austin3515

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??

You've got me convinced on this one: The most important sentence (in my opinion) from that DOL opinion for your current scenario is: "Moreover, the fiduciary must not rely upon and cannot be otherwise dependent upon the participation of the IRA in order for the fiduciary (or persons in which the fiduciary has an interest) to undertake or to continue his or her share of the investment." I'm sure the plan got in the mix as a source of capital to make the deal go through. I over simplified, the truth is the plan owns about 15%, and the rest is owned by the owners. But I think it's a reasonable assumption that the plan was involved to "top off" the investment.

I don't think so, it's just regular old ownership.

A pooled 401k Plan wants to make an investment in a limited partnership. Plan will purchase 50% of the LP from an unrelated party, and the owner of the Plan sponsor will purchase 50% of the LP from an unrelated party. Is this a prohibited transaction? I wouldn't think that simply being related to the other owners would create a PT. As an example, the Plan could by Microsoft stock and the owner could also by Microsoft stock without engaging in a PT (assuming the shares were acquired from unrelated parties).

Instructions to line 6 of the Form 5500: 2. Retired or separated participants receiving benefits (i.e., individuals who are retired or separated from employment covered by the plan and who are receiving benefits under the plan). This does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan. Anyone see a problem with applying this to a defined contribution plan funded with insurance contracts exclusively (i.e., no Trust).

Instructions to line 6 of the Form 5500: 2. Retired or separated participants receiving benefits (i.e., individuals who are retired or separated from employment covered by the plan and who are receiving benefits under the plan). This does not include any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan. Anyone see a problem with applying this to a defined contribution plan funded with insurance contracts exclusively (i.e., no Trust).

Just call them and ask for the form I mentioned above (Principal Reduction Form). They told me about it.

You don';t need to grandfather anyone. The whole point of semi-annual entry dates is to comply with the 18 month rule you are referring to.

Thanks Tom! [Mine is actually a plan termination, so the two you mentioned that I hadn't wouldn't apply] So for covered comp, it's the same calculation to determine covered comp, you just multiply it by 8/12 (my plan year runs through August). Is that right?

What limits need to be prorated for a short plan year? I know the SSWB, 415, and Comp, but how about covered comp? Anything else?

I cannot say enough good things about Great West. They are the gold-standard.

I think I like this explanation very very much. Based on this I can see how you could argue that the amortization is still level.

1) "Do you also tell participants that a hardship withdrawal will be followed by a 6 month suspension of elective deferrals?" Yes, because it is required if you're using the safe harbor standard??? 2) Why doesn't the partial pre-payment violate the level amortization requirement? It doesn't sound level to me if they can make non-uniform payments on a "willy-nilly" basis?

I was surprised to learn that Great West has a "principal reduction form" for participant loans. the option reads as follows: "Principal Reduction Method - You can elect to send a partial prepayment to reduce the principal balance of your loan. To elect this option, mail this completed form and your payment made payable to Great-West Trust Company, LLC to the address indicated below. Consider submitting payment by certified check or bank money order. The payment received will be applied first to the current payment due and then to the outstanding principal balance." I believe this would violate the level amortization requirement of a participant loan. What do you say? We've always told participants partial payments are not allowed.

You're obviously very well versed here - is the answer "maybe" it is taxable in State A? I did not see in the list anything that would pull in a non-qualified deferred comp plan.

Participant works in State A where he accumulates $1,000,000 in a deferred comp plan. Participant retires and moves to a state with no income tax, and then closes his account 6 weeks later. Is this good tax advice, or will State A claim that it is due some income taxes because the money accrued in their state? Edit: The Participant moved BEFORE constructive receipt.

http://www.dol.gov/ebsa/regs/fab2013-2.html Fee disclosures due date extended to "18 months" for this year to allow plan sponsors to "reset" the filing deadline to coordinate with SH Notices, for example.