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I'll put in my two cents. He had not met the eligibility when he termed. It's not as if he had met the eligibility and just not made the entry date. If that were the case i would say 02/01/2016. However, he meets the eligibility criteria as of his rehire date so I would say he enters the plan on the next entry date of 04/01/2016.

The DOL reg allowing for limited scope audits references that timing. 29 CFR 2520.103-5 - Transmittal and certification of information to plan administrator for annual reporting purposes.§ 2520.103-5 Transmittal and certification of information to plan administrator for annual reporting purposes. (a) General. In accordance with section 103(a)(2) of the Act, an insurance carrier or other organization which provides benefits under the plan or holds plan assets, a bank or similar institution which holds plan assets, or a plan sponsor shall transmit and certifty such information as needed by the administrator to file the annual report under section 104(a)(1) of the Act and § 2520.104a-5 or § 2520.104a-6: (1) Within 9 months after the close of the plan year which begins in 1975 or September 30, 1976, whichever is later, and (2) Within 120 days after the close of any plan year which begins after December 31, 1975.

Gannuscio, you can keep talking to the lackeys at the call center, or you can poke yourself in the eye with a sharp stick - same result. You'll probably get different answers every time you call. Heck, most people here are experts and we are disagreeing. (Although I have yet to see a credible answer as to why it should be deemed in 2014..."practical" is not credible, IMO.) I don't have a better way to handle it, but be prepared to spend a lot of time on it. You need to move up the chain somehow to someone who understands a bit about the Code and Regulations, and give them the cite for Reg. Section 1.72(p)-1, Q&A-10(a), and ask them how they square their reporting with what the reg says. (Don't refer to the FAQs which support 2014 taxation.) I guess the other option is to duke it out with the IRS and try to prove that the 1099 is wrong; that might actually be your best bet. I am chuckling when I think of Charles Schwab trying to correct a 1099 issued for 2014 and then issue one for 2013...never gonna happen. If something isn't right when it goes into their system, it's nearly impossible to fix.

Just thinking out loud here because we only have some pieces of information to go on. IF the plan requires that a loan balance be paid off by your vested account balance upon termination, they would apply your non-loan assets to pay off your loan. Basically, if you owe $5,000 on your loan at termination, they apply $5,000 from your vested balance to pay the loan off. You are then issued a 1099-R for the $5,000 because it was "distributed" in order to satisfy your loan obligation. You don't get an actual check for the $5,000 because it was used to pay off the loan (and you already have the funds from the loan). This would be reported on the 1099-R as a code 1 if you are under 59 1/2, without the extra L that would be used for a loan default.. The "we can do it when we want" statements are odd though, I'm pretty sure you were talking to a call center.

It seems to me if the corp is the trustee, then by the transitive property the owners are trustees. I get that it is less paperwork, but I do not see it reducing anyone's personal liability.

This is a really confusing area after 409A. Unsecured and unfunded deferred compensation plans historically avoided constructive receipt and current income taxation if they are subject to a "substantial limitation or restriction" under Reg. Sec. 1-451-2(a). A promise-to-pay plan subject to the claims of the employer's general creditors has such a limitation. In my experience, this limitation is often called a substantial risk of forfeiture by commentators and even some courts. The question here is the plan also subject to 409A, which is additive law furthering defining the constructive receipt doctrine? To be a 409A-covered plan, it needs only to be a "nonqualified deferred compensation plan" that involves a "deferral of compensation" which in plain English is a binding promise in one year to pay compensation in a future year. This looks to be the case here.. The only way to avoid the application of 409A is if the plan is if is an exempted plan (like 457(b) plan) or can satisfy the 409A "Short-Term Deferral Exception." The plan requires a 409A substantial risk of forfeiture to claim this STD exception. 409A substantial risks are those we all tend to call "real" risks of forfeiture like those to be found in Section 83 governing funded plans, and does not include the risk of loss to general creditors as an adequate risk. Most plans do not place real of risks of forfeiture on vested compensation (salary and bonus amounts voluntarily deferred), and one is not present in the offered plan design. And 409A can cover a plan for a single person. Hence, looks like this plan is subject to 409A, which means that it also must satisfy the requirements of Section 409A which are both: 1) documentation compliance and 2) operational compliance. FYI- with the addition in the June of proposed regs creating the separate definition of substantial risk of forfeiture under 457(f) governing tax exempt ineligible plans, there are now 7 different definitions of substantial risk of forfeiture in the Code for different purposes.