QDROphile

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?

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.