QDROphile

Unless it is the client sponsor who has the goal of allowing it, then "the plan says so" is a good enough answer and the proponent will put in the position of proving that the plan cannot say so. No other explanation is needed. ERISA is such a wonderful shield against belligerents that it can also be used as a weapon. The client sponsor should be easy to convince that it is not a good goal for the plan.

If you want to get away from the ERISA requirement for a trust to hold plan assets and the fiduciary responsibility for the record keeping that goes along with investments and compliance, you will have to depart from 401(a) and 401(k) and migrate to something like a SIMPLE. A SIMPLE has less flexibility and lower contribution limits, but it minimizes employer involvement and cost.

I now see in the title that is was an asset purchase. Unless there is something in the terms of the acquisition transaction or the relationship of the buyer and seller, the new Company A plan should be unaffected by the transaction and the Company B plan. Loan rollovers are legally permitted and depend on the loan, distribution, and rollover terms of the repsective plans.

One of the costs to Company A of business acquisition is professional help with repect to benefit plans. The questions begin before closing and before the decision to terminate the Company B plan. The desire of Company A to have a 401(k) plan should have been considered and the route to the goal mapped out before any transactions, including termination of Company B plan were carried out. All of your questions should have been answered already. It is just a matter of finding those who know to satisfy your curiosity. Those who know would also have information that must be gained by anyone who reads your messsage and might try to answer your questions, starting with the nature of the transaction (stock sale or asset sale?), the timing of the termination of the 401(k) plan, and certain critical terms of the Company A plan and the Company B plan with repsect to loans and rollovers. Are you sure that the acquisition did not occur on April 1?

Foreclosure must raise its ugly head in a more promimate manner. Late mortgage payments are not enough. Even a reminder that failure to make or catch up payments can result in a foreclosure is not enough in my book, but I imagine that others may differ. I think the f word has to be used with some seriousness rather than just formality.

The plan fiduciary should be very interested in all of this because it is a big red flag for failure of the fiduciary to understand and manage the relationships and services among the service providers and how required plan functions are carried out. The fiduciary is responsible and needs to get down to the fundamentals and revise the contracts with the providers if necessary. I realize that most plan fiduciaries do not really understand the arrangements that they buy into and are relying on the providers to do right. That is substandard fiduciary behavior and naive because the providers are going to protect themselves and their business model is something other than meeting a plan's needs.

You have to take into consideration that a lot of jobs for children, such as babysitting, lawn mowing, etc. are under the table for tax purposes. If the child is going to base the Roth IRA on the income, the income will have to be reported, probably as self-employment income. That may not matter for income tax purposes, but it will involve SECA taxes.

If the plna itself speaks to amendment procedure in detail, then terms of the plan must be followed to that level of detail. Most prototypes simply say that the employer may amend the plan. That is not very restrictive and the lack of detailed guidance is what causes questions, especially for those not familiar with corporate and agency law.

Although the premium payment arrangement iself is not an ERISA plan that would trigger filing, the inclusion of the supplmental policies demonstrates a level of employment involvement that would cause the plans to be employer plans as opposed to mere employer facilitation of payment. Or at least that would be the result before the Department of Labor started lying about the standard after the 403(b) regluations came out.

MIke Preston: First, the word "IF" and second, the absence of any statement that the separate rate groups are part of the plan document and tied to the allocation provisions. Everyone has become so infatuated with rate group testing as the answer to all impediments to abouse that they sometimes forget the basics.

The plan has a responsibility not to include a required distribution amount in a direct rollover.

Based on ignorance of the mysteries of testing, I would want to see plan terms with respect to allocation that said that different amounts could be allocated to different rate groups. To me, allocations are one thing and must be specified in the plan. Whether or not those allocations pass testing is another matter.

Agree. I depends on what the resolution says.

I try to focus on what the law is and how to comply with it. There is no reason to tax aspects of qualified plan benefits; the law is all artifice and policy. Those who want the benefits, especially if they want to maximize them, have to take into account that is all rules and no logic except some internal logic sometimes. They may also take into account that the rules are complex and enforcement is mimimal. Compliance can be a bother and I tend toward cynicism rather than horror.

