We have a long term incentive plan where participants vest after 3 years.  On vesting, they receive shares of Common Stock which they can't sell.  If there is a Liquidity Event everyone get's paid for their shares.  If they terminate before the Liquidity Event, they get paid 65% of the value of the shares (this reflects that there is no liquidity or marketability for the shares at that time).  

I think the discount in the event they terminate before the liquidity event is ok, but is there any guidance as to what an appropriate discount would be?  Is 65% normal?

The Company also wants the option at termination to either (1) pay for the shares in a lump sum, or (2) pay for the shares installments up to 5 years at their discretion.  I think this violates 409A's time/form of payment rules -- do you agree?

I'm not aware of any such requirement. But is there a requirement that non-SH employer discretionary matching contribution percentage be declared by any certain time. My understanding is that this is left to the language of the plan.

Does anyone have any authority on this.

Thanks!

I have a governmental entity setting up a 457 plan and wants to provide a match as well.  We are planning to have a paired 401(a) plan so  employees get to defer up to the 457 contribution limit each year.  For the document , does the 401(a) document just have the employer non-elective language with each person being in their own rate group?  In that case, the client will fund the match contributions only for those who made 457 deferrals, and since governmental entities are not subject to nondiscrimination - your allocation amount doesn't have to satisfy any testing.   I may be overly complicating how to draft the 401(a) vs 401(m) document items.    It doesn't seem like my 401a plan needs any matching contribution language since that plan will not have an deferrals. 

Does anyone have any experience naming a "backup" Trustee for a 1-man Profit Sharing Plan?  The plan document only states that the business would name a subsequent Trustee if in the even of death, etc.  He wants to have it stated somewhere who would control the Plan.

Thanks in advance!

Participant turned 70 1/2 this year and died in late November.  His RBD is 4/1/19.  Spouse wants to roll over the entireaccount now.

I believe the RMD must be taken first.  Others in my office are sticking to the RBD of 4/1 and she can roll out the entire amount.

Who is correct?  Cites?

Group:

Facts/assumptions as follows.

Client owns an S-Corp and sets up an S-ESOP with 20 eligible participants/employees. Value of S-ESOP stock is $20k when sold to ESOP Trust and loan is established to be paid off within 5 years.  100k shares outstanding.  Assume 6 yr step vesting.  ESOP Loan paid off by yr 3.

TPA informs me that stock is allocated proportionately to payoff of ESOP loan.  By yr 4 all of the 100k stock has already been allocated to the above-referenced 20 participants.

Q: What happens when 3 new employees begin work in yr 4 and begin to vest by yr 6?

Q:  How do you properly allocate shares/benefit to new employees?  Is TPA correct?

I'm informed by the TPA that the only way to provide a benefit to the 3 new employees  is if - and when - the original 20 ee's retire/leave and then forfeit their allocated stock shares.  At such time those retired shares (proper terminology?) can be allocated to the 3 new ee's.

Can Plan Sponsor issue additional stock for allocation?  or is the TPA correct?  I can't seem to find guidance

on this matter.  Thoughts, comments and resources would be much appreciated.

Thank you!

I have a plan that's a closed MEP. The participating employers have common ownership but it's not a control group. One of the participating employers is leaving the plan, effective as of the last day of the plan year. 

Is this considered a partial plan termination?

Should the employees who are part of the leaving employer be accelerated to 100% vesting?

Hard to believe this has never come up, but...

Participant died mid-year. S-corp owner. Rightly or wrongly (and I have no opinion) "he" is receiving no W-2 income for 2018, but his ESTATE received a check for his accumulated wages or whatever that is being classified as W-2 income, paid to the estate. Is this compensation considered as W-2 paid to "him" for plan purposes?

We represent Buyer in a carve-out transaction.  The subsidiary that we are buying is the legal employer of its employees, but HR functions are centralized at parent level.  Several employees of sub who are coming to buyer will receive retention bonuses post-closing, paid by the Seller.  The legal question is whether, where the services are not provided (and have not been provided) directly to seller but to PHS and the consolidated group is being split by the transaction, which is the proper entity to conduct payroll withholding on payments made after the closing?

I inherited a plan that runs 10/1/2017 through 9/30/2018.  Which year determines max compensation?  2017 or 2018?   

I know that a QDRO can be used to collect back child support from a participant's 401k account. The participant is now deceased and the ex-spouse does not currently have a QDRO for the back child support.  Another person (none of the children) is named as the beneficiary under the 401k.  Can the ex go get the QDRO now, post death, and apply it to the 401k plan and require us to hold off paying out to the beneficiary while she goes and tries to get one?   

