MoJo

You are really asking an accounting question for partnerships and other entities where the expenses of the company ultimately flow through to the partners in a reduction of their income/draw. It is common for partners in a professional services firm (generally) for all benefit costs to be allocated directly to the partner. I can't say I've seen a partnership ask for reimbursement when it makes a QNEC, but would expect your share of the QNEC to be charged against your partner share....

I think you are innocently playing a game of semantics here. As a practical matter, what you describe is what happens - except the "error" in what you have described is that you say a "new" plan will be created for Company B. I would not describe it as such. If you truly do a "spin-off" a "portion" of the existing pan will continue in existence in the guise of the plan sponsored by Company B. Take a meat clever and chop it along the lines of the respective employer's employees. Now, tell me which one is the "surviving plan?" Because both Company A's part of the plan and Company B's part of the plan will have history and protected benefits and possible liabilities of the original plan, both in essence or "surviving." As a practical matter, the "new plan DOCUMENT" for Company B's plan is merely a clone of the original (modified going forward as they see fit), but needs to embody that which must remain the same from the original. And for the record, I'd label Company B's plan 001....

I think you are looking for a published rate of "fines" for this - and it doesn't exist. Late contributions are a breach of fiduciary duty - the consequences of which range from "making the plan whole" to "being banned from ever serving as a fiduciary again" to "federal jail time" (misuse of employee benefit plan money is a federal felony). Bottom line, you leave your fate to the DOL, the DOJ and a judge. Very disconcerting, to say the least. It's also a prohibited transaction - whose penalties are widely known.

Simple solution - DON'T be late with contributions. The DOL has been harping on this for more than a decade. Business people have deadlines for all sorts of things - with penalties. A widget manufacturer who doesn't get product to GM get's stung HARD. A road paver who doesn't complete X miles by a certain date is penalized. If they are BUSINESS PEOPLE, establish a business process to handle this on time, and it isn't a concern.

I'm sorry, but IF the employer has corrected the error, then 99% of the work (data collection) has already been done. Using the VFCP platform is pretty darn easy ONCE the data has been collected. If you haven't already collected the data, then you probably haven't corrected the problem.

Simple: An audit. Using VFCP is far, far, far easier and less time consuming than responding to an audit request. Then, depending on what they find, all sorts of options for a plan sponsor to write a check (or worse) may happen....

Pattern and practice (and ancillary documents and educational material) are all relevant in determining what the plan documents "say" and what the participants expect. Not having it spelled out in a loan policy is certainly a factor, but if you say a "reasonable rate of interest" and since the beginning of time you've "defined" reasonable as "prime plus one".... Well....

I'm sorry - but they have been sending these letters out for years. It is "an invitation" to the VFCP program (it is, after all, "voluntary") with a reminder that the only corrective action acceptable to the DOL is through that program. They actually used to also "invite" you to participate in one of their "fiduciary responsibility" webinars - but the most recent letters I've seen have omitted that invitation. Bottom line is, for late contributions anyway, go through the program. It costs nothing. You need to make the correction anyway (and I assume you have - because the DOL get's the mailing list for these letters from filed Forms 5500 - and if you disclosed there and didn't correct, you're a fool). And we've found the use of the DOL calculator (only authorized if you use the VFCP program...) often results in lower earnings than other methods. The ARA is just blowing some smoke here. Maybe piggybacking on the current sentiment of the mean old overbearing regulatory bodies that currently exists.

As between the plan and the participant/borrower, yes - but as between the plan and it's fiduciaries, a correction has to occur *if* the interest rate is i the loan policy or otherwise part of a plan document. It essentially is an operational failure. The correct correction method (according to the IRS is a VCP filing - to seek either a retroactive amendment to the loan policy/plan document that specifies the interest rate (not always easy) or for a corrective contribution to be made to the plan in the difference between what is being charged and what should have been charged. We found this out the "hard" way....

Was the wire sent "timely"? The rule is that the money must be "segregated" from corporate assets in a timely matter. When the money is allocated is a different matter entirely (and is really a fiduciary matter - which in the scenario you posit doesn't - IMHO - rise to the level of a breach).

Fair? I dunno. I once heard of a guy who had two totally separate businesses. One was a medical practice, the other an x-ray facility (or pharmacy, or physical therapy facility, or a funeral home). Define "separate? As a financial advisor, does he ever recommend someone buy (or sell) a home or invest in rental property? It's all about potential....

I think you have done very well with the "predictable." In my mind, a SA is to define what happens in the "unpredictable" by defining with written clarity the limits of services provided. That way, when something unexpected (unpredictable) happens, everybody know what the responsibilities of the service provider are, and more importantly are not. I would politely decline. I'd never ever ever let a judge decide what the parameters of services offered are. Very dangerous.

Hey! I just learned something new (and it works). I guess I can go home now.... Thanks C.B.!

