QDROphile

Does No #1 mean (a) they cannot roll over or (b) they can roll over but it need not be an inherited IRA?

Is the question about lack of documentation or actual ineligible use of loan proceeds?

Rev. Rul. 2002-45

There are break-in-service rules for eligibility (rule of parity, if that rings a bell) that use 5 years as part of the standard for determining whether or not pre-break service will be counted after a break, but those rules are trumped if the participant accrued a vested benefit before termination. The vesting rules are different, but use a five-year break standard for counting pre-break serivce.

Adding an affilaite is probably involves a plan amendment. This would be a retroactive plan amendment that should have no trouble in VCP unless there are some strange circumstances, such as an extraordinary number of HCEs in the affiliate.

"no party-in-interest transactions as no one in either family will reside there" There is more to the prohibited transaction rules than that. Any time a family member is involved in the transaction, the analysis is clouded and Departmnet of Labor opinions only proide warnings rather than resolution. All of the elements of the transaction have to be evaluated, including the financing that is casually mentioned. Also, institutional trustees often have requirements or restrictions relating to the acquisition of real property. Nothing has been indicated about property management If the investment is just too good to pass up, some serious experienced help is warranted. This is not the sort of thing that a qualified plan is supposed to do; careful navigation is required.

Yes, there is a lot of chemistry and biology involved in "smells like a duck." Then there is the administrative question about whether or not the trustee is licensed to hunt ducks.

I disagree with the suggestions and implications in the next preceding post relating to ERISA section 404© except for the need to look into.

I had in mind section 72(d)(2), but that may not fit your circumstances. I did not check the rulings you cited for context. Section 72(d) is applicable generally to qualified plans.

You would need a lot more facts to decide.

Post-1986 non-Roth after-tax contributions are treated as a separate contract under section 72. Any distribution of the after-tax amount will include a pro-rata share of earnings and the earnings are taxable.

Unembellished constructive comments - If it turns out that the trustee has no discretionalry authority under plan terms with respect to purchase or sale of plan assets, ERISA 404(a) says that the duty of a fuduciary to follow plan terms extends only to the extent that plan terms are consistent with Titles I and IV of ERISA. The trustee could determine that implementing a PT or allowing a PT to remain uncorrected is not consistent, thereby liberating the trustee from the restrictive plan terms. This should be an opportunity for the trustee to examine the plan terms in a bigger picture and make sure that the terms proved the authority and powers to allow the trustee to act properly with respect to the respojnsibilites and potential liabilities that the terms impose on the trustee. Among other things, it is uncomfortable not to follow plan terms if justified under ERISA section 404(a).

"I've been reading legal-eze until I'm almost nauseated," So puke. What do the plan and trust documents say? And at a minimum you should read ERISA reg. section 404c-1(d), even if it makes you puke some more.

Be careful about what the plan says about distributions. The plan might be silent about the specific circumstances, such as the ability to elect to have the loan distributed, but what would you do if the plan says that an elective distribution must be in cash or that distributions will be charged pro-rata to the investment funds? What is the plan adminstrator going to do to the admin company?

A VCP filing to add hardship provisions retroactively will probably be successful with respect to what an appropriate hardship provision would have allowed. Some thinking should be done about the tenure of the vesting provision. Similarly, retroactive vesting would probably be allowed, but some similar thinking about exactly what the amendment would be is appropriate. Better late than never for thinking what the plan terms should be.

It can be a point of negotiation in the acquisition transaction. Sounds like it is too late for this transaction.

That depends on the relationship to the receivables. If the receivables are part of the proceeds of the sale of the business (deferred and contigent), no. If he kept the accounts receivable, sold the rest of the business, and remains "in business" to collect the receivabless, maybe so. To be subject to deferral, the income must be income from self employment or compensation by an employer, not income from sale or liquidation of an asset, to be subject to deferral.

Something so important to your business model that involves questions under several complex regulatory schemes would be worth obtaining competent professional advice. If you limited yourself to the second question, it would be reasonable to expect an answer in this forum, and that answer is that if the plans are not subject to ERISA, plan funds and operations are not subject to ERISA. You recognized that ERISA preemption does not apply, either

Among the thousands of types of securities that fit your description, included publically traded securities, there are some arrangements that could be problematic, others would not. I could imagine some prohibited transaction problems, but if you let me choose my facts I can always create problems.

Why not section 72(t)(2)(A)(ii)?

The plan should say that restoration will be done based on the balance at time of forfetire, withou adjustment for earnings.

The record keeper usually is expected to keep track of the vesting.

jpod: Your idea is that the for-profit adopted its own deferred compensation plan that has the same terms and the same document as the nonprofit's 457(b) plan and the nonprofit's 457(b) plan did not cover the for-profit's employees. That is conceptually possible if supported by the documentation. I doubt that the 457(b) plan has distribution provisions that are 409A compliant, but it might. I think it would have to be abundantly clear in the documentation the two employers were overlapping on the same plan document, which is almost certainly not so. But I like the idea.

A nonprofit organization cannot have deferred compensation based on compliance with section 409A alone. It has to fit 401(a), 403(b), 415(m)(if governmental), 457(b) or 457(f), or so thinks the IRS.

Doesn't every off-the-shelf document come with a disclaimer and a statement that the plan sponsor should seek legal advice?