New Client wants to to know if he can have a second Trustee for his plan, which of course he can. However, the client tells us that the person he wants to name has no relationship to the company and is not American.

Your thoughts?

I have a case in which two individuals are trying to broker a merger of their companies. The new company will be an LLC (taxed as a partnership). Member A owns 75% of the company and Member B owns the remaining 25%. A has proposed a NQDC plan exclusively for B. B must remain with the company for 10 years to received the deferred comp.

I understand that the pass-through nature of the entity and the non-deductibility of the deferred comp mean that A and B will report higher net operating income on their individual returns as a result of this NQDC plan. My question is: So what?

From A's perspective: he's going to report 75% of the NOI on his return, but he's also going to take the deduction on the back end if the deferred comp is eventually paid out. If B fails to meet his contractual obligation, the entire deferred comp balance will return to A's coffers. Alternatively, he could have paid B normal compensation (i.e. guaranteed payments), for which he would have received a deduction, but he would also find himself out a pile of cash if B decided to walk away prematurely.

From B's perspective: he's going to report 25% of the increased NOI on his return, but like A, he's going to take a pro rata deduction on the back end. If he fails to meet his obligation, he's out the deferred comp, but since he failed to perform the required service, the money wasn't really his to "lose" in the first place. And regardless, it can be presumed that B was aware of the consequences of his actions when he quit, and subsequently factored that into his decision making.

And because A and B are trying to broker a merger of their businesses, it seems like both parties can negotiate the amount of the deferred comp to a point where both sides are amicable to the risks and trade-offs they are accepting.

In short, every argument I've seen against pass-through NQDC plans revolves around the pro rata reporting of the pass-through NOI. Since this is recaptured on the back end by at least one of the two parties, I fail to see the problem? Given that there are many smarter than I that seem to be on the other side of the argument, I suspect that I am overlooking some crucial detail. Please... enlighten me!

thanks,

Suppose a top-heavy plan's test percentage fell below 60% but no action was taken to shut off accrual of the top-heavy minimum benefit. Would some sort of corrective action be needed or could the top-heavy minimum just be frozen as of the end of the current plan year? If correction was necessary, what would be an appropriate action?

Have discovered a plan that has employer securities has been filing using the 5500sf. Our firm had not prepared the prior year filings. Should we recommend amended filings going back to 2009 when the SF began, or start using the 5500 going forward. Thoughts?

My wife's employer is currently in the process of terminating their money purchase plan. They have schedule "meetings" for all plan participants to attend with the investment vendor. My wife's work schedule is part time and as such all of these "meetings" they have scheduled are on the days she does not work.

So being a person who works in the pension industry I advised her to simply request the distribution election forms so we could fill them out and get her money rolled over to an IRA as I suspect these meetings were set up as an opportunity for the vendor to sit down with the plan participants and potentially retain the assets via the participant rollovers to the 403b plan that will remain in existence.

Recently she recieved notice from her HR director stating that if she did not attend one of these meetings with the vendor, that they would suspend her and withhold her pay. Immediately I said, that is right.

I am looking for some help in identifying the specific section of ERISA or DOL regulations that would constitute this action as a violation.

Here's today's problem on which I ask for your help.

An employer has a 401(k) plan that the employer established without help from anyone beyond the salesman who sold the recordkeeper's packaged service.

The recordkeeper's service is unsuitable for this employer because everything depends on the employer knowing that it needs to do something. For example, the employer never filed any Form 5500 report. The recordkeeper's letter said all the right things, but the business owner never read that letter (or any of the few dozen other things that the recordkeeper mailed).

The employer has only three people: The owner is the designer of the business' products, the sole salesman, and the corporation's president, secretary, treasurer, safety officer, and everything else that's supposed to be done. A craftsman and a laborer do all the manufacturing.

While I don't condone the employer's conduct, I'd like to pursue practical suggestions.

Although I'm aware that it's almost impossible to get a service business to act as a retirement plan's named administrator, is it possible to find a service provider that would have a service rep (someone who's smarter than just reading from canned scripts) make telephone calls affirmatively to tell the business owner what he needs to do and why it's important? (It's okay if such a service is more expensive; the business has money to spend.) I understand that this would be a reminder service or an I'm-too-busy-to-read service; but is it possible to buy something like this? If so, what does a micro business pay for this?

Participant is a salaried employee whose regular work schedule is 35 hours per week. The person is paid for 35 hours per week, with no overtime.

Participant terminated on June 14th. Hours at 35 x weeks is under the 1,000 for vesting. If equivalency has to be used, at 45 hours per week, person has 1,000 hours.

Since hours are not actually tracked, is it required to use equivalency?

Plan uses standard definitions:

(1): The term Hour of Service means (1) each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer or an Affiliated Employer

(2): Use of Equivalencies. Notwithstanding paragraph (a), the Administrator may elect for all Employees or for one or more different classifications of Employees

Thanks for your help with this.

A participant wants to retire and enter pay status with an annuity. Then, come right back to work part time for the employer in two weeks. He is 68. The Plan does not allow for in-service withdrawals, except RMDs. I know the IRS has said you cannot simply quit to enter pay status and come right back to work. Does anyone have any IRS guidance on this?

I've just gotten hold of some internal IRS guidance on the application of vesting requirements to plans governed by section 411(e)(2). While the guidance was primarily directed toward governmental plans, it indicates that it would also be applicable to church plans. For anyone who is interested, I've put a copy up at this link.