I don't click on a search result - I "right click" on it and select "open in another tab". Simple way to not lose your place....

Two words: "guaranteed income." I'm told that those words have been getting a lot of use lately, and not having a solution is considered a deselector in the sales process...

Yea. That has it's own complications (and we've suggested it)....

Well, you've raised another good issue - as to how this can be accomplished within the confines of our document. The problem is, it isn't a client that wants to do this - its sales.... Guess who will win that argument? Thanks Belgarath. I believe that may be a peg to hang our hat on....

Not that I doubt you, Bird, but the lawyer in me (and my team) always looks for something to hang our hat on. That approach has a certain amount of logic to it - but....

Help settle a debate.... Assume a 401(k) plan is defined in such a way as that employee deferrals are distributeable only in a single lump sum when a distributeable event occurs, but any employer money (match, non-elective) is distributeable ONLY in the form of an annuity and ONLY after a distrubetable event AND attainment of the plan's Normal Retirement Age. Clearly the annuity distribution option must comply with the QJSA requirements (J&S Annuity and/or spousal consent). What about the deferral distributions? Is spousal consent required for that distribution as well? The debate is, if you look at the regs - says a "PLAN" is subject to the QJSA requirements when the annuity distribution exists - with the exception of a plan that is a "transferee" of money from a plan that was subject to the QJSA rules - and then ONLY that source need comply with the QJSA rules. The plan design referenced above seems, in some ways analogous to the "transferee" source scenario, but the regs say the "plan" is subject to the rules when the annuity exists and it doesn't seem that the rules were written with this plan design in mind. My team is rather conservative on such matters, and seem to believe that the "plan" as a whole is subject to the QJSA rules when an annuity exists, and the ONLY exception is the "transferee" plan exception - which allows only the transfered source to be QJSA constrained - which this scenario isn't. We may be over-thinking this - but it's my team's job to vet this kind of stuff.... Thoughts?

I think the rules is the date the assets are "segregated from employer assets" for purposes of the "DOL rule." When they are deposited/invested may be a fiduciary issues, but "segregating" from employer assets is the first hurdle. That said, IMHO, "mailed" meets the test, but I have lost that argument with the IRS on more than one occasion. Their position was never fully spelled out, but the undertones were 1) who mails checks anymore; and 2) it was still drawn on a corporate account, so it was still in the employer's "possession" (despite decades of law to indicate that a check - a "negotiable instrument" when taken out of the control of the drafter was considered out of their control.

I can't give you any "specifics" about those that got out of the business because of the "new and now defunct" (for now) fiduciary rule, but I do know that several providers "shopped" their recordkeeping shops because their business models could not feasibly comply (i.e. their business model was almost exclusively based on cross-sell opportunities and rollover capture into their retail IRA products). I know this because we've been a buyer - and reviewed some of the offerings.....

EBECatty: It is rather interesting that in the past we have gotten approval for the retro amendment. This one is a little more complicated for a variety of reasons, and was filed as an anonymous VCP - because.... The problem with the communications is that "system generated" materials (SPDs, regulatory notices) all were produced with the plan language, and SOME of them were manually edited by a rogue plan manager to conform to actual operations. If they had 1) raised their hand and said something isn't right here; or 2) made ALL of the communications conform, this wouldn't be an issue (and my preference would have been the former approach). All of the "glossy" materials (education) and all of the employee meetings were consistent. We'll see.... The lesson learned here is EVERYONE should be an issue spotter - and scream loud and long when something isn't right.

I just wanted to update with a very recent experience with the IRS on a pending VCP filing seeking a retroactive amendment to deal with a "scrivener's error." The initial response contains the following language verbatim: "1. Please revise your submission to remove the terms "scrivener's error" from all narative sections. The Service does not recognize the use of the term. (emphasis added)" ... "5. In operation of the Plan the Applicant is to follow the written terms of the Plan. The acceptable correction for your failure is to [make a corrective contribution] In rare circumstances, your request to correct your "drafting" error by adopting a retroactive amendment to conform the terms of the Plan to the Plan's operation may be considered if there is clear and convincing evidence to support employee expectations in accordance with the Plan's operation. Conflicting notices and communications were issued to the affected participants. Please explain how it is then possible to support clear and convincing employee expectations in line with how the Plan was administered." (emphasis added) I would suggest that to obtain IRS approval for a "scrivener's error" correction via a retroactive amendment when there have been auto-generated employee communications consistent with the error is no slam dunk - as some have suggested. Again, a problem with auto-generated documents - but for large(r) service providers, three isn't much of an alternative.

I don't put my sandals away until we hit 25 or below....

We have a large office in San Diego. You'd be surprised how often they complain about the weather.... I just remind them that when they get thirsty, they'll all move (back) to the midwest. We call our water storage system "snow."