QDROphile

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.

If the the plan had set things up correctly (cut off my legs and call me Shorty if it did) the plan would have an assignement of pay and would be able to instruct the employer to deduct amounts due and overdue at any time the employee is paid. The plan may have other remedies that efectively allow the plan to grab more than an installment's worth of dollars from a payment. As it is, the repayment arrangement is a contract that must be respected or renegotiated, and I doubt the the employer has anything to do with extraordinary actions. If the employer is the plan administrator or loan administrator, the employer would have the rights of the administrator, but in its capacity as administrator, not employer. The employer, as employer, simply follows the terms of the payroll deduction authorization. The employee can authorize special deductions for the sake of avoiding consequences of default.

There are no unspent FSA funds. There may be a difference between salary reduction amounts and the amounts of benefits paid. That difference is reflected in the general assets of the employer. For a healthcare FSA, the difference could be positive or negative.

4. Doesn't this situation point out that the loan terms are bogus? If 2% was a legitimate rate, 1% is not, so you can't amend to legitimize 1%. If 1% is a legitmate rarte, then 2% is not and the loan terms are bad.

One issue for consideration is granting of past service credit. That is typically a matter within the employer's authority. That point should have been negotiated as part of the terms of the purchase. Questions relating to rollover of plan loans are probably within the plan administrator's authority, not the employer's authority.

This sounds exactly like the legitimate reasons and circumstances for forbidding mid-year amendment. However, you might think about the rules relating to mid-year cessation of safe-harbor contributions and if compliance with those rules for the spin-off might work.

I have not enough empirical or anecdotal information to answer, but I don't think it matters.

Whose interests do you represent? From the perspective of the manager, who would not like to conclude that a prohibited transaction occurred, I think someone who has appropriate skills and knowlege should analyze the events. From the sketchy facts presented, I can narrate to a conclusion that the IRA simply distributed Stock A to the manager. The distribution is taxable, and may involve an early distribution penalty, but there is no prohibited transaction.

TPAs should not do anything extraordinary except at the direction of the plan administrator. As for what was done, how would you have corrected an excess distribution? Guidance under EPCRS says to request return of the excess.

Be careful about your plan for rollovers, Rollovers can occur only in connection with a distribution. The change of employment to the for-profit subsidiary may not be an event that enables distribution.

IRC section 3405© plus 402(c )(11) via 402(f)(2). You have to connect the dots. http://www.irs.gov/Individuals/International-Taxpayers/Pensions-and-Annuity-Withholding

The plan provision should be reconsidered. I advise clients that it creates hardship on the executives not to have the deferred comp benefit in play in a divorce. Perhaps the decision about assignement provision was not given enough thought. It sounds good just to say no without full consideration and understanding. Also, before the revenue rulings in 2002 and 2004, there was a lot of uncertainty about allowing a split in a divorce, so the habit was to forbid. Some minds never opened up.

The question was not, "did the plan allow a second loan." Is it proper under the standards for issuing loans to loan funds to an employee on unpaid leave? Hint: A loan is not proper if the fiduciary does not have a reasonable expectation of repayment. One fact is helpful. The default did not occur before the secon loan origination. I think some unusual analysis is required to a justify a loan during an unpaid leave. A commercial lender would treat a loan to someone without current compensation as an unusual case. But I am not responding to your question, so don't feel as though you have to enage on this issue.

Any question about the propriety of originating a loan during the leave?

A qualified plan should allow a QDRO to be amended or superseded. This assumes pay status has not changed, state law allows, and documentation is competent.

You are assuming that any thought went into the choice of into the definition. If the plan is on a pre-approved document, my bet is unconsciouslness. Still, the words are there.

If you do not get a convincing answer to your question based on authority, the question becomes, "How does the plan administrator (or whoever has authority to interpret plan terms) interpret the plan provisions concerning compensation relating to options?" The express exclusion in the plan should inform the interpretation.

Who are the knaves in charge who did not elect to defer before the effective date, or elected a disproportionately smaller amount, and will go all-in after? And who are the chumps who overweighted early?

Whether or not a distribution is requested, a competent plan document would provide for an offset distribution after any cure period has expired. The balance of the loan at the time of the offset should be reported as a distribution on Form 1099. Other amounts will reported if other distributions occur in the same year.

Agree with rcline on paragraph 2. As a practical matter, Company B will probably not maintain the plan and will not want to maintain the loans if it maintains the plans, but legally the loans could be maintained in the B plan. Administration would be a pain. Company A could agree to a payroll feed to the B plan, but no one is going to go to such an effort.

Agree with mbozek, That is one of the elements that makes setting up the grantor trust account as a corpartae account of the employer (as far as the fund company is concened) feasible for tax purposes. There are some state statutes that recognize grantor tursts as separate for certain corporate purposes to allow, among other odd things, grantor trusts to hold shares of company stock (usually for nonqualified deferred compensation plans). In those states, there is no such thing as treasury stock and were it not for the special separate identity, the stock would revert to authorized but unissued shares.

Corporate account; trustee is the only individual authorized to provide instructions; the account effectively becomes the custodial account for the trustee. That is how it looks to the provider, except that the provider does not know anything about the trust. This is a way to use typical provider products to achieve the investment arrangements for the grantor trust. It would be nice to be able to register the authorized individual by name with ", Trustee" after the name, but that might throw off the provider. The trust agreement will describe the legal relationships and operaton of the trust. This arragnement can work. I do not recommend it. I am in jpod's camp about thei worth of grantor trusts. But if one just has to have a grantor trust, then get an institutional trustee that has a deferred compensation grantor trust product.