MoJo

It is taxable compensation - but not considered a "fringe benefit." For it to be a "fringe benefit" (taxable or otherwise), it must meet the criteria. Otherwise, it's just a pay raise.... I can call anything I want an "auto allowance" - that doesn't make it a "fringe benefit" for code purposes (or more importantly, plan purposes).

Read the IRM. It's application is limited to inclusion for employment taxation - and says nothing about "how" such a payment to an employee is calculated, or "becomes" a "fringe benefit" as an "automobile allowance." You need to look further to figure out what an auto allowance is, and when it can be deemed to be a fringe benefit. Suffice it to say that not all payments "called" auto allowances are "fringe benefits" - and that is my point. The publication indicates that only certain transportation expenses are "fringe benefits." Meet the criteria - and you're golden. Don't meet the criteria and I don't give a flying bat guano what you call it - for IRC purposes, it is NOT a fringe benefit. You basically prove my point in your last post - saying that "I was not referring to sham auto allowance policies, but rather the real ones." Yea. And how do you think you differentiate between "sham" policies and "real" ones? I really doubt the IRS is going to take the employer's word for it.... There are CRITERIA that you MUST follow - and I can tell you for a fact - that simply giving a "blanket" flat dollar amount DOES NOT QUALIFY as a real policy for purposes of calling the payment a "fringe benefit." It must be related to actual use and be documented through mile logging and other means. If you give EVERYONE the same amount - it isn't a real fringe benefits - it's simply a pay raise - and it is COMP for plan purposes unless specifically excluded in the documents. You do what you want - but my client's documents are clear on that.

Yea. Whatever. So, a doctors groups can agree to give each doctor $5,000 each month for a "auto allowance" and it's a fringe benefit? Give me a break Austin. The tax code doesn't work that way. The criteria are clear - and the simple thing to do is as david indicates is to ensure the plan is drafted correctly! It cost my client (who became my client because of this issue) about $18,000 is missed opportunity costs, and filing fees, and my fees. It cost the prior attorney and TPA and recordkeeper a client.

Look at Pub 15-B - and it describes the very specific conditions that must be met for transportation benefits to be included in the fringe benefit category. Simply giving an allowance without meeting the criteria does not make it a non-includible fringe.....

I would disagree with the others. If it is a "flat dollar amount" not dependent on documentation, I believe it is includible (and took EXACTLY that issue to VCP a few years back). If I can find my research, I'll provide a cite - but the bottom line is, if you provide an "allowance: NOT based on actual expenses - it becomes part of comp for plan purposes. Of course, the plan could exclude such comp for certain purposes, if it so provides. The case I dealt with provided each "professional" with a $400 per month allowance (they travelled among various locations to provide services) and the issue for the VCP filing was the "missed opportunity" of not having deferrals taken from that allowance.

It depends on what you mean by "one bad apple." Keep in mind the IRS has no problem with "open" MEPs, and hence under their rules you should have the ability to use any IRS corrective measures if a problem arises under the areas under IRS jurisdiction. The DOL does not believe "open" MEPs are legitimate (as they have historically been offered - although there are "new" variants that arguably solve the DOL's concerns) and hence, there may not be an appropriate fix under any program offered by the DOL. Primary among the DOL's concerns are abdication of PLAN SPONSOR fiduciary responsibilities - which - even if you hire appropriate 3(38) and 3(16) fiduciary services - never actually goes completely away (i.e. duty to monitor, and fire/replace when necessary). If one member of a MEP fails in its fiduciary duties, under "current" DOL analysis, that would take down that plan sponsor - but arguably not impact the other plan sponsors (who the DOL views as sponsoring "separate" plans. If one plan sponsor does something "universal" (and I can't think of what that might be except something perhaps that affects the assets "belonging" to the participants of another participating employer), then there would be a problem that could affect the whole.... P.S., I've not seen any such problems - except DOL scrutiny when an employer has participated in a MEP. Problems I've seen often however, include scenarios when a plan sponsor leaves the MEP (or the MEP is shut down as a MEP but the "plans" continue independently, and then there is a gap in history from a Form 5500 perspective, and the inability to actually get information from the (defunct) MEP when a plan is audited.

