austin3515

Can anyone point me to the regs on this?

My election has got to be something different than that. That paragraph seems to me to be different than opting out of the plan altogether. Your site does not deal with that at all. For example, the Plan using your elections (where the partner irrevocably elected zero in that scheme) might include a discretionary profit sharing contribution in which the partner could benefit. I have seen these provisions in plans where the participants can irrevocably elect to have a percentage withheld from their pay each pay-period forever. I think an important distinction is that the elections made in your reference are made by PARTICIPANTS. Your issues should not apply to the fella in my case, who is not a Participant because he irrevocably elected out of the Plan altogether. Anyone else see it that way? Can anyone provide the site for my irrevocable elections? I looked in 410 but could not find it.

Kevin C - "A reference in a current document to an irrevocable election to not participate will almost certainly be referring to an irrevocable election under 1.401(k)-1(a)(3)(v) because the kind of election specified in that section is deemed to not be a CODA." It definitely is not that. You're referring to an irrevocable election to have one's pay reduced and equal amount contributed to the plan. This would be a nonelective contribution. That's not what we're discussing here. This is an election out of the Plan entirely and is therefore unrelated. And my irrevocable election dates back before the option was eliminated during the EGTRRA PT restatements. It probably date back 15 years or so.

Correction: My old documents say an Employee may elect to not participate IN THE PLAN at the approval of the Employer. This is not that plan - it's a different one. I don't know what code reference - it's the portion of the plan that allowed someone to irrevocably elect out of the plan. I didn't think it was limited to 401k.

Not sure I'm certain which side you fall on - yes, it's too good to be true, OR it's perfectly legit?

Two companies are in an ASG - Company A and Company B. Partner 1 is a partner in both Company A and Company B (he actually owns 100% of Company B and is its sole employee). Company A sponsors a 401k Plan, and Partner 1 signed an irrevocable election out of Company A's plan. Now (years later) Partner 1 wants to establish a Plan under Company B. That's OK, because he didn't elect out of any plan ever sponsored by the ASG. But we also want Company A to adopt Company B's new Plan. The B Plan would exclude anyone covered by Company A's plan. We want to do this so we can use his comp from both Company A and Company B. Again, he did not opt out of any plan ever, just the one that Company A adopted. Anyone have a problem with this? It sounds too easy, but it also seems perfectly legit.

I've been reading about Corporate Owned Life Insurance as the method to attain tax deferrals.

Confession: I am new to the Deferred Comp arena. I thought most plans used annuities to avoid taxation. Are you suggesting that surrendering the annuity will be a taxable event? That would be someone else's screw up (not mine!) - we were hired by the new recordkeeper...

Have a plan moving from an insurance annuity to a mutual fund platform. Is there a way to charge the participants for their own related share of the taxes paid on their behalf? Or is the sponsor simply required to pay the taxes, and the participant takes 100% of the assets available when they terminate? I suppose it all evens out in the end, because they get the deduction for the money that is left in the account when they them out, theoretically anyway (i.e., assuming the account continues to increase in value.

OK, but since the IRS is "hating" on the ROBS plans, isn't it more of an issue for ROBS plans, than say a PS plan invested in mutual funds (and maybe a participant loan)?

LEt's say you have a client charging prime + 0 on its loans. Do you tell them: a) There is little or no risk, the IRS is just puffing smoke b) There is moderate risk, because hey, the auditors want to find something; or c) I strongly recommend you increase your loan rate to prime +1 (the most common rate out there) because of the "recent" IRS comments endorsing Prime + 2. Specifically, I'm looking for practical advice on what others are telling clients to help them avoid audit troubles. I agree with all of the arguments I've read that Prime is just as good as any other since there is essentially no risk.

