QDROphile

The plan document may have terms that specify how to deal with an excess, based on provisions of the tax code. EPCRS guidance says that if the code provides a correction method, then that method applies. The EPCRS guidance also says that a failure cannot be corrected by an action that would cause another failure. Failing to follow plan terms is an operational failure. What you might find is that the correction provisions speak to corrections after the end of the year and your question will become whether or not you can do something else if you find the error and correct before the end of the year.

You are going to have to explain how a partner has 1099 income rather than K-1 income before the question even gets started. And the details will be critical.

If you want to add complexity to your considerations, check Field Assistance Bulletin 2008-1 wonder how that figures in.

A trust is the owner of plan assets. Generally a trust, or trustee, has its own EIN. A change in plan sponsor would not change the EIN of the trust. When the corporation was the sponsor, the corporation could not have been the trustee. It is possible that the individual sponsor is the trustee now.

Mr. Simmons is probably either the hospital's or the doc's lawyer. In either case he won't be able to rely on the determination by another person, at least not without disclaimer. I have been involved in situations with elements similar to what you describe. I advised that separate arrangements would fail if challenged and the IRS tends to scrutinize physicians with good reason. The nonqualifed options tend to be unacceptable, as you suggest. A 457(f) arrangement will not provide the long-term tax deferral that is desired. Generally, the greed arrangements are covered by the common law rule of "tough" and there are no clever substitutes that satisfy the greed standards. There can be issues other than payroll and benefits related to these sketchy arrangements. The assumption is that the employer is not a government entity or instrumentality.

Whenever faced with a controlled group or affiliated service group question, I always ask, "What undesired or abusive practice are/were physicians engaged in that resulted in the current law to prevent the abuse/practice?" Advising under the circumstances is difficult -- both the judgment calls and communicating an unwelcome conclusion. It can get especially difficult if you firmly believe in an outcome but are asked to assist with an arrangement that is improper under that outcome. In a slightly different vein, I am unaware that the lawyers for Microsoft suffered any consequences for bad plan drafting relating to eligibility of what were determined to be employees, notwithstanding contracts that said otherwise.

Because it is not good faith compliance with the SCP guidance to disregard a pretty clear interpretation as applied to the circumstances and the IRS is sensitive to disguised contributions.

What more do you need as long as there is nothing contrary? Also consider that you and the participant would want to reduce the excess net of negative earnings, so you should be consistent and reduce the account by the positive earnings on the excess.

"does a recordkeeper allow" For any respectable plan administrator,there's the rub, innit?

Back to the original Department of Labor position, except that the Department said that it was impermissible to allocate the charge to the participant's account. The Department's recant only said that is was permissible to allocate to the participant. It did not say that treating the expense as a general expense of administration was improper.

The IRS might assert that the provision effectively causes a violation of section 410(a). Section 410(a) involves standards for participation in the plan, but one cannot participate effectively in the plan if one cannot accrue a benefit. Any exclusion based on minimum service is going to rub the wrong way.

I support sticking with the interpretation of the domestic relations orders received as a QDRO. The plan is already deep into that position. The efforts should now be directed at administering the QDRO in accordance with its terms, whatever the plan administrator interpreted them to be. If the AP was shorted $2000, then fix it. Following documentation formalities as much as possible in the process would be both good training and good for defense.

This is a demonstration of the Department of Labor's zeal exceeding its intelligence and knowledge of the law.

I am not so sure about past compliance with section 457(b) (1), but that concern suggests that a spin off of the B portion of the plan should include former B employees to emphasize that B was maintaining the plan for its employees.. Also, for feasibility and efficiency of administration, assets are usually good; many service providers have minimum asset requirements or use assets as a factor in determining fees. No comment about state law, except that state law governs because there is no preemption and government entities are entities of limited powers.

Is B eligible and authorized to maintain a governmental 457(b) plan? Apologies if the question seems to be an insult to your analysis, but fundamentals are sometimes overlooked. The question has both a federal law and a state law aspect.

You will need a heap of advice about what life will be like after implementation in order to decide if this is the best course to follow, and that advice will involve understanding of your circumstances. You may get encouragement or discouragement here, but you will not be able to make a good decision about proceeding from the comments. You probably already know that the most common pattern is to freeze everyone in the DB plan and total migration to the DC Plan. There are reasons for that.

The new plan does not necessarily have a problem based on what you report. Neitehr does the transferor plan. A loan program is not necessary to maintain transferred loans, but some refinements to the new plan's terms would be appropriate. Opinions differ about maintaining Roth accounts in a plan when Roth contributions are not allowed. The documentation of the transfer may have been rough and in need of refinement, but don't jump to the conclusion that a disqualifying violation has occurred.

BG5150: I have never had a client follow that good advice.

There is a difference between a record keeper not having any responsibility and a record keeper doing what it is told to do if given specific instructions about what to do by the plan administrator. When the plan administrator figures out what to do under the circumstances, then it should direct the reord keeper what to do (if the action is within the reocord keeper's functions). By refusing to follow the instructions of the plan administrator with respect to a matter within the plan administrator's authority, the record keeper is making itself a fiduciary and then it will have responsibility and potential liability.

You need to know what documentation went along with the change. The plan could have merged into the corporate office plan or the plan could have continued with a different sponsor, or somethng else. All would have different reporting requirements, but none seem to allow a final Form 5500 as of the end of 2013.

What about helping clients achieve legitimate desired goals within acceptable tolerances of risk and uncertainty? Not batting an eyelash is rather conclusive (rather than explanatory) with respect to a controversial subject, but it communicates a judgment about risk.

Contributions are tested based on the plan year. An allocated mid-year contribution contribution could fail because of distortions in the remainder of the year, as you have illustrated. You might consider a contribution mid year that is not allocated until the end of the year based on compensationfor the year, but that allocation would not correspond to the employer wish to provide a particular contribution to the employees as of the closing because of the distortions occurring in the year after the closing.

Generally when you merge plans, the survivor inherits the historical problems.

Ater reading the chart, your next question may be "Can a qualified plan have a Designated Roth Account if it does not allow designated Roth contributions?" If you follow the link in the chart you will learn this about Deisgnated Roth Accounts: "A designated Roth account is a separate account in a 401(k), 403(b) or governmental 457(b) plan that holds designated Roth contributions. Designated Roth contributions are elective deferrals that the participant elects to include in gross income. The plan must keep separate accounting records for all contributions, gains and losses in the designated Roth account." Not a perfectly clear answer. Are the designated Roth contributions that are held by the plan the plan's own contributions or is it enough that the rollover is designated Roth contributions of another plan? I think a plan can have a designated Roth account solely for the purpose of holding Roth rollovers, but I am not sure and the IRS chart and its links do not directly address the question.

The plan reports a distribution on Form 1099-R and the trust records show no Kruggerands or silver dollars after the distribution. How the plan arrives at a value to report for the tangible assets is a different question, which you seem to anticipate by mentioning an appraisal. I assume the Kruggerands are grandfathered so they are legal assets.