Organizations I've been involved with have used Berwyn - https://www.berwyngroup.com/ - I'm told it's cheap (depending on the number, and your arrangement - subscription or one shot). In addition, personally I've used www.intellius.com to find a handful of missing participants for a "semi-abandoned" plan. When I used them, they had a "all you can search" in 24 hours (or 48 hours, can't remember) for like $25 bucks.

Well, the simple answer is "no" but the question should best be phrased a little bit differently. First, a BD is needed ONLY to effectuate certain types of securities trades - on an exchange. So, the "trustee" will need to have access, typically, to a platform on which the plan's investments are traded - and a BD is usually involved there (but most often truly behind the scenes, as the recordkeeper usually offers connectivity to handle those functions) - but not necessarily in the sense I think you imply. Perhaps what you are asking is does a plan need an investment" advisor or other "consultant" and the answer is again, "no." BUT, ERISA requires those wwho are fiduciaries with respect to the plan operate as a prudent "EXPERT" would do, and unless those actually performing those functions (selecting the plan's investments, or performing other fiduciary functions) are proficient at the level of a prudent EXPERT, it certainly is advisable to hire that expertise, and many (most?) now use the services of an advisor to assist. The trend is aware from "brokers" (commission or asset based fees) to more "fee only" advisors (flat fee for services).

In my experience, charter schools are either not-for-profit entities, or for-profit entities - and NOT governmental entities. As, yes, they can have a 401(k) plan. If a non-profit, they could have a 403(b) plan or a 401(k) plan.

This area is really ripe for error and merits further discussion. First, I wouldn't "sell" plan assets UNLESS the agreement between the service provider is WITH THE PLAN (as a party) and not just with the sponsor. If the plan is a party to the contract, the debt runs to the plan, and (theoretically) can be enforced against the plan. Choosing which assets to liquidate and when, however, smells like a fiduciary function, and care would need to be taken in doing so. Suing the plan is an option. Alerting the DOL as to the "deadbeat" plan and the possibility of suit is another. Clearly, the service provider is within their rights to terminate services - but if they are a fiduciary with respect to the assets, I wouldn't think it prudent to "abandon" those fiduciary functions without assurances that another (competent) fiduciary is in place to assume responsibilities. Of course,a court could force the appointment of a successor fiduciary if the plan sponsor is unwilling to do so. Just my 2 cents worth.

austin: The list of exceptions is almost endless.... One would think a FIDUCIARY service provider would be concerned with the accuracy of the data a plan sponsor sends - as not sending accurate data may be a breach of a fiduciary duty for which teh FIDUCIARY service provide may have co-fiduciary liability. And the circle goes on and on. CYA is now synonymous with contract.... Hey! What's Schlicter's phone number (plaintiff's ERISA litigation firm in St. Louis). I may have an idea for the next wave of ERISA litigation.....

My "gut" is going to say no - as you have a jurisdictional issue with a "real asset" held outside of the U.S. (i.e. U.S. courts would be powerless to issue any order over the foreign property). I'm sure their is someone who could/would give you a more thorough analysis of hte issues and a cite. My point in posting, however, is that their are ways around that. Create a corporate entity or partnership in the U.S. that holds real estate - then have the plan invest in shares or units of the corp. or partnership. Not saying there might not be prohibited transaction or tax issues to consider, but generally I see plans investing in real estate through a pass through vehicle rather than directly.

It's now on the DOL "audit list" to check to see if cash-outs have been processed and processed consistently. I've had client's DOL auditors question that a number of times in the last year or so. Also apparently on their list: uncashed checks. The DOL expects the same sort of "reasonable" search for those former employees as for "lost" participants - and some expect the uncashed checks to be redeposited into the plan's trust account. I've talked to several auditors (accounting firms) who all say they believe uncashed checks remain "plan assets" but they have yet to account for them in the audit (or to count the former employee as a participant until the check is cashed).

