Leaderboard

The firm I work for would tend to compute the amount of shares this person would have gotten in each year after they get back and you knew USERRA applied. To get the shares you would take them from the current release. There really isn't any other source at that point as you are setting up the facts. (Are there no terms whose shares need to be repurchased? If so, the sponsor could put in the cash to fund the payments and call that the USERRA cont and that person repurchases enough shares to make him whole. That would be first choice if the facts allow for it to happen.) I realize that The people whose share released in the current year aren't exactly the same group and the ratios of the years they got "extra" by the person on military leave being out of the allocation in prior years. But if that is your only source it is your only option and most likely the effect is not very material. I for one don't care for the yearly suspense account. I see no support for it in the rules. This is one of those situations where the section of a plan document that allows plan administrators broad discretion in implementing plan provisions in a reasonable nondiscriminatory manner applies. So once you set precedent I would document and make sure you do it the same way going forward. This is the type of situation when a little money spent on getting the plan's ERISA attorney's blessing is wise in my opinion. The company could put treasury stock into the plan to make the person whole if you really don't like the idea of using the current release. Obviously increasing the total shares outstanding would have a dilutive effect on the share price. But unless this person made a large wage that wouldn't be that material would be my guess. I don't think I have ever seen the treasury stock idea used vs the current release or using the repurchases. Then again you don't see the fact pattern as described very often.

As Bill and rcline46 pointed out, look for definition of "limitation year", you'll need to know that to also determine if you pro-rate 415 and compensation limit. It will usually be defined as "plan year", "calendar year", or "twelve month period beginning _______"

I think you may have missed my point. HCEs don't have to take a 12% loan since they surely have access to standard rates through a normal lender. NHCEs may have poor credit, meaning that it's either the plan or another loan shark if they need to borrow. And I have to agree with Belgarath - the plan either allows loans or it doesn't. The sponsor is not allowed to "want to discourage" anything. If they don't want participants to take loans, the plan should not allow them. Permitting loans is not a required feature, right?

I think I am aligned with FGC in not being convinced that a loan at 12%, even within the past 5 years, is not a PT. I also am not convinced that it is a 401(a)(4) problem just because HCEs might be able to "afford" a super-high rate while NHCEs can't afford it. However, I do believe it is susceptible to being re-characterized as a vehicle for making non-deductible contributions which, presumably, aren't allowed by the plan document and would probably result in an ACP failure.