Leaderboard

Well, first, did a plan exist? Communication to participants is an essential part of establishment of a plan. If not, then there may be tax fraud, depending on how contributions were dealt with. If a plan did exist, misuse of employee benefit plan assets is a FEDERAL felony (and Ill look for the cite). In either event, I would 1) advise them of the error of their ways; 2) resign immediately, and 3) consult an attorney about your obligations concerning having witnesses/having information/evidence of the commission of a crime. Part of me also would also anonymously alert the DOL (their website lets you do that) about this situation (and I resist that urge almost daily....)

If the plan is ERISA-governed, New York’s or any State’s law about how a divorce might affect a beneficiary designation is superseded. ERISA § 514, 29 U.S.C. § 1144; Egelhoff v. Egelhoff, 532 U.S. 141, 25 Empl. Benefits Cas. (BL) 2089 (2001). As Lou S. mentions, a plan’s governing documents might or might not provide that a divorce revokes an earlier beneficiary designation. See Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 45 Empl. Benefits Cas. (BL) 2249 (2009). To the extent that an ERISA-governed individual-account plan does not provide ERISA § 205 survivor annuities, such a plan provides that the participant’s surviving spouse gets the account, unless that spouse consented to a different beneficiary designation. ERISA § 205(b)(1)(C), 29 U.S.C. § 1055(b)(1)(C). A qualified domestic relations order may provide that an alternate payee who is a former spouse of the participant be treated as the participant’s surviving spouse for all or some ERISA § 205 purposes. Such a provision could wholly or partly deprive the participant’s actual surviving spouse of a benefit to which the surviving spouse otherwise might become entitled. ERISA § 206(d)(3)(F)(i), 29 U.S.C. § 1056(d)(3)(F)(i). A contingent beneficiary designation has no effect until all spouse benefits under ERISA sections 205 and 206 are exhausted. Anything on BenefitsLink is only general information, not advice, and might not fit your situation.

Names can be deceiving. If this is truly a dynasty trust than it is irrevocable and attribution is according to actuarial value of beneficial interests. In other words, if D is 50% beneficiary she is deemed to own 37.04%*50% of company. If it is a revocable grantor trust that becomes irrevocable on a later date (e.g. grantor's death), grantor (assumed as D's father) is constructive owner and his ownership is attributed to D. If revocable but non-grantor than attribution same as if irrevocable. First level cut. There may be re-attribution among family members depending on other facts.

They could do a SIMPLE - nothing for non-employee contractors, W-2 employees would be offered if they met the eligibility rules being established, and the owners' contributions "from the company" beyond their deferrals would be a function of their net earnings from self employment (since they're owner-employees not getting W-2s).

Actually, it has to - contractors aren't employees.

Correct. I anticipate plans will have to issue a 1099-R at year end for employer amounts contributed as Roth, the same as is done for in-plan roth conversions.

I don't know about you all but I find these discussions much more interesting and enriching compared to the "what compensation do I use to calculate the safe harbor contribution?" questions that make me feel like we're doing someone else's job of basic training their staff.