A retirement plan's sponsor would like to amend its ERISA-governed plan to restrict distributions to preclude a check and allow only a direct deposit to a distributee's bank or other financial institution account?

Would such a provision be contrary to any required provision of ERISA's title I?

Would such a provision tax-disqualify the plan under Internal Revenue Code section 401(a)?

Why?

I've understood that the IRS, when it comes to coverage testing interprets 1.410(b)-4(b) such that a plan that has everyone in their own group/classification will be considered to have "substantially the same effect as an enumeration by name" and as such, it is not a "reasonable" classification and the plan must pass the ratio percentage test instead.

That's fine - but is there any written guidance stating this? For some reason I'm unable to locate it if there is. Any unofficial IRS pronouncements to this effect at recent ASPPA conferences, etc? I've seen reference to an indirect interpretation of the issue from back in 2001, but I'd sure like to find something more direct and more recent.

Thanks.

P.S. I know they withdrew the portion of the proposed regulations that would have applied this same interpretation to NONDISCRIMINATION testing, But I'm still trying to track down some documentation/confirmation that this is how the operate n the coverage issue. 

Facts:

Divorce was final 20 years ago.  ALL marital assets including all retirement funds were properly divided at the time of divorce, and wife waived all rights to all post-divorce properties in Divorce Decree. Husband remarried 17 years ago, and established a new 401K account (and ERISA fund) with a new employer 5 years  ago. The new wife is the designated and statutory beneficiary to the 401K. ERISA does not allow husband to change beneficiary without the new wife's written consent.

Ex-wife now is suing husband for alimony owed to her and the court awarded her the entire balance of the new 401K. Ex-wife claims that she is the "former spouse" under the QDRO exception and is entitled to the entire balance of the new 401K, although the new 401K is a post-divorce asset and the new wife is the beneficiary. The new wife objects on the basis that this 401K is her marital asset and the Ex-wife has no right to take it. 

Is Ex-wife a "former spouse" to this 401K or simply a "creditor". What the "former spouse" mean in ERISA?

I have a client who is In the process of establishing an LLC as an investment vehicle for self-directed IRAs.  I'm aware of the 25% rule that would cause funds transferred to the LLC to be considered as "plan assets" & subject to the prohibited transaction regulations if the aggregate equity in the LLC held by all IRAs exceeds 25%. Assuming the LLC does not satisfy the 25% rule exemptions.

My question is does a prohibited transaction occur at the time an IRA accountholder purchases equity in the LLC (IRA equity exceeds 25%) or does a potential prohibited transaction occur based on the use of the funds once invested?

Our interpretation of ASOP 51 is that it is not applicable to ASC 715 reporting, but we wanted to see if others had the same interpretation.  Thanks in advance for all responses.  

We're taking over a PS Plan that is employer directed and not taking over the 401k Plan, employee directed.

In reviewing both documents, we found that both Plans provide the TH minimum. The 401k also includes some Union people but otherwise the covered employees are the same. Under the 401k, the PS eligibility is 6 months (never contributed to) while the PS is 21/12/1000. We found that no one had been doing the combined TH Test and luckily, they are not top heavy but we are thinking that only plan should provide the TH and since we are restating the PS, we'd suggest removing it from this Plan.  Are we missing anything?

If the Plans were TH, would 3% have to be given to both Plans? We have differing opinions in the office.

Thanks for any feedback    

Hi.  The employer is a school division.  They have a retiree health plan.  The employer subsidizes a very small portion of the premium.  Most is the retired employee's share.  The superintendent has recently retired.  The school board would like to pay the employer and the retired employee's share of the premium until the retired superintendent reaches Medicare eligibility.  Is this permissible?

I thought that these types of arrangements (employer pays or reimburses an employee for premium cost) was banned by the ACA.  Are there other ways to accomplish this?  I know that the school board won't want to change the structure and raise the employer subsidy for all retirees.  I also thought about the option of having the school division hire the former superintendent as some sort of consultant so that they could pay him a wage equal to his share of the premium cost (but I don't think the school board is interested in that).

Other ideas?  Am I missing a simple solution?

Thanks.

My reading of the ASG rules for A-org or B-org groups (management organization does not apply for my case) is that there must be at least some overlap of ownership for two entities to be an ASG, is that correct?

I have two service corporations (S-corps) that are each 100% owned by separate unrelated persons. They provide their services together under the same brand/joint marketing, so to the public it looks like ABC company, but each company X and Y has it's own book/P&L. 

