QDROphile

See 457(e)(18). No section 414(v) catch up unless the employer is a government or instrumentality. But 457(b)(3) provides for a higher limit that some people refer to as a "catch up." See 457© and compare it to the provisions of 457© before amendment to answer your first question.

If you have any responsibility for legal compliance or investment management for the plan, don't touch it.

I don't presume that plans are looking for a fight, but I suppose that a plan might refuse to cooperate if it had withheld amounts and does not want to deal with the adjustment, e.g. if the recipient elects a rollover. If the plan will simply cut a new check, the plan would then still take the position that the distribution occurred when the distribution occurred, not when the new check was issued. If the plan will acknowledge and fix a problem with notice, even if it can show it is not at fault, I think that is firm ground. While the practical risk of problems with a new check is low, the only way to be sure about the outcome under these facts is to get an IRS ruling. I am not aware of any free pass on destruction of a check, but the IRS should be sympathetic in its ruling position.

You cannot get a rollable distribution without warning, maybe unless it is $200 or less. You should claim that you never received the tax/rollover notice and that you do not want to receive the distribution until you have have a chance to read the notice and give instructions concerning the distribution. If the plan is smart, it will send you the notice and then you can decide what to do. The clock should start over.

If Dad or Son are involved in conducting the business or are employees of the business or are otherwise compensated for their services to the business, they are playing with fire.

See section 415©(3)(D) and the revised 415©(1). What you are reading is obsolete.

If it is not an amendment, what is it?

Please explain why a dependent care spending account cannot pay eligible expenses incurred after termination of employment and within the same year.

Yes. No, unless the plan terms specify that the eligible expenses will be as stated in the SPD, but that would not be a good idea for plan design.

Does one type of mistake make you suspect another? Are you responsible for compliance, or is someone else responsible?

Look at Rev. Rul. 2002-27. I think there is some other IRS guidnace that is related.

Perhaps there is no formula or other instruction for determining the amount of the contribution but there is a formula for allocation of the amount once it is determined. How the amount of discretionary contribution is arrived at is a matter of plan terms, and if the plan is silent, then a matter of corporate governance.

UBTI

Sorry be so picky, but I can't venture a specific answer because there is not enough information. We don't know what the plan terms are. I did not even understand the original post to mean the 401(a)(17) limit was the "comp limit" so I did not understand the perceived problem. 401(a) (17) is an amount limit, not a timing limit. The plan design can be so stupid or ignorant that it makes the compensation limit effectively lower than the 401(a)(17) amount. In general, you look at the formula. If the formula refers to a percentage of compnesation, the percentage cannot be applied to a number larger than the 401(a) (17) amount for the year. In general, you can annualize for purposes of the limit even if the period for the match is less than an year and there is no true up for the year. You do not need to shut down when pay reaches the 401(a)(17) amount during the year, even though some inferior systems are designed that way. If the match is 33% of deferrals, disregarding a deferral amount in excess of 6% of compesation, then the maximum match for purposes of the 401(a)(17) limit is is 33% of 6% of $205,000 (2004) = $4059. The plan design and the timing of elective deferrals may cause the participant to fail to get the full match, but 401(a)(17) is not the limiting factor.

jquazza: You misinterpret how the 401(a)(17) limits are applied.

I think amounts become taxable in 2006 when the restriction lapses for purposes of 409A. I think Notice 2005-1 was intended to make it very clear that rolling risk of forfeiture is not permitted. The IRS has never bought into it as currently used (or abused) and took its opportunity in Notice 2005-1 to put and end to the arrangement. I think you misunderstand the IRS position on vesting. Look at the example in the Notice. The vesting is irrelevant because the established deferral period exceeded the vesting period. A change in the vesting did not affect the deferral. It may have changed whether or not the employee actuall got any compensation, but not when or in what form the compensation, if any, would be paid. The deferral was compliant with 409A. It does not work that way under 457(f) because there is no separate deferral under 457(f). 457(f) works on risk of forfeiture alone. 409A says you can't extend the period for risk of forfeiture, with an express exception. I heard the IRS comments about vesting and a lot of people came away confused, perhaps including me. I don't think they were saying anything different from what is in the Notice.

Which means the amount will become taxable at the time the risk lapses for 409A purposes. To me, that means that the arrangement is not compliant if you try to give effect to it the same as you would under the terms of the 457(f) arrangement, if you believe that rolling risk works under 457(f) in the first place.

A rolling risk of forfeiture, as it is known under 457(f) arrangements, is not compliant with 409A. See Notice 2005-1 Q&A 10: "*** any extension of a period during which compensation is subject to a substantial risk of foreiture is disregarded ***."

Yes. Discrimination rules apply if the benefits are not provided under group health insurance policies or are provided through a section 125 plan. Depending on circumstances, you could have issues with your health insurance provider.

The only one who is making sense is Kevin Wiggins. The issue depends on the facts and no one has bothered to discuss anything concrete.

Where does that come from?

See the first sentence in my first response. Your other concerns relate to the question about whether or not the contributions are mistaken. That is why one of my example questions was whether or not the commissions were compensation even if the customer cancelled. If the commissions were compensation, then the contributions relating to the compensation were not mistaken. Also, "forfeiture" is not the best term to decribe corrections generally, although some corrections may involve forfeiture.

A plan can always correct mistaken contributions and allocations. The optimal and acceptable corrections vary with the circumstances. Most of the circumstances you describe involve issues in addition to mistakes in the contribution and allocation amount. If you really have these circumstances to deal with, you need legal counsel. For example, in the first situation, is the commission earned? If the commission amount is not earned because somehow the commission is retrieved if the customer cancels in 30 days, why is it paid before 30 days? How is it retrieved? Is it offset against future commissions as though it were an advance? What is the commision agreement? Are there any state law mandates that affect treatment as compensation?

Someone is overestimating the difficulty of amending the plan and transferring assets to new arrangements and underestimating the negatives of plan terminations. Yes, it can be done, but be careful what you ask for.

So why should someone offer an explanation to you on this board when you could could ask the partner for an explanation and you don't provide enough information about the situation for anything but a speculative response? I have no trouble imagining how the partner is correct in any number of likely circumstances. With respect to your question about the 18 month rule, think about it from the perspective of the plan administrator.