Gina Alsdorf

Brother sister controlled group has two requirements: 1) Common ownership of 80% or more of each entity by five or fewer individuals and 2) the same five or fewer individuals have identical ownership of more than 50% (See 26 CFR § 1.1563-1 - Definition of controlled group of corporations and component members and related concepts.)

I don't think that this problem can be totally avoided. Are you operating as a 3(16), do you have procedures that direct when you should pay out? Does the sponsor sign anything saying they never received a QDRO?

Is there an employee here? I think Schedule E is passive income. I am worried about compensation. See publication 560 for the fun part: https://www.irs.gov/pub/irs-pdf/p560.pdf

Silly question, but why not just stop funding the SEP after this year and join the MEP? As I was taught, you can't move IRAs into a Plan omnibus. It doesn't work that way.

Read the document and then here is a great resource. https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

Overly legal argument, but I would think no trust can exist until the plan is effective. i.e. You can't deposit into a plan until there is a plan. This might be an indirect rollover. The rollover wouldn't be complete in my mind until you had a effective plan document. However, this is not advice.

I remember many years ago (like 20?) the DOL had a project and basically targeted plans with Real Estate. Owner only would not be ERISA, but I think that sums up the likelihood of something going wrong with a real estate investment as far as a PT, or some other issue.

I don't know any other way to do this other than a spin-off. That is how I would do it. Then terminate the plan as a single employer plan. You can't terminate a PEP, only the sponsor can do that and you need a distributable event to pay everyone out.

It will be interesting to see what the self-certifications look like. I wonder why the limit was $22,000 that seems so random.

I think it would have to be severely under That Memo is a trip, can you imagine that today? Wild.

Pre-ERISA you could terminate a plan without funding vested benefits. There were not vesting or trust requirements' either. Basically, pensions were paid out of general assets of the employer and you gambled they would be solvent at the point you retired. This is in large part one of the reasons ERISA passed. To create the trust, vesting and funding requirements and set up insurance for when an employer was insolvent and plans were underfunded. Title IV!

Yeah, I would request the procedure documents to the extent the Administrator could get copies.

If the document is ambiguous or doesn't have the information, generally it is the plan fiduciaries that have the power to interpret a document. Usually the administrative services agreements for TPAs and Recorkeepers have some direction to the service provider from the plan sponsor, to follow standard processes and procedures or some sort of manual. That manual or those process and procedure documents will then control. They are probably available online, they usually will specify what is "NIGO" - not in good order. Good Luck, unless you get all of the documents related this kind of thing is hard to parse.

Unless you have a successor plan issue.

Just a note not a suggestion: You do have the option of requesting penalty relief due to reasonable cause as an alternative to submitting via DFVCP. It's a facts and circumstances test whether or not you would be eligible for relief.

I don't think unlawful is the right word. You won't get arrested for this... just lose tax status.

@fmsinc That is a wild question. Normally a QDRO can only specify payment options allowable under the plan, I would want to read the plan document...

C.B. It sounds like a calculation still needs to be done, but you can use the annuity payments to offset your actual RMD amounts. Am I reading that correctly?

Also, you should note, fidelity bonds don't cover contractors, usually. I've seen this be an issue.

I've seen a few places that do IRA/LLC structures that do things like this. The "checkbook" IRA to invest. Of course the bank accounts in those instances are in the name of an LLC. I don't suppose it's been less than 60 days?

Mercer has a decent article, secure 2.0 had some stuff about this. https://www.mercer.com/en-us/insights/law-and-policy/correcting-retirement-plan-overpayments-under-secure-2-0/

Uncle Sam always gets his piece. That is pretty much the truest part of tax law. You can delay it, but usually it is an eventuality.

I second what Bri said.

Personally, I would send to Penchecks for a paper-trail showing that the company didn't benefit from assets of the plan. A third party feeing out is different than a fiduciary zeroing out, and is allowed so long as fees are reasonable.

If you want to step out of the safe harbors (and likely amend your plan), I think it may qualify... Due to an immediate and heavy financial need. Limited to the amount necessary to satisfy that financial need