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Tax Court Rejects Aggressive IRA Investment Strategy with Coins in an LLC

"Ms. McNulty then took physical possession of the AE coins and placed them in a home safe with non-IRA assets ... In so doing, she relied on a statement on the LLC vendor's website that advertised that an LLC owned by an IRA could invest in AE coins, and IRA owners could hold the coins at their homes, without tax consequences or penalties so long as the coins were titled to the LLC. The LLC marketers believed they had found a proverbial tax loophole, but the Tax Court disagreed." [McNulty v. Comm'r, No. 1377-19 (T.C. Memo Nov. 18, 2021)]  MORE >>

Can an LLC Adopt an ESOP?

"The IRS recently issued [Private Letter Ruling 2015 38021] allowing an LLC to adopt an ESOP. This is the IRS of course, so the ruling included several conditions.... This ruling was very careful to recite certain aspects of the LLC that the IRS clearly wanted to emphasize in approving the LLC's request to adopt an ESOP."  MORE >>

Want an ESOP But Have an LLC? Convert!

"[T]he downside for LLC owners considering an ESOP is that an ESOP must be invested primarily in 'employer securities' and LLC membership interests don't count. The solution is to convert the LLC into a corporation. It can be done, but it has to be done carefully ... This article is an overview of the five most important considerations for an LLC conversion to corporate status: [1] The 80% Continuity of Ownership Rule; [2] Timing; [3] Partnership versus corporate tax; [4] Mechanics of conversion; [5] Governance changes."

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The Future is Now: SCOTUS and Putnam Investments, LLC v. Brotherston

"[At issue in the case is whether] an ERISA plaintiff bears the burden of proving that 'losses to the plan result[ed] from' a fiduciary breach ... or whether ERISA defendants bear the burden of disproving loss causation ... [T]he ultimate decision in this case could have a significant impact on the future of the 401(k) industry and the ability of plan participants to have a meaningful opportunity to work towards their goal of 'retirement readiness.' " [Putnam Investments, LLC v. Brotherston, No. 17-1711 (1st Cir. Oct. 15, 2018; cert. pet. filed Jan. 11, 2019, No. 18-926)]  MORE >>

'Compensation' for Sole Proprietors, Partners, and LLC Members -- It's Complicated

"Instead of the appropriate variation of taxable wages, 'Earned Income' is the basis for retirement plan allocations for sole proprietors, partners, and LLC members. It can be the Internal Revenue Code version of a Rubik's Cube."

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IRS Says Employees of Disregarded Single-Member LLC May Participate in Parent's 403(b) and 457(b) Plans

"[GCM 201634021] provides that employees of a single-member LLC treated as a disregarded entity must be allowed to participate in a section 403(b) plan sponsored by its parent 501(c)(3) tax-exempt organization. The LLC may also be allowed to participate in a 457(b) plan sponsored by such a parent."  MORE >>

IRS Clarifies Treatment of Disregarded Single Member LLC Employees in 403(b) and 457(b) Plans of the Tax-Exempt Member of the LLC

"[GCM 201634021] provides the following clarifications: [1] A [single member limited liability company (SMLLC)] that does not elect to be taxed as a corporation is disregarded with respect to its member for purposes of the 403(b) and 457(b) eligible employer requirements. Therefore, if the SMLLC's member is an eligible employer, then the SMLLC is also an eligible employer for both 403(b) and 457(b) plans. [2] Employees of a SMLLC generally must be allowed to participate in a 403(b) plan sponsored by the member in order to avoid violating the 'universal availability' rule applicable to such a plan under Code Section 403(b)(12)(A)(ii). [3] Employees of a SMLLC may be allowed participate in a 457(b) plan sponsored by the member."  MORE >>

Fiduciary Plan Governance, LLC Comment Letter to DOL on Proposed Fee Disclosure Guide (PDF)

"We think the best approach is to put the burden on the service provider to make the determination of whether it is subject to the guide requirement under consideration of the following factors: [1] Is the disclosure drafted in a manner understandable to the average person, and assuming the recipient has no knowledge or understanding of financial industry fee structures? [2] Is the disclosure only as long as is necessary to convey the required information consistent with the first factor? If the service provider cannot answer both questions in the affirmative, they would be subject to the guide requirement."

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Text of Notice of Pendency of Request for Exemption From the Bond/Escrow Requirement Relating to the Sale of Assets by an Employer Who Contributes to a Multiemployer Plan: Rangers Baseball Express, LLC, and Texas Rangers Baseball Partners

2 pages. "This notice advises interested persons that the [PBGC] has received a request from Rangers Baseball Express, LLC, for an exemption from the bond/escrow requirement of section 4204(a)(1)(B) of [ERISA] with respect to the Major League Baseball Players Pension Plan."

