katieinny

A one-man professional corporation dissolved the business, so he is maintaining his DC plan as a sole proprietor. A resolution was adopted and the name of the plan was changed accordingly. However, a few years have gone by and the EIN is turning out to be a problem. There's a piece of property in the plan under the old EIN. The state is buying a chunk of the property and won't distribute the check because the EIN doesn't match the name of the plan. I'm thinking the sole proprietor might need to apply for an EIN for the plan, get the EIN changed on the property and see if that makes the state happy. This can't be the first time this has happened. Does anyone have any thoughts or a better idea?

Perfect -- Thank you all for steering me in the right direction.

This is a one-person profit sharing plan. He hasn't contributed to the plan in quite awhile, and realizes it's time to simplify and terminate the plan. However, he wants to keep the town house. Assuming the property isn't being rented out by a family member and there are no prohibited transaction issues [i'll quiz him more about this to be sure], I think he would need to make sure that there is an up-to-date appraisal, then roll the property over to a self-directed IRA, which, according to what I've read on the internet is the only way an IRA can hold real estate. The only other thing I can think of is to replace the town house with cash equal to the appraised value (assuming he has cash available to do that) and have the deed transferred out of the plan's name to his name. Then his rollover would consist of all cash and he can follow the normal IRA investment rules. If neither of those options works, what would be the proper way to handle this? Guidance would be appreciated.

I certainly agree that some type of communication to the plan participants regarding the plan's benefits and features makes a great deal of sense. I'm getting a strong impression that nothing about the new amendment will be sent to participants, and it's very possible that nobody would care anyway. I was just hoping that the requirement to communicate or not communicate would be more definitive and not so grey. I appreciate getting your input, so thank you both for responding.

The Church has a DB plan that was updated in 2011. It is a non-electing plan. They are currently amending the plan and I mentioned providing a SMM to participants. They would prefer not to have to do that since they are not covered by ERISA, and I don't know the answer. I don't know if an SPD was ever provided, or if it should have been if it wasn't. Your guidance would be appreciated.

An organization that for all practical purposes operates like a chamber of commerce, would like to be able to sponsor a retirement plan document for its members. I am not talking about a multiple employer plan. The ERISA Outline Book says that a Sponsoring Organization is usually a bank, TPA or law firm. It's the word "usually" that makes me think that other types of businesses might be able to do the same thing. They are hoping to retain the services of a TPA firm to help with the administration, but they want to use their own plan, not the TPA's. Any thoughts?

The provision will apply to all participants. I'm not sure that the denomination matters. It is a well-established Christian church with long standing beliefs relating to same-sex relationships. I think it just comes down to a basic question -- must a non-ERISA plan comply with Revenue Ruling 2013-17?

A New York State church has a non-ERISA defined benefit plan. My reading on DOMA's affect on retirement plans suggests that non-ERISA plans, such as non-electing church plans, are not obligated to follow the changes to qualified plans that came about under DOMA. I was thinking that I would find several articles on the subject of church plans and DOMA, but either I wasn't looking in the right places, or there wasn't much said about non-ERISA plans. I'm asking because a church plan wants to specifically amend their DB plan to make sure that provisions that might apply to same-sex couples will not apply. I suppose that's do-able?

I do apologize for my inaccurate statement. Frankly, I don't love Congress -- at all. I happened to be reading an article in the newspaper this past weekend about how the IRS gets blamed for Congress's transgressions. Since I pretty much hate Congress these days, I certainly want to place blame where it's due.

Thanks Bird and ESOP. Ya gotta love the IRS.

We've assisted an employer with a VCP submission for his Safe Harbor 401(k) plan. He's made his employees whole and we're hoping the IRS will say good job, you're done. But of course, no one can assume that. We suggested that the employer not terminate the plan until the IRS review is done. We haven't even received the Acknowledgement Letter yet, so we're a long way from the end. In the submission, we've asked the IRS to allow the employer to only make a Safe Harbor contribution for half of 2014. I've explained to the employer that that might not get approved, but we had to at least ask. The employer really wants to terminate the plan now. I suppose if the IRS requires adjustments, we could get it done somehow even with a terminated plan, but I'd rather not. What would you do? Allow him to terminate, or make him wait?

