Leaderboard

In my experience, most DB plan documents have "414(k)" provisions in them, but they are not referred to as such. They are usually called "separate account" provisions and are found in the late retirement benefit section of the document. Usually, the document language is something like "upon reaching normal retirement age, the particpant may elect to have his lump-sum benefit transferred to a separate account, which shall remain a part of the trust and share in any gains and losses . . .", etc. The account is often specified to be a segregated investment account, but favorable determination letters have been issued on separate accounts that are just a pro-rata type of allocation. However, Code section 414k is much more general and does not specify separate accounts to be limited to this purpose, it only states how they are to be treated under the Code. From my small plan perspective, the advantage of 414k accounts in a DB plan is that 414k states unequivocally they are to be treated like DC plans for most purposes, including code section 415. In a small DB plan, this can be very valuable to prevent overfunding, especially in an era of 30%/yr investment returns (2000 excluded!). In larger plans the advantage is mainly for the participant - he/she can control the investments. One footnote: I spoke to a Reish & Luftman attorney recently who attended the LA benefits conference. Apparently, and this is all second-hand as I was not there, Wickersham made statements to the effect that 414k did not allow for DB 415 limit protections on overfunding. This remark elicited a "WHAT???" from all present (again, I was not in attendance but this is the attorney's account). The sentiment was that one would have to pretend 414k did not exist to justify this. The Reish & Luftman tax attorney stated to me he would "love to trounce the IRS in tax court if they ever tried this". Would love to hear more opinions on this. Perhaps someone else can contribute more on the coverage and discrimination issues.

Just an FYI - I spoke directly to the DOL and they confirmed, so long as a client has not received a notice to assess a penalty from the DOL, the plan is still eligible for DFVC.

Yep, sure looks like a calculation issue to me. I'll update as soon as I hear anything.

In a situation like this, there are details that make a big difference in the answer. The key rule is this -- if the current surviving spouse never gave written, notarized consent to you being a beneficiary of your father's Keogh Plan account, then she is deemed to be the beneficiary. (There might be an exception if your father was married less than a year at his death, but most plans I work with don't provide for that exception.) Unless your father had elected a distribution option that named you as beneficiary before his marriage to his current spouse, and benefit payments had started before his death, you probably have no recourse. If your situation is in the least bit complicated, talk to a lawyer rather than us.

Thanks to all. I found the answer on the DOL website. Q37: If a plan sponsor pays a third-party service provider on the plan's behalf and seeks reimbursement from the plan, should the Schedule C reflect a direct payment from the plan to the service provider and not a payment to the employer? Yes. When a plan sponsor pays a plan third-party service provider and then seeks reimbursement from the plan, the Schedule C for the plan should reflect a direct payment from the plan to the service provider. In this regard, direct compensation is defined in the instructions for purposes of Schedule C as ”payments made directly by the plan for services rendered to the plan or because of a person's position with the plan” and excludes ”payments made by the plan sponsor, which are not reimbursed by the plan . . . .” The Department notes that if the plan sponsor pays a service provider directly, and does not seek reimbursement from the plan, such payment does not need to be reported on the Schedule C. https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/2009-form-5500-schedule-c.pdf

If anyone has received one of these notices and is willing to share a copy without the identifying information, we can try to get an answer through ASPPA/ARA. Thanks

I want to thank everyone who responded to my message! I needed to show my work since the Plan is audited. I added division codes in Relius. And then I ran the ADP Test by division to get the report that I needed.

Fair Q. Probably a programming mistake. Wouldn't be the first time.