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Text of PBGC Approval of Exemption from the Bond/Escrow Requirement Relating to the Sale of Assets by an Employer Who Contributes to a Multiemployer Plan: Ricketts Acquisition LLC and the Chicago National League Ball Club, LLC

3 pages. "Section 4204 of [ERISA] provides that a bona fide arm's-length sale of assets of a contributing employer to an unrelated party will not be considered a withdrawal if three conditions are met."

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Pension Governance, LLC Sponsors Research Sites on the Social Science Research Network

Excerpt: Pension Governance, LLC (our sister company) is pleased to announce the sponsorship of two sections of the Social Science Research Network. Check them out [http://www.ssrn.com/update/lsn/lsnann/annA026.html] and see for yourself. You'll find interesting research papers and announcements about forthcoming events in the areas of employee benefits law and corporate governance, respectively.

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Profits Interests: Are They the Right Long-Term Incentive Design for Your LLC Firm?

"Changes by the Tax Cuts and Jobs Act of 2017 to capital gains and income tax brackets and rates made profits interest plans even more favorable than they were before the passage of this law. When structured carefully, profits interests combine the leveraged growth opportunity of corporate stock options, the design flexibility of a performance-based stock plan and the long-term capital gains tax treatment of outright equity ownership."

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Text of EBSA PTE 2023-14: UBS AG and Credit Suisse Asset Management, LLC Located in Zurich, Switzerland

"This exemption allows the UBS QPAMs, CS Affiliated QPAMs, and the CS Related QPAMs to continue to rely on PTE 84-14 as of the closing date of the Merger, if certain conditions are met. This individual exemption is necessary to preserve the ability of the QPAMs to engage in the transactions permitted by PTE 84-14, which would be lost solely due to the impending merger of UBS and Credit Suisse ... This exemption will be effective for one year beginning on the closing date of the Merger."

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Tips for Structuring LLC Incentive Compensation

"LLCs wanting to offer incentives to a broader group of employees typically do so through a cash bonus plan. These bonus plans are rights to cash only, so there is no possibility to get capital gains treatment, unlike an equity award, but they are very flexible.... There are some considerations for cash plan compliance depending on design choices with respect to Code Section 409A[.]"

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Putnam Investments, LLC v. Brotherston: The End of 'Business as Usual' for 401(k) Plans

"The predominant invest options in many 401(k) plan continue to be actively managed mutual funds. However, the evidence with regard to the historical performance of actively managed mutual funds shows that the overwhelming majority of actively managed funds are cost-inefficient, not only consistently underperforming comparable passively managed, or index funds, but doing so at a significantly higher price. So much for the three fiduciary requirements of prudence set out in the Restatement."  MORE >>

Text of DOL Prohibited Transaction Exemption 2019-02: Retirement Clearinghouse, LLC

73 pages. "This document contains a notice of a five-year exemption ... [which] permits [Retirement Clearinghouse (RCH)] to receive certain fees in connection with the transfer under the RCH Program, of an individual's Default IRA or Eligible Mandatory Distribution Account assets to the individual's New Plan Account, without the individual's affirmative consent, provided the conditions described [in this exemption] are satisfied."  MORE >>

Pension Rights Center Comment Letter to EBSA on Proposed Exemption Involving Retirement Clearinghouse, LLC (PDF)

"To better inform and protect participants we recommend that the conditions of the proposed exemption be more specific in several areas.... [A]ccount holders should be fully informed of their rights to place their accounts with another IRA provider or to cash out on demand ... [C]onsider imposing limits on some of the fees, particularly the monthly administration fee and the transfer and communication fees to be assessed after RCH identifies a new employer.... [I]nclude a statement that participant records must be maintained until the accounts are distributed ... [R]equire an appeals procedure for mistakes or disputes."  MORE >>

Text of Brief of Secretary of Labor As Amicus Curiae Supporting Appellants In re: 1POINT SOLUTION, LLC

Excerpt: STATEMENT OF THE ISSUES: Whether a bankruptcy trustee, who also is an ERISA fiduciary, has standing to bring an ERISA action on behalf of plan participants against a former fiduciary of an employee benefit plan. Whether the defense of in pari delicto can be asserted against an innocent ERISA fiduciary seeking to remedy a fiduciary breach caused by the defendant fiduciary.

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Benchmarking of Retirement Plan Expenses (PDF)

This analysis is based upon data entered into PlanTools? by professionals evaluating retirement plans. The data reflected in this analysis is not from a survey ? what a service provider might charge a client, but instead actually identifies what a service provider has charged a client for the categories of services listed in this analysis.

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Prohibition on Loans from 403(b) Plan Participant's Account to Church-Related Employer Applies to Indirect Loans

"[IRS Chief Counsel Advice Memorandum 201742022] presented two situations ... In the first, one of the plan's investment options was an investment in limited liability company (LLC) shares where the LLC's primary function was to offer loans to the employer. The investment return to the participant was the interest on the loan paid by the employer. The LLC was not controlled directly or indirectly by the church. In the second, one of the plan's investment options was an investment in an LLC controlled either directly or indirectly by the employer, but offering loans to the employer was not the LLC's primary function."  MORE >>