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Jaded

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  1. A controlled group of companies, C, sponsors a 401(k) plan. Unbeknownst to C, one of its subsidiaries, N, in order to win a contract signed on as a participating employer in a multi-employer pension plan H. H has a frozen DB plan and a 401(k) plan, 12 of N's employees are eligible under both C's 401(k) and H's pension. H's DB plan could not pass testing, so using SECURE Act relief, they aggregated H into a DB/DC plan and then demanded data on C's entire control group of 4,000 employees - which C gave them. The H plan then passed 410(b) and 401(a)(4) testing. Of course, C has been performing its own independent ADP/ACP testing for years, not even being aware of H until the recent demand for control group data. H's actuaries are now recommending that C go back in time and re-do their ADP/ACP testing to aggregate H's 401(k) data. H's actuaries admit that the SECURE Act relief that allowed H to aggregate its DB plan with its DC plan, and thereby pull in C, is silent on how H's decision to aggregate would affect C. So what say you experts? Does C have to re-do its historical ADP/ACP testing to add H's data to the mix?
  2. My client, a federal contractor, received a demand letter for pension withdrawal liability when their 7-year federal contract expired. The entity that won the new contract continued employing the exact same people doing the exact same job, making the exact same pension contributions. If this were a sales transaction, the successor liability question would be clear, but this wasn't a sale. This was a contact ending and being picked up by the next employing entity. I would argue there hasn't been a withdrawal at all since these same employees continue to participate in the pension plan, just under a new employer's EIN. Is my client seriously on the hook for this charge that will probably bankrupt them?
  3. A company has several ex-employees who were promised they could stay on the employer's group health plan until death or, in the alternative, be reimbursed for cost of substantially similar coverage until death. The insurer finally caught on and kicked these people off the group health plan. Company does not want to reimburse these people every year for the next 20+ years and wants to buy out this privilege in a lump sum. They used actuarial calculations for various people's expected demise, and also certain assumptions about how insurance costs will increase over the next 20 years, to come up with rather significant lump sum payouts ranging from $50,000 to $500,000. They want to make these payments to non-employees without paying any tax on them. They asked me to structure it as a legal settlement, and I declined to do so. I advised this lifetime payment stream was deferred comp and absolutely subject to taxation (after the first 18 months of COBRA, which I understand can be provided tax free). I also advised that by paying a lump sum, they are accelerating the benefits in violation of Section 409A so these people getting a $500,000 check are going to owe self-employment tax, income tax, and an additional 20% excise tax. Does anybody disagree with this assessment? So then the employer said they'd bump up the lump sum to cover all the taxes, so that one individual (who is in a 35% tax bracket and a 10% state bracket) would get a 35% fed + 10% state + 20% excise + 15% FICA bump for a cool buy out of $900,000. I've been trying to figure out how the employer should report this? I've seen that deferred comp is reported on Box 1 of 1099-NEC. But I've also seen that Section 409A failures and penalty are to be reported on Box 15 of 1099-MISC. Are these people going to get 2 different 1099s? And in my example, would the 1099-NEC show the full $900,000 but the 1099-MISC only report the $500,000 (prior to the bump up for taxes)?
  4. CuseFan - not the IRS or DOL, but the NLRB showed up and claimed a ULP against an employer that excluded the union from its retirement plans. We tried to explain to the NLRB that barring collectively-bargained employees from retirement plans is standard plan language, but they wouldn't back down. It was cray-cray (technical legal term when dealing with the NLRB)
  5. I would not assume the case is closed, the IRS is simply that far behind. It sounds snarky, but it hasn't even been a year.
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