Good morning to all,

Something new to us came up this morning.  We put in a good number of brand new 401(k) plans in 2018, with effective dates of 01/01/2018.  Therefore nobody in those plans had an account balance at 12/31/2017.

If a 73 year old employee made salary deferrals in 2018 to his employer's new plan and then quit during the year, must he take a RMD before 12/31/2018?  What would the distribution be based upon, since there was no balance at 12/31/2017?  Same concept if it was a working owner of the business: a 73 year old owner installs a new 401(k) plan in 2018 and makes salary deferrals.  He's still working at 12/31/2018, but because he is the owner, he would normally have to take a RMD by 12/31/2018.  What is it based upon, since there was no balance at 12/31/2017?

At first blush we thought maybe they don't have to take one until 2019, but nothing is ever that simple or easy.

Advice as to what the rest of you are doing will be greatly appreciated!

Non-publicly traded ESOP large plan is terminating.     Plan is a 12/31 year end.     Plan terminating amendment was prepared by ERISA attorney who provides the document and executed by the client (6/17/18) to terminate the plan as of 6/30/18.     Included in the amendment was a change in definition of compensation.   It defines compensation as the 12 months immediately prior to 6/30/18 (7/1/17 - 6/30/18), therefore, using full year compensation for the allocation.     Removed the hours requirement and stated the contribution would be allocated to all eligible employees who were employed on 6/30/18 based on full year compensation.      Anyone else have experience with this type of change?     The 7/1/17-12/31/17 compensation was already the basis of allocation for the 2017 plan year.    Can this same compensation be used as part of the basis of allocation for the 2018 plan year?

My understanding has always been that the Section 415 limits are independent for a participant who works for two unrelated employers.  To clarify, Employer A has a plan and the HCE participant has a $55,000 Section 415 limit for 2018 in the plan.  Unrelated Employer B (no controlled group or affiliated service group) has a plan and the same HCE participant has a $55,000 Section 415 limit for 2018 in the plan.  There is no combined limit. 

At the 2018 ASPPA conference, I was in a session that was addressing this issue and the presenter said that even if the employers are unrelated BUT there is common ownership of more than 50% between the unrelated employers, then there was a combined 415 limit.  I am unable to locate anything in any of my research.  Does anyone know anything about this?  Did I mishear what was said?  Does anyone have a reference that I can read?  Is this in the EOB? 

I have a new client that has a safe harbor 3% non-elective plan that excludes NHCEs and HCEs of 2 of the three participating employers from making elective deferrals. The excluded employees are small in number and don't trigger a 410(b) problem and they do receive the SH contribution.  I have never had a plan with this type of exclusion.  I don't see anything in 1.401(k) -3(a-b) that prevents this but I thought I would ask if any one else has such a plan or an opinion on whether this works.

The plan is a multiple employer other plan because two of the employers are related and the third is unrelated. The two employers with the excluded employers are small with 10 or so employees while the third employer has over 400 employees all of which are eligible to make elective deferrals. Although the plan says it excludes all employees of the two small employers, I suspect that there are no HCEs employed by these employers.

Thanks for any insight you can give.

We are in the process of terminating a PBGC covered DB Plan. There are participants who we have not been able to get in contact with and have gone through a provider to do an employee search. We have exhausted all forms of communication (mail, phone, email) outside of showing up at the addresses provided and have not heard a thing. The phone numbers are disconnected or goes to a full mailbox of someone that is not the participant. The participant's lump sum value is above the $5K automatic cash out and all annuity providers we have reached out to have said that they will can't take on such a small amount. This is holding up the termination of the plan, what possible solutions are there to this?

Is it too late to add safe harbor match provisions to an existing 401(k) plan for 2019?

If a plan participant making after tax contributions converts the entire balance to Roth and the plan later fails ACP how would one operationally suggest the ROE be handled? Would you unwind the conversion for amount of the ROE plus earnings and distribute or simply process the ROE from the Roth source?

It may be a difference without distinction since it is all after tax and you just have to deal with the earnings but curious if anyone has dealt with this yet.

Can a calendar year 403(b) plan have as a condition for matching contributions that individuals must work 260 hours each quarter and be employed on the last day of each quarter?  Is it acceptable to have contribution conditions established on a quarterly basis rather than an annual basis, knowing that ACP and 410(b) will be tested annually?

Thank you

I've got a lawyer (naturally) who wants to establish a trust for the sole benefit of his wife as his plan beneficiary.  He's wondering if this requires her consent, since she is technically not directly the beneficiary... but she kind of is ("kind of" isn't his term, of course).  No, I don't know why he's going through all this, or if he's trying on purpose to not have her sign something - I'm trying to get those details.

Any initial thoughts?  Thanks.