With respect to "make sure" there is a special rule that treats all K-1 compensation as being received as of the last day of the year. That allows K-1 partners to have elective deferrals determined and contributed after the end of the year with respect to all compensation for the year, unlike W-2 employees. As we know, the elections still have to be made before the end of the year. Partners in businesses that have unpredictable results can "make sure" they stay within the limits by having the contributions determined after the end of the year after compensation is determined. Partners who have the luxury of different circumstances may "make sure" as appropriate under the circumstances. I don't think mistake of fact cuts it, but that is not the only avenue of return of the improper contributions to the employer. I am more tolerant of returning mistaken contributions to the employer under Rev. Proc. 2013-12 than a lot of the contributors to the message boards.

Greed: "self-employed individuals who take advantage of this opportunity to defer amounts during the year must make sure that the amount contributed during the year will not exceed the limits" What part of "make sure" failed here? If it is not a section 415 failure, it is still an operational failure: Improper contributions were made to the plan.

If amounts in excess of the 415 limit got into the plan, the plan has an operational failure. I don't think mistake of fact works, at least in the IRS view. This was not a mathematical error. Greed + rectal cranial inversion is not a mistake of fact. The idea that the correction is not a taxable event for the particpant has merit, but the anaylysis needs to be done under Rev. Proc. 2013-12.

For post-1986 after tax accounts, any distribution must include a proportionate share of related earnings. If the entire after-tax amount is distributed, the entire amount of related earnings must be distributed. Your analysis then shifts to the new rollover guidance to get you where you want to go. As always, plan terms matter.

One aspect of disguised service-based exclusion should be examined empirically. Look at the excluded group. Does it have a preponderance of limited service employees or some some odd pattern of service? How does that fit with the character of the work that is being performed? For example, on-call employees are often limited- service employees, but significant variations can occur (some may be effectively full time). But the character of their job is different from an employee who is not on-call, even though the actual work that is done by both categories of employee is the same. (e.g. unloading shipments). The IRS has respected the on-call distinction, but I think facts and circumstances will have a lot to do with it. For example, if on-call employees are not eligible for other benefits, such as health benefits, it helps. You can be assured that the scrutiny is higher, so you had better be able to cocme up with a good story and demonstration. Whether or not someone is a full time student is not relevant to character of employment unless the employer is the school or there is some other strange circumstance. If student status empirically coordinates with limited service, I think it will be a tough sell.

I thought the "loan interest is taxed twice" misconception had been laid to rest. Don't bother arguing. I am taking the same position about debate as Stephen Jay Gould did with evolution deniers. You can talk among yourselves.

I thought the "loan interest is taxed twice" misconception had been laid to rest. Don't bother arguing. I am taking the same position about debate as Stephen Jay Gould did with evolution deniers. You can talk among yourselves.

At some point an interest rate would be high enough to inspire the IRS to assert that the arrangement provided for disguised contributions. Goldilocks is a good role model and commercial lending rates (although there are no similar loans on the market -- some old posts go into this in detail) are the standard. The IRS is more likely to go after individual or small professional organization plans with respect to loan hijinks.

Welcome to the compliance club. It is very popular and appreciated, especially in an environment of noncompliance.

The plan document sucks. Ideally it would say that a participant may specify that all or a portion of a lump sum distribution will be directly rolled over. It has nothing to do with elective or nonelective accounts. The plan provides for lump sum distributions. To me, that means all account balances are distributed at once in "a lump sum." He cannot get a distribution of one source account and leave the other source account in the plan. Look at your document very closely again. If it does not prevent an interpretation that would be in line with the ideal plan terms, then interpret the plan that way. The service provider needs to be on board to handle payment of one portion of the lump sum distribution as a direct rollover and the other portion as a taxable distribution

Why associate "typically" with "bad idea"? A safe habor match with typically be made to the plan with the CODA (and therefore not typically made to another plan). There is less affinity between a nonelective contribution and a CODA, so when a safe harbor contribution is made to another plan, it will "typically" be a nonelective contribution. Sponsors with plans that have nonelective contributions may simply adjust them if necessary and use them as the safe harbor contribution to go with the CODA in the separate CODA plan. Sponsors "typically" do not have matches in a plan other than the CODA that is matched, so when they adjust the pre-existing match (if necessary) to achieve the safe harbor, the match stays in the same plan just as the nonelective safe harbor contribution stays in the same plan as before safe harbor. I read "typically" as empirical rather than qualitative. It is more about the statistical affinity of match and CODA than issues. But it never hurts to ask.