austin3515

Anyone have any cites for how to determine if two mutual insurance companies would be part of the same controlled group? Do the non-profit controlled group rules come into play (same board, etc)?

I would not bat an eyelash. I say amend!

What amendment? No amendment is required as Company B just hired some new employees. Now if you want to recognize service, that is a different story. The amendment would just say "Company B Plan recognizes service with Company A".

This is total nonsense and should not be relied upon, but I'd clean it up and move forward. Nothing wrong with Prime+1%. I personally would have changed the loan policy (I think it would have been a better story), but either way I would not go crazy. Now if this is a very large plan with an audit, etc. perhaps my answer changes. But if we're talking about a 50 participant plan with a dozen loans, there are only so many hours in the day! Perfection is a very tough standard to meet.

I totally agree!

This is great, thank you! Q-7: Will the plan administrator be subject to liability for tax, interest, or penalties for failure to withhold 20 percent from an eligible rollover distribution that, because of erroneous information provided by a distributee, is not paid to an eligible retirement plan even though the distributee elected a direct rollover? A-7: (a) General rule. If the plan administrator reasonably relied on adequate information provided by the distributee (as described in paragraph (b) of this Q&A), the plan administrator will not be subject to liability for taxes, interest, or penalties for failure to withhold income tax from an eligible rollover distribution solely because the distribution is paid to an account or plan that is not an eligible retirement plan (as defined, with respect to distributions from qualified plans, in section 402©(8)(B) and § 1.402©-2, Q&A-2 of this chapter and, with respect to a distributions from section 403(b) annuities, in § 1.403(b)-7(b) of this chapter.) Although the plan administrator is not required to verify independently the accuracy of information provided by the distributee, the plan administrator's reliance on the information furnished must be reasonable. For example, it is not reasonable for the plan administrator to rely on information that is clearly erroneous on its face. (b) Adequate information. The plan administrator has obtained from the distributee adequate information on which to rely in making a direct rollover if the distributee furnishes to the plan administrator: the name of the eligible retirement plan; a representation that the recipient plan is an individual retirement plan, a qualified plan, or a section 403(b) annuity, as appropriate; and any other information that is necessary in order to permit the plan administrator to accomplish the direct rollover by the means it has selected. This information must include any information needed to comply with the specific requirements of § 1.401(a)(31)-1, Q&A-3 and Q&A-4 of this chapter. For example, if the direct rollover is to be made by mailing a check to the trustee of an individual retirement account, the plan administrator must obtain, in addition to the name of the individual retirement account and the representation described above, the name and address of the trustee of the individual retirement account.

This is the my question, thanks. I am not involved in the Former Participant 401k Plan. Others agree?

Former owner of my client terminated with said client and took another job at an unrelated company. He had some nontraditional assets in his account and I believe instead of rolling to an IRA he decided to set up a 401k plan for the sole purpose of accepting rollovers. I am suspicious that there is no business tied to this 401k plan, he just preferred this to the IRA platform because he would have more flexibility. So I am concerned that the plan is not qualified. Now I could be ALL wrong about this. Remember, these are only suspicions. The amount involved happens to be quite substantial. What obligation does the plan sponsor have to vet this out? The sponsor "should know" enough to be suspicious because based on the Plan name on the rollover request it is clear that it is being sponsored by this individual and they do know he has not gone into business for himself. And he has been employed by them for "several years" so the existence of an old plan seems remote.

I would think these guys can handle a spin-off. Standard operating procedure for these guys. In light of KEvin C's interpretation (which I agree with) they have no choice but to facilitate a spin-off.

Well when you put it like that I almost feel guilty for asking I have a feeling she's not going to tell me his name. And yes I realize that giving a link to the article would have been the same thing (hence the guilt)... I actually tried googling it but found nothing. I actually think this would be a good article from one of those law-firms. The expression "oh, let's put your spouse on the payroll" is something that I have heard many times before. I always clarify when I hear it by saying, "No, let's find a job for Spouse to do for which we can compensate them." I think if I could say "here's an example of a guy who was convicted in court for doing this" my warnings would have more bite!

