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The sponsor certainly has an insurable interest in a key person's life but if it wanted to insure someone's life it should pay the premiums. I don't see any circumstance where it would be permissible for the plan to pay premiums and the sponsor be the beneficiary. I'd want to know what the intent was and then...try to fix it. It's a pretty serious screw-up, whether it was intentional or just accidental (where the plan was intended to be the beneficiary). In either case it is gross incompetence on the part of the agent, and the insurance company as well. In all circumstances, the plan should be the beneficiary, even if it is a "directed" by the participant in a DC environment. I've heard of buying insurance as in investment in the context of a pooled account; the concept being that key person insurance is appropriate to make up for lower contributions, or perhaps even the termination of the company and plan, in the event of a key person's death. That's irrelevant to this situation but I mention it as a possibility of someone's (flawed) thinking in a DB plan. I guess it might be a permitted investment in a DB plan but I've never seen insurance in a DB as anything other than part of a benefit.

Wouldn't it be easier to just grant service credit for eligibility for service in January and February 2018 with the previous employer for those included in the asset purchase and then apply the regular 12 month / 1,000 hour with dual entry?

Jaclyn, let's assume for the sake of argument that, even after further discussion the prospective employer REALLY does insist that the individual repay his plan loan. I agree that the Section 510 argument has potential, but I have a feeling that any attempt to explain to the employer that he is violating the law is not going to end well. He is likely to view that as you threatening a lawsuit if he doesn't hire you, even if you didn't intend to convey that.

Sounds like someone was trying to purchase key-man life insurance and thought the cheapest method (ie, tax-advantaged) is to use plan money for paying the premiums. (Just a hunch, there is an insurance broker somewhere who has the ear of the client/executive.)

Talk to the IRA provider. Ultimately they are the ones who have to fix it and you'll have to follow their procedures. They're not gonna make it easy...

BenefitsLink furnishes the prepublication text of the Treasury’s final rule (scheduled to be published next Monday) about hardship distributions and related provisions. https://benefitslink.com/news/index.cgi In my quick glance, the Treasury’s explanation responds to the questions raised in the discussion above. It also answers a few other questions. Leaving aside thoughts about whether one likes or dislikes the rules, does the final rule sufficiently remove uncertainties?

https://www.irs.gov/retirement-plans/fixing-common-mistakes-correcting-a-roth-contribution-failure The IRS link above states that if a participant requested deferrals be withheld as Roth, but the employer inadvertently withheld the deferral as pre-tax, then the employer MUST transfer the erroneously withheld funds from pre-tax to Roth - corrected tax forms, etc. Conversely, if a participant requested deferrals be withheld as pre-tax, but the employer inadvertently withheld the deferral as Roth , then the employer CAN transfer the erroneously withheld funds from Roth to pre-tax - corrected tax forms, etc. Does anyone else agree with the interpretation that the correction is not necessarily REQUIRED when the participant requested pre-tax and the funds were inadvertently withheld as Roth? Since it's not spelled out in EPCRS, I'm not sure how I want to interpret this. The IRS isn't necessarily the best at drafting their materials....

ratherbereading (so would I, btw), anticipating that you may still get some pushback notwithstanding that this was done by plan amendment, I would point out that there is some tension in the nonqualified CODA rules surrounding what exactly constitutes an "election." Although every situation is unique and this is to a great extent a facts and circumstances issue, putting aside the timing of the amendment (e.g., how late in the year it was, whether the participant had already satisfied the allocation conditions, whether the contributions in question were completely discretionary, all of which are important), every negotiation ends in an agreement of some sort, which means both parties "agree." Whether the participant's agreement to something at the end of a negotiation constitutes an "election" by the participant can be of a gray area, to be sure.

All this loan stuff is great for us pension geeks (well not really), but it isn't germane to the OP's question - what does the plan loan have to do with a hiring decision? It could be the OP misunderstood what the employer said, it could be that the employer doesn't know what they are talking about, or it could be that they don't want to rehire her and are using this as an excuse. If the employer really told the OP that any hiring decision was contingent on repaying the loan, I still think this is a possible ERISA 510 violation.

I agree with C. B. Zeller those articles are written for the average person and they use language that makes sense to them. In many ways it looks like you are paying interest to yourself but legally speaking it is paid to the plan and allocated to your account. In my world the common way of explaining an ESOP is legally incorrect. It is often times said you own stock in the company in your account. For most purposes that is a good description but legally speaking all the stock in an ESOP is owned by the trust and the participants are a beneficiary of the trust. There just isn't much practical value in all the extra verbiage when doing an enrollment meeting so it is skipped and we talk about how the participants own the stock of the company. Even in a 401(k) plan we talk about how you are invested in this or that mutual fund like you own the mutual fund. Legally speaking the trust owns all the assets and the participant is the beneficiary of the trust. The poor person who asked the original question getting hit with these technical side conversation! To that person I agree with the other people go talk to HR and see if there is some kind of misunderstanding as I have never in my decades seen a rule like you describing.

Of course that can't be done. Employees don't have the option of "waiving" their contributions, otherwise employers would be "encouraging" such an action all the time. Frankly, who cares what the employer is "thinking". They don't know the law; that's why they pay us. The employer has to be told that this is just not legal. No more than trying to force an employee to pay back a loan made to the participant by the employer (not the plan) from the retirement plan distribution to that employee.

Does the plan get the interest on the loan? YES IT DOES. That's the law. Now, how that return on investment gets allocated is another issue, and in many plans it is allocated back to the participant who borrowed the money. In many of my plans (with no participant direction) it is not. It is simply another investment of the plan (it's a lot like a bond). Our QP world is full of technical issues that are confusing to the lay individual (and rightfully so). That's a good thing because that's why employers need people like us! (that's sarcasm). Did you know that employee 401(k) deferrals are also NOT employee contributions? Legally, they are EMPLOYER contributions. And while that makes no sense at all to the lay person, it actually makes perfect sense when you understand our convoluted tax laws.

Get a copy of the plan's SPD and see if you have met the requirements described in it. It will specify the money type(s) available and the conditions. If you determine you meet all of the conditions, write a letter to the decisionmaker demonstrating your satisfaction of the conditions point-by-point and the sufficiency of your account and demand that they follow the terms of the plan as described in the SPD.

You might want to read the plan and/or the SPD. I think both will indicate that the loan is an investment of the plan; ie, it's the plan's money being loaned, not your money.