QDROphile

This thread illustrates why it is not a good idea to have the corporate plan sponsor be the plan administrator. The Department of Labor can assert that every individual director and executive officer is a fiduciary personally based on the formal identification of the plan sponsor plan administrator, and it has done so. In the end, the argument that there is a very clear and well defined (by practice) limited number of persons who are the functional fiduciaries will probably control the personal liability questions, but it will be rather uncomfortable for those poor formal fiduciaries to suffer through the process with the liability cloud over their heads and the outcome is uncertain.

With respect to deposit of elective deferrals, the Department of labor view is the the plan administrator, or some other fiduciary, is responsible for receipt because the amounts become plan assets at some time and the fiduciary is responsible for the management of plan assets. To use what jpod posted, the fiduciary has a duty to make sure that the plan receives its assets. That does not mean liability for a late deposit unless the fiduciary breaches its duty either by not paying attention or by failing to take appropriate action if the deposits are not received timely (including an appropriate correction if the deposit is late).

OK to amend as you describe.

Has the plan filed Form 5500 in the past? Why not ask the vendor to explain its statement?

How does one change the plan sponsor if not by restatement or amendment? A restatement is an amendment, but not every amendment is a restatement.

The plan document should say that the sponsor may elect to cover administrative costs. Sometimes the sponsor is required to cover certain admimistrative costs.

Plans can have a safe harbor definition of compensation that excludes taxable fringe benefits. That DOES depend on plan language and I am glad to have the opportunity to clarify my statement that plan language does not matter for income tax purposes.

The plan document has nothing to do with the income tax treatment to an employee of employer-provided health benefits to a domestic partner. Marital status and dependent status determine the tax treatment. Domestic partners are not spouses unless the state has converted registered domestic partnerships to marriage. Check out Washington -- I do not think the conversions are effective yet.

I may have seriously underestimated the understandings and arrangements described in the post.

The original message also said that each of them has their own 401(k) plan, presumably as employees of the S corporation. Then it goes on about 401(k) plans in a partnership context and uses the term "partner" to apply to each of the employees of the S corporation. Who knows the actual circumstances? I only know that the correct assessment and advice cannot come from the message boards.

Employees cannot maintain personal 401(k) plans with respect to their W-2 income. You should also get acquainted with section 401© of the tax code. A partnership is the "employer" of an individual who has self-employment income, and the individual is an "employee." You probably need to buy some competent professional advice to find some compliant arrangements for yourself and others.

I know no secrets. The IRS let the horse out of the barn with its inattention to execution of new comparability and appears to have given up the chase. However a blatant pie in the face, with no attempt at illusion or formality, might get exceptional enforcement.

For example, if the SPD (or other communication) says that each year each partner will determine the partner's profit sharing contribution for the year, that would be of concern unless the IRS has abdicated, which it pretty much has. The decision about contributions has to at least have the appearance of being made at the entity level, not at the individual level.

So that is what is meant when plan terms use "prime" without any other modifier or explanation?

Please identify the definition of "Prime"

A plan can be designed to do this. Although the client is probably not acting rationally or intelligently, is it your job to change the "desired" design? A thread in the last week revealed all of the authority on the subject, including preamble to the section 415 regulations and an article from the IRS Employee benefits news.

Indica of ownership in U.S. requirement?

Some professionals are bound by ethical code or other requirements for confidentiality about what is learned in an interview with the prospect of engagement. If you have no duty of confidentiality, you might be interested in a whistleblower award. A Google search will take you to the information on the IRS website.

The argument by the lawyer that the answer based on the specified dollar deferral does not dispose of the issue shows that the lawyer is not only not knowledgeable, the lawyer is a weak thinker. Criticism of the lawyer's ethics is a possibility, depending on the circumstances.

As for not getting caught, what about the employer's reporting requirement? Fraud is a very nasty prospect and does not have a three-year statute.

How can something that is impossible taint the IRA just because some incorrect words appeared in the paperwork? A paperwork correction to reflect what happened, and the only thing that could have happened, is not a problem. The IRA might have a problem if it were somehow actually operated (meaning distributions, mainly) in a way that would have been improper for an IRA of the husband.

You might get some traction on a cut off under VCP, but SCP guidance does not support a cut off. SCP guidance is not the final answer under SCP, but we don't have much information about how tolerant the IRS is about deviation from the SCP guidance

ERISA and the tax code wouldn't like it and I don't think the circumstances fit the IRS concept of mistake of fact, which is a suggestion you will get. For income tax purposes I do not think the payees can walk away from the income -- this goes beyond constructive receipt to actual receipt. If the owners want to plow their pay back into the Company, they can do it, but on an after tax basis. They can give themselves a pay cut prospectively, but beware the rules under section 409A if they think they are deferring the pay to better times. I don't think any competent ERISA fiduciary who knows the facts as you tell them will part with the contribution money.

Mike Preston: True if (a) the company has no directors or executives that are not expected to function as fiduciaries and all directors and executives are aware that they have full fiduciary responsibility and attend to it, or (b) there are never assertions of substandard fiduciary performance. I suspect that a lot of (b) is responsible for your position. And to quibble with your wording, I agree that the plans do not suffer. The potential victims are the directors or executives who do not understand that they are fiduciaries with potential personal liability and fail to pay attention to the responsibilities that they fail to understand that they have. The corporate entity will not shield them from personal liability.

The total contribution is the responsibility of the Board. The allocation is the responsibility of the plan document. The Board can effectively determine the allocation by its control over plan terms (e.g. amendment), but otherwise should not get involved with the actual allocation of the contribution. It should limit its express action to the contribution. This thinking is driven in large part by the presumption that the company is not so stupid or ill-advised as to have the company be plan administrator. If you are looking for a legal reason, specific determination of allocation is an administrative/fiduciary function. Determination of the discretionary contribution is not a fiduciary function. The board should not want to be a fiduciary. If the board dabbles in fiduciary matters, the board will be a fiduciary and will not know how far the responsibility and potential liability goes once the fiduciary status is unconsciously established.