I believe the rules say that there must be some ownership overlap between the A or B organization and the FSO, am I missing anything?

Thanks

Employer acquires a company under an asset purchase

There were several individuals that were paid 1099 by the prior employer.  Under the new employer these employees will be paid w-2 wages.

Eligibility for the 401(k) and match is immediate. The question is regarding vesting and if the new employer can recognize service for vesting purposes. 

If the employer credited service for vesting, he would have to list each individual as a sole proprietor, correct? The new employer would need to get the effective date of the sole proprietorship in order to determine the years of service.  Does this make sense??  Are there any issues with giving vesting service credit to this group??

Thanks

Working on a plan with employer securities and finding that there are certain required disclosures as part of the 404a5 notice rules.  It seems like the disclosures are generic in nature.  Would someone be kind enough to share the language they have in one of their disclosures?  I assume there is a difference in disclosure if one is publicly traded or not--mine is privately held.

Thanks in advance!

I just joined a great company as a 401(k) administrator and immediately saw that their annual 401(k) match calculation formula of 25% of first 6% had two failures (1) failed to cap wages at the the 401(a)17 compensation limit and (2) failed to cap the match computation based on the first 6% of wages. 

They essentially took 25% of deferrals across the board as the company match.  $750K overpaid match in 2018 by my calc.  Match was correct for those whose effective deferral rate was 6% or less (400 EEs).  The match on 600 EEs with higher deferrals than 6% were all overpaid.  It is an audited Plan; been around for many years making this mistake.

I can see that a VCP filing will be needed.  I took a look at Rev Proc 2018-52, 2.07(1)(b), Example 25 and I don't see how a retroactive amendment will work when it's not just a 401(a)(17) failure but compounding computational errors.  The company is successful and expensed and shelled out way more than it should have.  The company I'm sure they would be more willing to fix going forward than pull funds out of accounts.  I'm sure we'd offer to pull out money from executives at a certain level and above if that's what it takes.  Has anyone seen such a longstanding mistake and what would be a typical IRS response to the company  be with such a huge overpayment?  How far back would they make the correction go?  What negotiation can be done?   Haven't informed ERISA counsel (I'd fire the auditor if it were my decision) yet only working my way up the chain of command at this point.  I am a new hire afterall.  I just want to have some idea of what the company is facing here before I push harder.  Thank you!!

https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-using-a-plan-amendment-for-correction-in-the-self-correction-program

I am trying to verify control group, no family attribution.  

Company A  - has owner 1 and 2 owning 50% each

Company B - has same two owners and ownership %

Company C - has same two owners and ownership %

Company D - has the same two owners above owning 27.5% each.  Owner 3 has 35% and Owner 4 and 5 each own 5% each

The two owners only receive compensation from Company A but of course are officers of all.

I was provided an income interest repurchase agreement from Company 4 which states Owner 3 (35%) has the right to sell his vested portion (there is a vesting schedule and he is currently 0% vested), but it must be sold back to the company.  

I feel Company D is part of the control group, based on that Owner 1 and 2 have option to repurchase.   The client feels differently and instead of seeking Legal Counsel per my request they have asked their Accountant to review.  The Accountant is telling them that their is no attribution because Owners 1 and 2 are not family.  

Am I missing something?  Thoughts?

Participant does not qualify for a PS (term < 500 hrs).  However, plan fails ADP and he's getting a QNEC in lieu of HCE distributions.

Does that QNEC trigger a gateway?

I think I know the answer, but:

Participant is age 75, non-owner, still working.  She decides to take a full in-service distribution and rolls it to her IRA.

In June, she retires.

Does she have to remove what should have been her plan-related RMD from the IRA?

Hi,

How does one get a statement of sorts or proof of class billing for the future 12 months? Normally you don't know what classes are available for the future semester until around the end of the current semester you're in. To figure out what classes are available in 9 months isn't really possible, nor is it to submit paperwork with correct classes on it if the college doesn't even have the courses posted that far out? Looking at doing a withdrawal since we don't have anymore financial aid loans available before finishing degree in about 9 months. I apologize if I'm missing something, or have overlooked something on my state colleges website that is obvious.

Thanks in advance.

