My 2 cents

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My 2 cents last won the day on March 24

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  1. Are disappointed doctors supposed to be better losers than lawyers? Technically, if a plan is just well-funded enough to pay one lump sum but would fall under 110% if they were to pay a second, then the first one out of the gate wins. But wouldn't it be cheaper to fund up enough to meet the full demand for lump sums than to have to try to defend against litigation?
  2. Just don't attach an accountant's opinion! Oh, you mean how to file a 5500 without an accountant's opinion and suffer no adverse consequences! THAT might not be so easy. Why not have the plan pay for an audit - I think the expense of preparing an audit for attachment to the 5500 is an allowable plan expense.
  3. Wouldn't the fact that this was a law firm argue against pulling a stunt like that? Watch out who you turn into enemies!
  4. Asking for information on the last 5500 filed isn't going to get you anywhere if there had never been one filed!
  5. Failure to follow the terms of the plan? While he may not yet be, technically, an HCE, if push comes to shove, it won't look good when it comes to the "facts and circumstances". What were they thinking when they let him contribute early? Bet it was discriminatory in intent!
  6. Accrual vs cash accounting etc. - one is supposed to follow the same methodology year after year, so if they counted accrued interest and/or receivable contributions, you should too!
  7. I am not a lawyer but... Without any doubt! And provide any subsidized early retirement benefit accordingly. Any purchased deferred annuities must so provide.
  8. What about back taxes, interest and penalties for the years in which he took money out? Did he declare those payments as ordinary income and pay taxes on them? Disqualifying the plan is unlikely to spare him back taxes, penalties and interest for underpayment of taxes over a period of years. If it's egregious enough, there could even be jail time for tax evasion. If the IRS is offering him a clean slate for a payment of $X, perhaps that is the easiest and cheapest way out, almost irregardless of what $X is.
  9. Through what sort of financial analysis was the decision made that the best possible investment for Plan X's assets is a loan to Company Y? The decision would have been made by the Trustees of Plan X. Not by Company X and not by Zelmo. By the Trustees of Plan X, acting as fiduciaries, and not as people beholden to either Company X or Zelmo. I suspect that a loan from Plan X to a company owned by a participant in Plan X is a prohibited transaction. It being so easy to imagine conflicts of interest and self-dealing in the decision to make the loan, it seems as though it ought to be. How would one distinguish between a loan to Company Y and a loan to Aaron? Also, it could make a difference whether Aaron is a highly compensated employee with respect to Company X and/or Zelmo. I am not a lawyer, and some of the issues here could require a close legal analysis to determine if Company Y would be treated as a disqualified person on account of it being owned by Aaron (who would, as a plan participant, be a disqualified person).
  10. I don't usually work with 401(k) plans, but is it not inaccurate to say that community funds were used to contribute to the 401(k)? Wouldn't the contributions be salary reduction amounts taken from the participant's earnings (which, I would think, are not community funds at all, at least until they have come into the participant's hands)? Not that it makes much difference.
  11. Interesting question. Do fiduciary standards apply when the default IRA provider is selected? [Insert usual caveat that I am not a lawyer, etc.] 1. Even if they did, who is going to sue if the total amount put into the IRA prior to any fees is certainly less than $5,000? The complaint would be that when the person whose benefits were rolled over to the IRA went to collect it, instead of $3,800 under a carefully chosen default provider's IRA, there was only $1,800 (due to fees and poor investment performance), the difference being the result (at least in part) of a fiduciary failure in choosing the provider. Is it a defense to such a suit to point out that it was essentially the participant's fault that a default rollover had to be made in the first place? How often would there be enough default rollovers to lead to the possibility of a class action? Nearly all instances would be individual suits. 2. Even if there were some degree of negligence in choosing among potential default IRA providers, once the money is transferred to the default provider, the person whose money is transferred ceases to be a plan participant, and it is an absolute certainty (the sponsor and the default provider being unrelated) that the sponsor is absolved of any need to pay any further attention to that person. Unlike the selection of investments, once the default provider is selected, it is unlikely that a credible argument could be made that the sponsor has an ongoing duty to monitor the performance of the selected IRA provider.
  12. Not an expert to be relied upon, but it seems to me that there could be issues involving Prohibited transaction - might be. Is the son, who does not work for the sponsoring company, considered to be a party in interest? Failure of the company president to discharge his duties prudently and according to fiduciary standards. Under what reasonable process did the president reach the conclusion that his son should handle the plan's investments? While it might constitute a conflict of interest, is that something that ERISA and applicable regulations address? Would the son be working under a conflict of interest, or is the concern here that the father would be? I suspect that the father is aware of any conflict of interest that the son might have (it should not be necessary for the son to inform the president that he, the investment advisor, happens to be the president's son). If the father is operating under a conflict of interest, how could it be cured? The biggest problem here with respect to conflict of interest could involve questions as to whether the president is choosing an investment advisor prudently and in accordance with the fiduciary standards.
  13. Having heard of instances where someone who entered a calendar year plan on July 1 and who terminated employment (without the requisite service for vesting) before July 1 of the year containing the 5th anniversary of entry was denied any plan benefits due to not having reached NRA (and was therefore not vested), as well as early and late retirement adjustments having keyed to NRA being the exact 5th anniversary of entry and not to NRA being the first day of the plan year containing the 5th anniversary, yes I am being serious. That sort of thing has been going on for years and years and years and those plans are not in violation, since the plan (which had no trouble receiving favorable determination letters) called for exactly that treatment. That the regulation itself does not refer in any way to "plan years" is of great significance, and interpreting the regulation by presuming that they "must have meant" it to refer to "plan years" is just wrong (especially given the care lavished on regulations issued back then). The requirement that one must go back to the beginning of the plan year is entirely absent from ERISA or its legislative history and the so-called requirement that NRA should key off of the beginning of the plan year is incompatible with the clear statutory language. That, together with the regulation not even using the phrase "plan year", should be determinative. Looking at the regulation itself, in context that part of the regulation was surely intended to differentiate between the 8 different plan entry dates for a particular person, to specify which one of the 8 is to be used to determine the 5th anniversary of entry.
  14. Just as I said - nothing tying it to plan years. If they meant "first day of the first plan year", they would have said so. They didn't. And that quote is, in context, in a place where the focus is on what to do if the person had more than one plan entry date. ERISA (as amended) clearly calls for NRA being tied to the 5th anniversary of plan entry with no mention of the start of a plan year. Plans defining NRA as the later of age 65 or the 5th anniversary of plan entry (with no mention of the first day of a plan year) have been getting determination letters for over 30 years, and if that is what the plan says, administration must follow that.
  15. If the problem were from an EA exam, the candidates taking the exam are expected to be familiar with the general conditions (such as NRA being 65 unless specified otherwise). While there may be gross unfairness occurring here in the BenefitsLink discussion concerning what NRA may be (perhaps the OP should have mentioned what NRA is), there should be no unfairness at all for those taking the EA exam, who should not only have familiarized themselves with the plethora of general conditions but who would (I believe) have access to a copy of the general conditions handed out at the exam itself and available for reference during the exam.