We've had some discussion here in the past regarding what vesting requirements applied to qualified governmental plans. The confusion arises because Code section 411(e)(2) says that governmental plans are required to comply with pre-ERISA section 401(a)(4) and (7), but Code section 401(a)(5)(G) says that 401(a)(4) does not apply to a governmental plan.

I've now gotten a copy of an internal IRS directive on the subject, and have posted a copy of it at this link. Essentially, it is applying pre-ERISA section 401(a)(4) to the vesting standards of governmental plans, notwithstanding section 401(a)(5)(G). My analysis of the guidance can be found at this link.

Are government plans (federal and non-federal) subject to the uniform coverage rule or is they exempt from this under ERISA? I have a broker telling me that govt plans can get out from under uniform coverage because of ERISA, I don't agree. I've read several of the posts on the website, but don't see anything, but I could have missed this. Your help is much appreciated.

Question about whether or not a plan is eligible for a VCP filing. (Takeover plan, of course).

• 401(k) Plan was established effective 1/1/2003.
• The original plan document was NEVER SIGNED and no required amendments have been done since the plan was first established. The partner that was supposed to sign the document is long gone so there is no chance of getting his signature on any documents.
• The plan has always had less than 20 participants.
• The employer handled the administration of the plan on their own.

Questions:

• Can we do a VCP filing for this plan to bring the plan document up to date? I am concerned that since the plan document was never signed it may not even be eligible for a VCP filing.
• If we can file under VCP would the user fee be $750? This assumes the plan document issue is the only problem.

Thanks in advance for any thoughts.

Because I administer just a few plans, I use IFile with Sungard Relius and use the "actuary signs" option. I note that system will not generate xml file if attachments are a completion of SR templates. It will generate xml if attachments are pdf add-ons. Before I contact the vendor,

Is anyone else experiencing this issue? If so, please indicate if you have a fix.

If you don't use IFile, would appreciate anyone just attempting to generate an xml where you've use the SR template (e.g., for retirement age) rather than adding a pdf. Even if you could try with an existing filing where you don't use IFile, your efforts will be appreciated.

Thank you.

andy t.a.

Because I administer just a few plans, I use IFile with Sungard Relius and use the "actuary signs" option. I note that system will not generate xml file if attachments are a completion of SR templates. It will generate xml if attachments are pdf add-ons. Before I contact the vendor,

Is anyone else experiencing this issue? If so, please indicate if you have a fix.

If you don't use IFile, would appreciate anyone just attempting to generate an xml where you've use the SR template (e.g., for retirement age) rather than adding a pdf. Even if you could try with an existing filing where you don't use IFile, your efforts will be appreciated.

Thank you.

andy t.a.

I know that you can apply statutory exclusions when giving the Safe Harbor contribution, provided your eligibility is less than 21/1. In relation to that topic, can a plan have immediate eligibility for 401k but a one year requirement for safe harbor?

Or would they both need to be immediate, but then the company could apply the stat exclusion for safe harbor?

Calendar year plan was frozen 12/31/08. Participant terminates employment 4/30/13. Does participant's compensation earned after the freeze date get considered in the 415 compensation limit? Thanks.

I have a takeover plan where many years ago a failed ADP test was semi-corrected. The TPA issued 1099s for the corrective distribution amounts and the HCE's paid their taxes however, the assets were never physically removed from the trust.

The old TPA's solution for the years since the failure was to just reduce the trust assets on the 5500 by corrective distribution amounts. We discovered all this when reconciling the trust for 2012.

Objectively, I look at this and think "VCP - one to one correction", but it's a rather large sum of money so the prospect of a one to one correction under VCP is not desirable. Is there any chance the IRS has ever viewed taxation of corrective distributions as sufficient correction?

An ESOP is being terminated and assets being distibuted 50% in 2013 and 50% in 2014. Does the termination of the plan constitute a termination of employment? If yes, must a pp in the ESOP who will be 70 1/2 this year, must an RMD be taken from the ESOP before the distribution is rolled over to an IRA?

Amazingly, after over one year, my ex's employer and health insurance provider, have agreed to implement the QMCSO! I was repeatedly denied by both the employer (who kept pushing it off to the insurance carrier - Isn't it their responsibility to ensure the Order is followed?) and the insurance carrier (who claimed they COULDN'T follow the Order and did NOT have to follow the Order).

I provided the employer and the insurance company with a listing of claims that I did not receive reimbursement; they, in turn, have had the insurer send me a listing of all claims paid to my ex in which the checks were cashed by the ex, and want me to indicate what claims I was not reimbursed by anyone. Is there a reason they are doing this? I provided them a list. Insurer has indicated they will go after the ex for a refund of those items I identify.

Insurance company now indicates their legal department agrees they have to follow the QMCS - last year I was told their legal department indicated they did not have to comply and that I should take my ex to small claims court (among other "recommendations..)

Yesterday I received two checks - the claims were not on the list I provided and the reimbursement is now a higher amount! (I have no idea how they balance their books.)

Why are they asking me to review a listing of reimbursements?

Just in case you have not seen this, IRS Notice 2013-49, http://www.irs.gov/pub/irs-drop/n-13-49.pdf.

(Sorry, have not seen the tables posted in spreadsheet format yet.)