. 401(k) deferrals/Roth contributions) and loan payments in a timely manner. Having said that, it is worthwhile reviewing the rules and consequences of making late deposits.

What are the rules?  

In general, the Department of Labor (DOL) requires that participant contributions and loan payments be deposited as soon as the amounts can be reasonably segregated from the general assets of the employer.  This is because the amounts are considered to become plan assets at this point in time.  

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