Selling 3(16) FIDUCIARY services, IMHO is just the latest "marketing gimmick." In most cases, the "admin" work of running a plan is handled by service providers in a non-fiduciary capacity that relieves the "day to day" burdens of operating the plan. Loan approvals, (safe harbor) hardship processing, Form 5500 prep, and the like are staples of the service provider industry and they have been doing it for decades as part of their service model. The question to ask is what does the plan sponsor actually gain from having those services now performed as a fiduciary function by a vendor, rather than having those services provided by a vendor in a non-fiduciary capacity? In my mind, not much. In either case, the plan sponsor remains a fiduciary and has an obligation to monitor the activities of the fiduciary or non-fiduciary service providers providing services to the plan. The key is: Does the vendor have a process in place that is consistent with performing the function correctly and timely, consistent with the terms of the plan and the standards of ERISA? If the answer is "no" then whether the service provider is a 3(16) fiduciary or a non-fiducary vendor, the plan sponsor has a problem. I believe there is a common misconception in the industry that a plan fiduciary can "off-load" responsibility by hiring another fiduciary to handle some functions. Only in the case of 3(38) investment management services (where ERISA recognizes that true investment savvy is something that not many plan sponsor may have) does the off-loading provide a "clear" break of liability - albeit in the limited sense of no responsibility for the underlying actual management of plan assets (but the obligations to prudently select and monitor still remain fiduciary obligations of hte plan sponsor). Even "proper delegation" of fiduciary functions to a 3(16) may not have the same "shield effect" that 3(38) has (and the statutory language is different - for a reason). More fiduciaries in the plan may mean more monitoring, more co-fiduciary liability, more headaches, and ultimately more liability. I counsel clients to 1) inventory fiduciary functions; 2) inventory those who perform them; 3) ensure the right people are performing the right functions (and all functions are covered); 4) develop processes to ensure the functions are performed appropriately; 5) build in "escalation" processes when a performer of a fiduciary function can't follow the process (in other words, DON'T LET THEM WING-IT); and 5) stop paying attention to the fear mongers that want to up sell you a service that you are probably already paying for anyway. If they can't use appropriate care in performing the non-fiduciary functions (without being paid more to do so as a fiduciary) - fire their a$$ and get a better (non-fiduciary) service provider.

I agree with Bird. I don't like either the plan sponsor being a trustee or a "named position." One cannot be a trustee without consent - so if a new person occupies the position without consenting to trustee responsibilities, you have a problem (and besides, someone may occupy the position who really isn't qualified to be the trustee...). Keep in mind, I know ERISA makes you a fiduciary based on the functions you perform - but being a trustee is a "special" type of fiduciary that certainly implies, if not explicitly requires, consent to serve in that capacity. Naming the plan sponsor (and I know of at least one law firm around here that insists that it is ok (and does so for their own plan)) is dangerous. Business entities cannot "function" and require real people to do so - hence, when an individual performs those functions, they are now ALSO a fiduciary - and may or may not be appropriately selected or supervised. I just think it raises more questions than answers. Plus, even thought hte plan sponsor may be a fiduciary by virtue of function, best not to "bet the firm" on virtually complete liability for plan assets.

"Even if you wanted to have a QDRO offering the ex-spouse nothing to formalize the absence of any rights, it wouldn't have any authority until the divorce was final, would it?" I don't agree. I don't believe there is anything that requires that a QDRO be issued incident to a divorce. The only requirement being that it is made pursuant to state domestic relations law. Indeed, I've seen DROs issued (that were Q'd to become QDROs) that provided for support payments when no divorce was ever granted. Rare, yes, but the effective date of the DRO is independent of the date of divorce. To that extent, I could see a DRO being issued that, if it complied with all the requirements, would be effective in granting ZERO to the spouse/soon to be exspouse. My only qualm would be, is it truly within the purview of the issuing court to do so, and that is dependent on state law. BUT, to the extent that everyone is in agreements (and I assume the spouse is, or the court probably wouldn't grant such an order), why no just have the spouse irrevocably consent to naming the other beneficiary?

I think the one thing everyone has missed so far is that it not only depends on the debts you have, but on what other assets you have as well. Insurance is an expense, and whatever resources your survivors will have (i.e., your spouses income/prospects, a trust fund from the grandparents, your 401(k) balance, the existence of a pension benefit - and I'm just scratching the surface). The goal should be to build sufficient wealth to be "self-insured" so to speak. The "8-10 times" income is just a guess - and one that shouldn't be made without a whole lot more information.