Background: Married in ‘16 then Oct ‘17 accident in CO, I survived my husband did not. I hire a accident firm. Life insurance is under ERISA which is based off 2x’s wage(there’s an annual raise). Within the first week the ex submitted a claim and was told she wasn’t listed as the beneficiary. She hires a lawyer. DRO from 2014 does not have plan names or amounts. Jan.-employer sends them a non-QDRO letter. Feb.-they open a motion to clarify for DRO to insert 2014 amounts and judge tells them they need to figure out who to substitute in due to death. Around the same time my accident lawyer contacts the ex to ask if she’ll sign for a QSF to work out details of wrongful death suit that will go to husband’s daughter. Her lawyer contacts my accident lawyer trying to get 2014 life insurance information. My lawyer informs him she’s only handling the accident case. The ex’s lawyer decides to fight QSF since he can’t get 2014 information. In May he starts declaratory judgment case against the employer and me while also asking the court to weight the life insurance and wrongful death amounts against each other. Case is transferred to federal court under ERISA. Oct ‘18 passes by and I don’t have to open the estate since we were co-signed on house and totaled out truck. I hear nothing back about modifying the DRO, I think they missed the 90 day to substitute someone in. No claims come in to estate from ex’s lawyer, he still just wants 2014 information. Jan ‘19 judge dismisses case and separates wrongful death back to state court. Feb ‘19 ex’s lawyer rewrites his case against employer to ask that DRO be considered a QDRO and asks court to consider extending time to sue the estate if not QDRO. He then also starts a conversion case against me at state court saying I’m controlling the funds that the employer has not paid out yet since I won’t sign them over.

Question: Have you ever seen a statue of limitations to submit a claim against an estate extended relating to an ERISA benefit? I am excused from the ERISA case but have been keeping tabs on it with my pacer login. New case against me brings up my accident lawyer, so she is going to respond asking for fees and harassment since the other judge in the dismissal hinted to the ex that I’m not apart of the DRO.

A 401(k) plan sponsor used a daily recordkeeper for it's plan assets. It has become clear from the trust report (which is by participant and money source) provided by the recordkeeper, that the transactions are not recorded accurately. 

For example, several distributions were processed in 2018 with the non-vested account balances to be forfeited. The report has a column for forfeitures, but in many instances, it isn't used. The forfeited amounts are variously lumped into Transfers, or Gain/ Loss, etc. 

Similarly, several items which I would expect to show up as Contributions, are instead listed under transfers. 

The known errors have been pointed out to the recordkeeper and several requests for an updated trust report have been made. The recordkeeper will not provide an updated report unless someone agrees to their hourly fees for the time it would take to fix the transaction history and trust report. I suspect there are a number of other mis-coded transactions that haven't even come to light yet. 

At what point should the plan sponsor and trustees contact the DOL? Would that be futile? 

For what it's worth, due to other issues with the recordkeeper the money and recordkeeping was moved away to another provider, so future errors should be limited. 

I usually only see DOL involvement when it looks like fiduciaries might mis-handling plan money. I don't usually see the plan fiduciaries go to the DOL (or IRS) over an issue with a service provider. So i'd love some suggestions, or to hear of people's similar experiences and how they were resolved. 

Notwithstanding the general rule that you can't terminate a SIMPLE and replace it with a 401(k) plan mid-year, if the employer has become ineligible to maintain a SIMPLE and is beyond the grace period and they correct under VCP by stopping any further contributions in the middle of this year, can they start a 401(k) plan for the rest of this year?  Or do they have to wait to start the 401(k) until next year?  It seems that, given that they can't continue the SIMPLE for the rest of this year, they should be able to start the 401(k) plan, but EPCRS says that a SIMPLE plan that is corrected for an employer eligibility failure through VCP "is treated as subject to all the requirements and provisions of ... 408(p)," which could mean having another qualified plan is prohibited for the rest of the year.

A TPA is suggesting that the employer would need to wait until the next year, so I was curious what others on this forum thought about this.    

Non resident taxation of NQDC in New Jersey if residence is in Florida

under fed code 104-95, distributions  would not be taxed in the nonresident state if one of 2 conditions were met.

   The condition in question, is under section(ii) which state, if a plan was "created solely for the purpose of providing retirement benefits for employees in excess of the limitations imposed by 1 or more sections, including 401K plans".   How do you interpret "Soley"?   The plan I am questioning  states explicitly that the plan was created to allow tax savings for the participants. 

    I have submitted a non- resident tax  return,  requesting that all withheld NJ taxes   be returned. Will that be allowed?

A 1099 "employee" has been with a client for 7 years and is now a W-2 employee.

Eligibility 21/12 months with entry the 1st of the month following.  Must this guy wait 12 months, as technically he was not an employee priorly?

Or, maybe he was, but the client treated him as 1099 as a way to keep him from being an employee?