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  1. Yesterday
  2. Agreed. Using the facts from the OP, 2018 is not a required distribution year.
  3. Mr. Bagwell, thanks. Learn something new every day, and this is it for today. Very unlikely to have been the result intended by Congress, of course, since seems unlikely they would have created such an elaborate, but fragile, way for a married couple to separate their respective businesses. Neither family- nor working spouse-friendly.
  4. Patricia Neal Jensen

    401k late due to chg in recordkeeper, or not

    The requirement is not that the funds be deposited with the "new" recordkeeper but just that they not remain in the plan sponsor's bank account. I maintain my earlier position: the correct resolution to this problem was within the plan sponsor's control. I have done hundreds of these in my career. There is always a way that does not include the plan sponsor holding such assets beyond the time limit established.
  5. Patricia Neal Jensen

    403(b)(7) vs. 403(b)(9)

    As usual, Luke is "spot on!" I do a reasonable number of church plans and have not to date done a 403(b)(9). While I acknowledge the 'No required document" material cited, I always do documents. How else does one know what the rules are? And I work and live in litigious California so I think it is good housekeeping.
  6. Most pension actuaries will advise to do the testing (at least approximately) first; ie, before plan design and timing is finalized. Has this been done?
  7. Fiduciary Guidance Counsel

    Ineligible employee?

    If organization 1 runs payroll for both organizations, how does either plan's administrator know whether a worker is an employee of 1, 2, or both? If the worker is classified as an employee only of org 2, might she be a leased employee or borrowed servant for org 1? Is the retirement plan 401(a), 401(k), 403(b), 457(b), or something else? If the plan is of a kind that can allow a nonemployee, what does the plan's document say about who is eligible?
  8. Kevin C

    Ineligible employee?

    If they are separate 501(c)(3) organizations, trying to do a corrective amendment like you would normally do for a 401(k) plan will create a bigger mess. By that, I mean amending the plan to allow the ineligible person from #2 to participate. Under 1.403(b)-5(b)(3), when a 403(b) plan covers the employees of more than one 501(c)(3), Universal Availability for salary deferrals applies separately to each 501(c)(3) organization. So, if the plan allows one employee of #2 to defer, it means that all employees of #2 must be allowed to defer, unless they fit under one of the allowable exceptions in 1.403(b)-5(b)(4). But, note that some of those allowable exclusions have an all or nothing rule attached. I'm thinking the best option is going to be refunding deferrals to the person incorrectly allowed to defer. Otherwise, #2 would likely not be satisfying the Universal Availability requirement for deferrals. Going forward, they may want to look at including both #1 and #2, but I doubt they would want to do it retroactively. It's also interesting to note that CG and ASG rules apply under 1.403(b)-5(a) "Nondiscrimination rules for contributions other than section 403(b) elective deferrals", [see 1.403(b)-5(a)(4)], but not to 501(c)(3)s under 1.403(b)-5(b) "Universal availability required for section 403(b) elective deferrals".
  9. Years ago, I was at a Relius training and the speaker was telling a story about this same scenario. He said he and his neighbor was talking about 401ks and the neighbor told the speaker that he owned 100% of his business and the wife owned 100% of her business. I don't remember all the middle details of how and why they got onto the discussion, but the speaker gave the husband some warning that the two companies may be a controlled group because the speaker knew the couple had minor children and the husband may want to talk to his 401k provider. The husband inquired and said his provider did not consider this to be a control group. The speaker then told the husband to tell the 401k provider the IRS code to look up. To make a long story short, the speaker had worked for the IRS and helped write the code. (That's what he said) I understood that the speaker was nice to the neighbor as he was discussing the issue. The speaker did not drop the trump card that he helped write the code.....lol. That story is why I'm really cautious of the husband owns 100% of his company and the wife owns 100% of her company scenario..... my brain always says "do they have minor child/ren?".
  10. PensionPro

    Ineligible employee?