April, is there any press on this case? I would love to circulate this around to people. If it was public information in the press I don't see how it would be a breach of confidence, but hey, I would understand...

Owners work their you-know-what's off but had no income to show for their hard work. What do people think? In the testing as a zero, or not? I know it is a gray area.

Participant has comp of $10,000 and defers 100% (call it $9,235 after PR taxes). I believe we can give that employee a $2,000 profit sharing contribution if they are over the age of 50, because some of their deferrals will be reclassed as catch-ups, even though total exceeds 100% of pay. That's because 100% of pay is a 415 limit and contributions over the 415 limits are reclassed as cactch-ups. Do I have it right?

mbozek, your two paragraphs seem contradictory. On the one hand you indicate "why impose any restrictions" but on the other you list out some excellent reasons. For example, some employers may wish to have all investments funded through annuities to avoid current taxation. And of course certain types of investmetns should be banned altogether, such as the ones you mentioned. Is that so much different from having an approved list? And if it is exempt from fiduciary rules, why is there anything to worry about in that regard?

Per 457(b): (5) Includible compensation The term “includible compensation” has the meaning given to the term “participant’s compensation” by section 415©(3). And 415c3 of course includes the exclusion of severance via the regs.

Do the same rules apply as in 401k plans with respect to 457(b) deferrals from severance? Or would it be permitted?

What do you mean by volume submitter though? Prototype formatted volume submitter, or just the one that looks like an individually designed document? Because the attorney documents that I work with are submitted on the 5 year cycle. I suppose that's the big question, will they revert the pre-approved 6 year cycle.

I think the recurring conversation goes something like: Attorney: You should really restate your document, Client: OK, sure. How much willt that cost? Attorney: $__thousand. Client: Next year's looking a lot better, we'll do it then... Obviously this client should be on a preapproved plan. Will the attorney tell them that though? Who knows. I wonder if the attorneys will start using the VS check the box document more often or if it is just that contrary to the fiber of their being. I think they have a wonderful incentive to do so - the mandatory restatements for which they can charge. 98% of these documents are not doing anything that can't be done on a good pre-approved document. Or maybe the good ones will give their favorite TPA's referrals!

How about amending the plan year to have an 8/31 year end and then switch to 3% effective 10/1. That might work. I can't say for sure but depending on how important it is, something to check out... I think the only requirement is that the next full plan year has to be safe harbor. I don;t think the requirement is that it has to be the same contribution. You can check the regs. There is info in there about changing the plan year.

There was no "trust" box - it was only the list of particular kinds of trusts. But come to think of it, the EIN really does need to be the corporate EIN for tax retporting purposes, doesn't it? My this is a conundrum. I'm all of a sudden realizing that I know how to run, jump hurdles and all the proper stretches, but have not learned how to tie my shoe! Someone must have set up an account like this at a brokerage account who can tell me what to do. I hear a lot of wonderful technical advice and it all sounds brilliant. But I'm down here in the weeds with paperwork and boring practical stuff. What are other people doing (assuming no one wants to spend the big bucks for the specialized bank trust).

I never thought about that before. Do I need to?

But wouldn't the corporate account be registered to the corporation? And what would be preventing an authorized representative of the employer from diverting the assets? Perhaps the answer is you designate the trustee as the authorized party? But then again, the corporation as the controlling party on the account could simply act to remove the authorized party...

Would anyone like to comment on the original question which is how to get these darn accounts opened?

My understanding is that the assets are held in a trust separate from the employer. It only reverts to the employer in the event of liquidation. As such the account should probably be registered to a trust (or more specifically to the Trustee, FBO the Plan, just as it is in a qualified plan). But I'll restate the question - are you guys suggesting that it should be a corporate account? And if it is a corporate account, how could the trustee prevent a diversion of assets?

They trust the trustee. That's why the named him as the Trustee. I think it's actually where the word comes from . I know I'm being a smart-alek but I'm not following how it relates to setting up an account. So are you saying it can be a corporate account??