Leaderboard

It all comes down to what the document says. I could certainly see this being an outcome, in fact the likely outcome, unless steps were taken in advance to keep them out. It's possible the document could have been drafted to accomplish all your goals, but that's water under the bridge at this point, you have to go by what the document says.

This is quite likely a 406(b) pt whether or not the son is a p-i-i.

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.

Well this "memo" was written by the IRS. I think the huge gaping hole in this system is that the participant is required to keep the documentation. That is just a hilarious assumption.

I would be very careful with self certification even after memo. It doesn't make self certification compliant, but says you should treat it as if it was compliant if certain steps are taken. If you fail to take those steps, you are once again not complaint. I spoke to some ERISA attorneys and auditors at luncheon last week and none are recommending self certification.

A mid-year amendment to the match formula is prohibited under 1.401(k)-3(e)(1). The modifications to that rule in Notice 2016-16 provide that the only mid-year formula changes allowed are ones made with at least 3 months remaining in the year and that increase the safe harbor contribution. See Section D of the notice. The amendment under discussion would result in lower SH amounts for at least some individuals. So, if they do the amendment mid-year, they would fall under the rules for reducing or suspending the SH contribution under 1.401(k)-3(g) and lose the SH for the year.