austin3515

The document thing made me think, and I checked w/ Corbel and they said I should be able to do what I'm trying to on our VS.

Everyone in the plan has the same opportunity to direct their own investments. I don't think there are any unusual trust (Webster definition) issues here. Owner C who has $1,000,000 dollars a) does not want a statement saying that his Million is owned by someone other than himself and b) does not want to be responsible for the investment losses in any event for Owner B's investment decisions on his million. Both seem like perfectly rational motivations. On this we agree!! It seems strange to be uncomfortable with this delegation but not the individual plan strategy which as far as I am concerned is three steps past a delegation of responsibilities. Is there a rule or some guideline or even principle that I am violating?

The calculation is essentially "what does the employer get for a tax deduction compared to employer contributions allocated to participants."

OK, I guess I didn't read Bird's closely enough. It seems to me that expressly because it can be done with 4 plans it should be able to be done with 1 plan. That takes nondiscrimination off the table altogether because clearly the right to be a trustee is not as valuable as the right to be a trustee AND have one's own plan. But I don't understand how merely delegating the responsibilities of the Trustees (which is a very routine aspect of Trustees/Fiduciaries) creates a problem. The Employer has the discretion to delegate responsibilities among the Trustees. What in particular is problematic about delegating them in this manner? Would it be more appealing if Owner Steve was the Trustee of Owner Bob's account? It should not be, in my opinion anyway. How about if Owner Steve was Trustee over not only his own account but the accounts of those employees in his division, and the same for Bob and his division?

When calculating for owners the tax benefit of their plan, do we include 401(k) in that analysis? I've always said "no" because more likely than not there is some level of 401k that can be done with no employer contribution at all. But if the Plan is top-heavy, I suppose the 3% is the cost of doing the 401k quite literally. But it also occurs to me that I'll bet someone has done quite a bit of research on this analysis. I wouldn't be surprised if one of the large accounting firms has written something about this. If not, they should, because I have this conversation with clients all the time. Does anyone have any info they can share?

There's something like 10 other employees and no one has any intention of making them Trustees. So what I'm hearing is that no one really has a problem with this set-up?

I do not think being a Trustee is a BRF. There is a literally nothing that a trustee can do that the participant cannot.

Have a plan with 3 partners. The 3 partners don't want to be responsible for the investment decisions of the other two. What's more, they don't want the other partner listed as the "account owner" (these are brokerage accounts) on what is for each of them a very substantial balance. So we have each partner listed as trustee of their own personal accounts, and just one of the partners serves as Trustee for the other employees. It just so happens that one of the other employees who is semi-retired is the founder of the partnership, and he also wanted the same set up (i.e., trustee of his own account). This person obviously has a lot of clout and the 3 partners for political reasons do not want to say no. There are no rules regarding who can serve as Trustee - any one have a problem with this?

Wasn't someone saying something about getting burned really badly if you don't know the rules

IF the employer wants to provide a reasonable benefit at minimal cost, then you bet. They can at least do an IRA.

how could you hope to pass the 401(a)(26) requirements? This doesn't apply to 401ks I know you know that My2Cents... Given that the intention is apparently to provide nothing to the hourly people, how could you hope to pass coverage By excluding all of the HCE's

No offense but if you're drafting documents for clients and have that question, then I sure hope someone who knows this rule is helping you out. I'm not saying it to be critical - only because you can really get burned if you don't know this stuff cold.

I always tell my clients that these rules are targeted against small, long-term employers, or worse yet small long-term family owned businesses, and that the likes of Microsoft and IBM are exempt from these rules. Believe me if they affected CitiGroup the way they affect small employers, these rules would have been tossed in the trash long ago!

That would make me happy, I think the top-heavy exemption is the most potentially cataclysmic issue, especially for a TH SH Match plan with very low participation. I submitted a question to the ASPPA IRS Q&A on this point. I hope they take it!

[bird, first and foremost let me say that I learn more from your posts on this forum than from almost any other poster. but I do disagree with you here, and I think that this is kind of fun . So I'll say in the office "well Bird said... and he's sharp! ] I'm sorry but use of forfeitures should not be public policy. We're talking about a pimple on an elephant's but here as far as national policy goes, even as retirement plan policy goes.

A safe harbor plan paid for entirely by forfeitures? Sign me up! I've never seen forfeitures account for more than a smidge of the safe harbor. I have a feeling your hard-working business owners clients would not see it from your perspective, just a hunch

Oh you can spin it any way you want, but you see my point. A dollar in your account is a dollar in your account. If there was hair brained public policy agenda to ban forfeitures from being used to offset ANY employer contributions, then sure everyone gets more money and the economists are happy happy happy. But that's not what's going on here. What's going on here is a silly nuanced ultra-literal interpretation of a vaguely worded reg and nothing more. It's a wholly manufactured burden on businesses (in particular small ones).

The employee for starters. Economists for another.

Shame on you Bird! This is the dumbest position I've ever heard of! It's a classic example of a solution in search of a problem that just did not exist. The employees get the safe harbor contribution. That's the only thing that matters.

Bird, I think the gray area is that compensation must be reasonable. And the presumption might be that it is unreasonable based on the close relationship, with the fiduciary being obligated to prove it is reasonable. I think that is the issue most of us have. And as others have stated, how do you prove something is reasonable when that standard is by definition subjective.

To be clear, I think it is inadvisable. My point above is that one is a gray area (the brother) and the other is explicitly forbidden (the son). For whatever reason, neither a girlfriend nor a brother are considered a party-in-interest, so at least no one can point to a law and say, "Look here, you broke this law."

The difference between son and brother is the difference between son and complete stranger. So the example is not really spot-on because the son is within the definition of party-in-interest. The brother is not.

I'm inclined to agree with all that. I will caution the client accordingly... I think the DOL would be over this like a fly on you know what.

ok, that works for me. other expenses it is. That;s where we've put it historically. You just hate to increase those expense lines so when the marketers they call they say "you're paying HOW much in expenses??"

What I am surprised by is that there is not some clear guidance on this. I know it's only 1% of plans, but it seems like it should come up often enough that there would be some written guidance over the past 40 years!