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When I advised a charity that preferred not to be involved in claims decisions, we got each provider’s contract obligation that it will decide all claims without asking the employer for anything beyond furnishing factual information (not discretionary findings) the employer has and the provider reasonably needs. For an IRC § 403(b) non-plan, the trick is to get each provider’s obligation before the employer permits the provider “to publicize [its]products to employees” and before accepting a wage-reduction agreement that would specify a contribution to the provider. Likewise, the employer would avoid being a party to, or otherwise adopting or approving, an agreement, plan, or other writing that states, or without the employer’s assent could be amended to include, a contrary provision. Such a constraint narrows the available investment and service providers. If the employer had not obtained role-limiting provisions, a participant’s claim can result in the hard place Belgarath describes. Many employers, unwittingly or reluctantly, do things that establish or maintain a plan. And many businesspeople don’t understand that what an employer intended as a non-plan became a plan. Enforcement is almost none until a participant’s surviving spouse discovers the spouse was not named as the participant’s beneficiary (and learns that, if the plan is ERISA-governed, the beneficiary designation might be invalid). Even then, not everyone pursues it.

To be clear, I'm not questioning it either - I fully agree. I'm just saying that in many real-life situations, it isn't that clean. What SHOULD happen and what DOES are often different.

Yes, unless it's a governmental or church plan, we advise the employer to keep its hands off to the maximum amount consistent with meeting its legal obligations. For example, it has to adopt a plan document, and determine what providers will be permitted to offer their products. However, distributions and loans should be left up to the providers (although of course the plan document would govern when they would be available).

Just an added note: I would talk the client out of this stupidity. He now has 365 entry dates instead of, generally, two. No doubt it will get screwed up - guaranteed.

If possible, I advise Non-ERISA plans for which I am doing the documents and our firm is doing whatever administration or consulting is involved, not to have Hardships or Loans unless they are using a vendor like TIAA where the vendor will assume the responsibility of resolving such questions with the Participant without the Plan Sponsor's participation. It is my understanding the the Sponsor can answer factual questions (such as "Is this person an employee?" "What is the person's hire date? Birth date?") The prohibition relates to questions involving a judgment or fiduciary action (Does this Participant have a Hardship? Is this person creditworthy for a loan?) I agree with Carol (good judgment on my part!!). I also note that Non-ERISA plans are a slippery slope. The IRS and DOL would prefer all 403(b)'s to be ERISA so no favors or leeway is given to plans purporting to not be subject to ERISA. For an excellent discussion of this see Bob Toth's comments in "The Business of Benefits", January 30, 2014, "Trouble Ahead for the Non-ERISA 403(b) Plan." In this article, he discusses a lawsuit the DOL filed against a plan sponsor for late deposits (these were really late...months not days). The DOL maintained that the Plan Sponsor exercised discretion over the plan assets by late depositing them and that exercise of discretion made the plan ERISA. Finally, most of the clients we advise in this space (and their advisors) believe that if the plan does not permit Employer contributions, that plan is Non-ERISA. As everyone responding in this space knows, it is not in any way so simple. We also work with many plans for which the day to day matters at the employer's work place are handled by a modestly paid person who is also doing a lot of other HR and related tasks. These jobs also have higher turnover. If a Plan has loans in it, and the vendor asks the Plan Sponsor for a signature, the person I just described may just sign off on paperwork without consulting us.

Diversifying should be a situation you explore based on your individual circumstances at the time and preferably with the help of a qualified trusted advisor, and NOT based on what "everybody else" or "most people" do because most people often make the wrong decision and for the wrong reason, even if they get lucky with the outcome. This is not a decision to be made in a vacuum - you have to consider all your retirement assets and income sources, the company's health (which may not be so apparent), and a whole host of other retirement decision tree criteria.

CarolC, if these amounts have been forfeited and are in a forfeiture suspense account, then they (both the original amount forfeited, which will already be a mixture of allocated contributions and nonvested earnings on the nonvested portion of the allocated contributions earned while in the participant's account) can be used either as additional (or offsets to) employer contributions or to pay plan expenses, assuming that the plan document says so. There is no distinction between original contributions, forfeitures, or earnings on forfeitures.

In my very limited contact with ESOPs, most participants do not diversify. Many of them have regretted it. Other folks here who deal more with ESOPs will undoubtedly chime in.

It is a potentially messy situation, and sometimes with no good answer. The non-governmental entity keeps its hands off to the greatest extent possible, yet some vendors require a sign-off before processing distributions, etc. - the employer is then left with the choice of having a needy employee being unable to get a hardship distribution, or to "cross the line" and make certain determinations or give approval. Rock - Employer - Hard Place.

Wow. Your second paragraph contains the answer to your first question. So does the Summary Plan Description, if the SPD is properly drafted. The short, short answer to #1 is "no" and the fuller explanation is in the SPD.

Actually, having letters after your name also means you have to stay logged in for the entire webcast.

Did both entities adopt the plan? If so, yes, you combine the two amounts, paying careful attention to ensure the earned income is calculated properly, just as you would if the only source was the sole proprietorship. There are no regulations on how to divide the deductions. The accountant is technically responsible for the breakdown although as a practical matter it usually falls to the actuary to, at a minimum, suggest how it might be done. The only guidance I am aware of is informal guidance from the IRS at conferences to "do something reasonable".

While we don't have specific guidance, and I agree that it makes not much sense to put it in just to limit its time period, I don't think it's a protected 411(d)(6) protected benefit. I do think it can be discriminatory if HCEs used it in the early time period and then you shut it off. BTW, as of today, we have not had one client who desired to add CRD options to their plan.

Purplemandinga, I think that's a good question. The issue does not seem to have been addressed one way or the other in the CARES Act. Safest thing to do, of course, would be to just leave it in through the end of the year, if you decide to put it in. Why take it out once it's in?