    are they a controlled group?
  11. Check out EOB 2013 edition 1A.36 and 1A37. There is a discussion on this very similar scenario. I'll closely type the section. Minor children attribution not disregarded. Although a husband and wife might not be attributed each other's ownership interests in the respective businesses, if the have minor children (under 21), other attribution rules may result in a controlled group relationship. Under the stated facts of the example, Husband and Wife are not attributed each other's ownership interests in their respective businesses. Normally then, Husband's wholly-owned corporation would not be part of a controlled group with Wife's wholly-owned corporation, because the companies have no common owners. But suppose they have a minor child. The minor child is attributed the stock in each company. This creates a controlled group relationship because the minor child, as the common owner by attribution, owns 100% of each company. Comment: controversy on this issue. .......At a Q&A session with the IRS at the 2012ASPPA annual conference, IRS representatives indicated that, until there is a statutory change made by Congress, the IRS would follow the literal wording of the statute.
  12. TPApril

    401k late due to chg in recordkeeper, or not

    They have (less than enthusiastically) agreed to deposit the lost earnings and understand that this will show up on their 5500.
  13. Non profit #1 sets up non profit #2 and runs payroll for them. #1 lets a #2-ee into #1's plan. I see provisions in EPCRs regarding how to fix letting employees in early, but this doesn't seem to fit that. She seems ineligible to me, though she's on the payroll... Any thoughts?
  14. Luke, The premise was that the minor children attributed all of the parents stock, therefore owning both businesses. Not that the spouse stock went to children, then children's stock went to other spouse.
  15. Bird, I am agreed no RMD.
  16. Mr. Bagwell, I don't think that is right. Someone might think that that is a correct application of 1563(e)(6), i.e. you meet the requirements of 1563(e)(5) to avoid attribution from your spouse, but then 1563(e)(6) attributes your spouse's stock to your minor children (first attribution), and then your minor children's stock to you (second attribution). But I think 1563(f)(2)(B) blocks the second attribution.
  17. Are we agreed that in the case originally posed, there is no RMD? She did NOT terminate. I'm confused by subsequent responses which see to overlook this detail and are off to the races - in the wrong direction, IMO.
  18. What? "I agree, the RMD wouldn't be applicable until the participant met the RMD requirements of the plan & regulations." Of course that's true. The question being posed is what are those rules and how do they apply in a particular situation.
  19. Being a CPA does not eliminate the possibility of also being an idiot!
  20. We are setting up an early retirement window in our pension (DB) plan -- retire within a specified time an you get two additional years credited service and two additional years age. Our actuaries are wondering if it would make sense to add a statement in the early retirement window amendment that the early retirement window enhancements are subject to meeting non discrimination testing requirements. By doing this, they think it gets out of paying the benefits out of the plan if the discrimination test is failed or by giving non HCE’s additional benefits in the plan to allow discrimination testing to be met. This seems unnecessary to me -- wouldn't both of those things be options if we fail nondiscrimination testing anyway? Why do we need to include it in the amendment?
  21. One of the details/exceptions is whether there are minor children? I was taught that if there was minor children between the two, then the two plans are a control group.
  22. Back to my point after your discussion about how FU it is to try to cut out employees from elective contributions a based on less than FT employment. It is not a wise policy decision at many levels in most cases. An employer must have a really good reason to go there, and I have not heard many. The student exception is different.
  23. You are correct. If the businesses are treated as separate property under state law by virtue of a valid agreement and the non-involvement exception applies, the two entities can be treated as unrelated but check the details.
  24. I agree, the RMD wouldn't be applicable until the participant met the RMD requirements of the plan & regulations. The plan still must allow the deferral to retirement (some plans opted to remain under the age 70 1/2 rules regardless of the new rules). If the plan document uses the pre-2002 RMD language, the deferral of RMD until retirement wouldn't apply. One situation I've seen for this type of rollover to IRA is in the instance the only distribution option allowed is a total distribution with no exceptions. I've seen quite a few plan documents with the total distribution option, with no RMD alternative language (some providers still distribute installments not otherwise available under the plan). The participant may want to begin distributions in an annuity option that may not be available under the plan.
  25. Agreed to the train wreck. Especially if the 403(b) is subject to ERISA.
  26. http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irlf22d/1/doc
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