It seems that the tax free donation of RMDs from IRAs to qualified charities has been extended a couple of times, but I'm not sure that it's safe to say that it's a fixture. It is discussed in the 2013 version of Pub. 590. I don't see reference to there being a deadline in that publication, but before I pass on any information to a client about doing it for 2014, does anybody have a definitive answer as to whether it's available this year, and for the foreseeable future?

Thank you both for your comments. Between this format and other reading, I think I have a better understanding about how this works. It seems these agreements are more common than I realized.

An employer is considering the implementation of a Fiduciary Indemnification Agreement for the 401(k) plan's named fiduciaries. Has anyone had any experience with these agreements, drafting one, or had to test the effectiveness of one? It sounds like a terrific thing to have, but I'd like to hear from those with real world experience. Does it mean that the company would cover the legal costs of the fiduciaries and pay any costs that might be incurred if it's determined that the fiduciary(ies) breached their his/her duty?

I'll have to think this through for a bit, because maybe I didn't pose the question properly -- or more likely, I don't know what I should be asking. I've been reading articles that seem to say that that the earnings distributions CAN be used for other plan purposes (other than paying down the loan), such as "repurchase obligations and plan expenses." However, I could certainly be misinterpreting what I'm reading, and there are no citations mentioned to help me out. But I see your point about increasing the owner's percentage and decreasing the plan's. So the part about "recycling the shares within the plan" is probably what I should focus on. It sounds like I must be confusing allocated vs. unallocated shares. I very much appreciate your input.

An ESOP holds 30% of an S-Corp's stock and the owner holds the other 70%. I understand that distributions (not dividends since this is an S-Corp.) are often used to pay down the loan. One article I read says that distributions cannot easily pass through to ESOP participants. However, this client doesn't want to pay down the loan or allocate it to participants. Instead, the company would rather use the distribution for other plan obligations -- perhaps to liquidate the shares of retiring employees or for plan expenses, for example. I'm looking for something that definitively tells me that that would be okay to do. I've looked through the BNA ESOP portfolio, thinking that surely that there would be a discussion about the earnings distributions there, but I didn't see anything. Can somebody point me in the right direction? Before amending the plan, I want to make sure that what they want to do is permissible.

Thanks for your reply. That's what I think, too, based on what little I can find on the subject.

We're in the midst of helping an Employer make a correction to his Safe Harbor Plan for 2012 (he failed to make the required 3% Safe Harbor Contribution that year). He's making the corrective contribution this year. Will he be able to deduct the contribution this year?

We're in the midst of helping an Employer make a correction to his Safe Harbor Plan for 2012 (he failed to make the required 3% Safe Harbor Contribution that year). He's making the corrective contribution this year. Will he be able to deduct the contribution this year?

Thanks for your replies. I know that attorneys need to enter the states in which they are licensed to practice law, and that gave me pause for a minute, even though it certainly seemed logical the I could represent clients from any state before the IRS.

I've never given a thought about crossing state lines with my ERPA designation because everybody I've done work for is in NY, as am I. However, I was just filling out a 2848 for a client in another state, and suddenly I started wondering if there might be a problem. Am I limited to working with clients only in my state?

"Just when I thought I was out, they pull me back in."

ETK: I started researching the right of first refusal language. If I understand what I'm reading (big IF), I think that if there are reciprocal rights, meaning that both owners have the right of first refusal for each other, we don't have to count the other person's ownership percentage. So, if hubby and bro have rights of first refusal for each other, and wifey and friend have similar language in their agreement, we don't have to assume that hubby, wifey and son are 100% owners. I certainly wouldn't have given that a thought, so thank you for bringing it up. I'm going to get confirmation of the language in their agreements next.

ETK: I understood your analysis up to the 'right of first refusal' paragraph. It's probably a safe bet to say that there is a right of first refusal in place for both companies (I'll confirm). So, assuming the language is there, are you saying that both husband and wife (and son) are considered 100% owners of their respective companies now?

Husband and wife each have 50% ownership in their own companies. The other 50% of her company is owned by a friend and the other 50% of his company is owned by his brother. Due to the couple's minor children, they can't rely on the spousal exception. So, the 80% test is satisfied because it looks like husband and wife own a total of 100% of each company. But the identical ownership (50%) test also adds up to 100%. I feel like there's double attribution going on here -- or maybe the fact that neither has effective control (voting power) in the other's company that makes me think that the 50% test is not met. Is my intuition steering me in the right direction, or am I grasping at straws and just need to face facts?