Forgive me for being skeptical

PS, I submitted to Corbel and they didn't have a problem with the PS only / no contributions scenario. They have never heard of this being issue. They did not say that it was a slam dunk, only that they have never heard of the IRS taking the position. And I actually do put a lot of faith in the "out of profits language" because it appears to me nonsensical to make a profit sharing contribution when profits do not exist. I go back to the original intentions - the business owner would love to have profits from which to make contributions. Can it be held against him that profits never materialized? I figure they will either go bankrupt or add a 401k feature eventually.

I recognize the 401k feature helps, but unless the ps only doesn't work, they just don't want the trouble of administering a 401k plan; not only the trouble of the deposits, but also the fact that they have to find a home for the money. People starting up businesses are not looking for extra projects. They're looking for cash to start/finance their business.

So 1.401-1(b)(2) indicates that the Plan is in trouble unless there are "substantial and recurring contributions out of profits" (emphasis added). So a small start-up probably is not turning a profit. Does that get them a free pass for a while? They couldn't be expected to make a contribution if they are losing money, and how should they know when they will begin making money? It would be one thing if they could wait until they file their taxes to establish a plan, but the plan has to be in place before the end of the particular year.

Participant loan...

Employer is setting up a new plan. Without question, she hopes the day will come when she can make "substantial and recurring contributions." The motivation for now is to allow herself and her employees to have a place to park rollovers from their old jobs. Practically speaking, how is the substantial and recurring contributions rule enforced? If a plan is opened and no contributions aside from rollovers are ever made, is that a problem? If they add a 401k feature in year 3 or 4 is that a problem? Are people doing the 0% money purchase plans in these situations? Finally, Corbel's 401(k) plan has a "frozen plan" option with NO qualifications (i.e., no mention of the substantial and recurring issue). What is the purpose of that, as it seems to contradict this rule? Edit: Another Finally - is it a disqualification issue, or a partial termination issue? I see the substantial and recurring terminology crop up in the partial term rules.

Just before Line 3, Schedule R says "Profit Sharing Plans, ESOPS and Stock Bonus Plans, skip Line 3" I just can't see why this information is relevant for a 403b Plan. It seems to me they meant to say "non-pension plans, skip Line 3." Has anyone been filling this line out for the audited 403b's?

Probably because the word affected can be looked up in any two-bit dictionary to find that someone needs to be impacted by the event to be "affected." If I quit in June, and my plant is closed in August, by what definition of the word "affected" am I an affected employee?

I tend to have the clients who look to us for recommendations. We advise of the risks, to be sure. What I'm still trying to determine is which statement has more credibility? On the one hand, you have someone who sits around writing Rev Procs (and sometimes forgets to include important words ), and on the other hand, you have field agents who are actually enforcing the rules. I'm leaning towards the latter, assuming Sal is to be taken at his word (even though I'm getting it 3rd hand!).

Belgarath, I'm surprised by your last post considering your prior post that the IRS is training it's staff to do it "correctly" (i.e., vesting involuntary terms only).

So if that's what they say the code and regs say, isn't silly that they are contradicting the code and regs so obviously? "The facts and circumstances include the exclusion, by reason of a plan amendment or severance by the employer" I'm sorry, but I don't think you added enough emphasis

Is anyone planning an article to refute? This seems like a night and day inconsistency. Also, what do the actual regs say on partial plan terminations? Shouldn't the regs control? Seems like an inadvertent grammatical error (and the pride of the rev proc author which was too great to admit such a stupid mistake) has turned the rules upside down.

It would be one thing if a clear public policy was being served, but it really only serves to penalize the Employer for having the audacity to reduce its work force when the economy sours. Hey, remember that guy who quit and stole 10 of your clients? Guess what! He's 100% vested and you owe him $5,000!! Maybe MH will give us the name and number of the author so our clients can call him or her...

Place this just behind the prohibition of using forfeitures for safe harbor contributions, which holds the number 1 spot on the list of most ridiculous policy positions ever. This one is a close second, though. http://www.mhco.com/BreakingNews/APartialTermRev_082213.html Please tell me someone has something to contradict this, or that ASPPA will be writing a letter??