Would not a TPA be a "party in interest" giving justification to the DOL to investigate? In addition, where is it prohibited that the DOL can only "review" information about a plan from the plan sponsor or other fiduciary? The "subpoena power" allows them to get information from anyone who holds that information. Over twenty years ago I worked for a bundled service provider (a large bank) and the DOL routinely requested (sometimes informally, sometimes formally) about plans we serviced, and at least once, came in and request a list of all plans that met certain criteria for further examination.

and I'm telling you that there is NO way to effectively document what happened that in fact would be appropriate. ANY documentation now created in fact becomes the noose which will hang the plan sponsor. I NEVER recommend that the client "put something in the file" without consider it's propriety, and it's effectiveness in correcting the situation - else it is what a lawyer (me included) would call an "admission against interest." Either fix it, or bury your head in the sand and hold your breath until the "audit lottery" risk is past (NOT what I ever recommend). The ONLY real fix is the missed opportunity correction going backwards, with a contemporaneous amendment to effect whatever the plan sponsor wants to have going forward. Do it right, and get it fixed - but if you don't, at LEAST consult with an expert before you "paper the file" with ANYTHING that might come back to haunt you.

I can't speak to all jurisdictions, but in Ohio, 1) a court can issue a DRO without both parties agreeing to it's terms (it is, after all, an ORDER of the COURT), although typically it is an agreed upon order, it doesn't have to be (especially when the parties don't agree and the matter is resolved through trial); and 2) generally, the final decree "reserves" to the court continuing jurisdiction to enforce the terms of the settlement (or decision, in the case of a trial) - which implies just that - that the court can revisit the issue to enforce the provisions. of it's previous order/decree of divorce/dissolution. I don't believe it is relevant that the QDRO attaches post "divorce" assets accrued in the plan - as long as it is otherwise a valid DRO (under state law). Typically (in Ohio) as well, the DRO only applies to assets accrued during "coveture" (meaning the time they were together) and once they "separate," future accruals aren't (necessarily) factored into the split of marital assets. In the case at hand, it appears the court is simply looking to the balance to satisfy a different provision of the decree/agreement to split the proceeds of a house sale, and if valid under state law (and otherwise a "Q"DRO), it would be valid.

Yes, but generally only for those things that do not affect an accrued benefit. Retroactively suspending contributions does NOT rectify a missed opportunity - which is accrued with each paycheck for which deferrals are suspended. Look it up. EPCRS has a specific remedy for that violation - and it involves making a contribution to rectify the problem - not adoption of a retroactive amendment. There are lots of things that can't be "adopted" retroactively. In fact, the general rule is that you can't, but there are exceptions where you can. Not the other way around.

Just "saying something is changing" does not constitute an amendment. One of the fundamental requirements of ERISA is that the plan be IN WRITING - and that implies a formality to changes made, so that the terms of the plan can be ascertained from within the "four corners of the document" (or documents - as it need not be a single document). If the company simply ceased deferrals without any "writing" that can be construed as part and parcel of the WRITTEN plan document(s), it fails. It's as simple as that. We've seen plan sponsor do this many times, and then pay for it either when the plan is audited, or (for the smart ones) who correct through VCP (which generally involves making a missed opportunity contribution pursuant to the EPCRS program). I have three VCP filings with such missed opportunity issues (plan changed in operation without appropriate documentation) pending right now. My response is that you CANNOT now create documents that will suffice as "amendments" to the plan in order to correct this scenario. You must go back and operate the plan as WRITTEN, making changes only prospectively, as desired.

With all due respect, those are amendments that can not be made retroactively. Either they already exist (which doesn't seem to be the case) or doing so would actually be a bigger problem. I often recommend that plan sponsors search for appropriate documentation to indicate an amendment was made (Board minutes, letters, emails, or what ever), but if it doesn't already exist, it can't be "created" retroactively.

Without trying to be snide, the documentation I would get is an attorney's engagement letter. Unless the plan was amended to 1) suspend deferrals, and 2) limit participation (i.e. not include the employees of the acquirer) there are missed opportunities (for at least the existing participants if not the acquirer's employees) and breaches of fiduciary duties by ceasing loan repayments (without other payment arrangements being made).

What rcline said: A trust is not an employee. "Employee benefit Plans" benefit employees. Members of LLC's can actually only participate in a plan to the extent they are employed by the entity they own. While a trust may own an LLC, a trust cannot be employed by one.