QDROphile

I don't think you get to blow off the possibilites under EPCRS that readily. See Rev. Proc. 2013-12 sections 6.09(2) and 8.04, Example 5.

Where is the 403(b) plan in all of this? RMDs are a requirement for the plan, too I think Rev. Proc. 2013-12 offers some options.

You might check to see if there is a requirement for an amount to be distributable before it can be "rolled over" internally. Such a requirement would be a limiting factor, especially with respect to amounts that are not elective deferrals.

How are distributions from pooled account plans any different from distributions from individual account plans? There is always an allocation of taxable and nontaxable amounts in a distribution. The notice addresses destinations, not sources.

I would not act based on that difference. The operative words are "a person in whom F has an interest which may affect the exercise of F's best judgment as a fiduciary." That aligns with a lot of the gut discomfort expressed above because it also describes a brother.

No, but the arrangement can essentially be accomplished by plan-to-plan transfer, probably without adverse effect on the section 410(b)(6) transition relief. I think service follows the participant to the new plan in a transfer. If you are inexperienced, someone else needs to be advising about the arrangements. Transfers are often misunderstood.

That would not be simple, would it?

See IRC section 410.

What frustrates me is that there should be PTEs for other arrangements because, as you have observed, there is no harm. That is why we have the PTEs that we have -- no evil under the prescribed circumstances. What frightens me is that there may be some PTE or other analysis or guidanance that says there is no PT sanction in other similar circumstances and I just can't find it. Consequently my clients are schmucks who end up being restricted because they have the "benefit" of my advice while everyone else is having a good time and getting discounts.

CPTE 93-33 and CPTE 97-11 There are things other than fees that provide "consideration." Fees tend to provide more vivid illustrations.

IRC section 4975©(1)(E). If the account minimum is $500,000 and the $100,000 in the self-directed plan account is necessary to achieve the minimum, the plan assets are being used for the person benefit of the participant (who is a fiduciary under the IRC even though not under ERISA) to the extent the account is used for assets that are not the plan assets. This is more obvious when the deal is a fee structure based on assets under management. The investment adviser has a fee scale that steps down as assets increase: 1.0 % for first $500,000, 0.75% for next $500,000, 0.5% for amounts in excess of $1 million. If the manager is willing to aggregate all sources, including the plan assets, then the plan assets may be contributing to acheiving the next step in the fee structure, which reduces the blended rate for all of the assets, including assets that are not in the plan (personal to the participant). If you are skeptical because there is "no harm" to getting a better price than the plan account could have achieved on its own, consider that there are two published PTEs on the subject, but limited to brokers and banks, not the average schmo. Prohibited transactions do not require harm. Perhaps your situation with the brokerage account fits into one of the PTEs.

All good points. Perhaps there is something for which they are seeking a private letter ruling, but I cannot imagine what that might be.

What you are describing is a determination letter.

prohibited transaction

The real question to ask is what the employer wants to do. If the employer wants to escape the TPA, a new plan is unnecessary. If the employer wants to distribute benefits, the the 12-month rule under the 401(k) restrictions on distributions is relevant, although perhaps not very artfully articulated.

The sole proprietor is adopting a plan and immedately merging the corporate plan into it. The new plan has exactly the same terms as the corporate plan, saving documentation. Does not have to be done that way, but you wanted a statutory reference for something that gets you there. I think you may not be able to find reliable authority for a conceptually more simple change of sponsors, but the IRS infomally accepts it.

IRC section 414(l).

I would be wary about describing the fee that way. There can be no penalty for maintaining an account under the plan after termination of employment. To the extent that the employer covers a cost that can properly be paid by the plan and allocated to accounts on some basis, the employer can cover the cost for employees and not for former employees, effectively levying a charge on accounts of former employees. See Rev. Rul. 2004-10 (I think).

The plan should be amended in connection with the termination to specify the effective date in terms of the last pay period that is subject to elective deferrals. Depending on the nature of the transaction, the last pay period may end the day before or day of the closing and it may be a short pay period -- no prorating necessary and hope that the hidebound payroll provider can at least cope with that. To minimize lost opportunity, you need to understand the corporate aspects of the deal and work around them.

What does the plan say about amendment? It is probably something unhelpful like "the Employer may amend ... " if so, then it is a matter of "corporate" governance concerning the requirements and formalities for the Employer to act in the matter. Those formalities will be determined by such things as the partnership agreement, at which point you are probably getting very close to "it is none of your damn business" and you probably need to rely on the lawyers to know their own governance rules. Or prove you know better. Or have a well-drafted plan document that specifies (ha!). Instead of pursuing the issue and getting a black eye one way or another, disclaim responsibility and get acknowledgement.

It is curious that the plan is going to be terminated rather than frozen. Does the employer have enough cash to buy all the stock at one time?

According to Rev. Proc. 2013-12, the VFCP calculator is is available only if other reaonsoable methods are not. only

And investment gains are subject to ordinary income tax rates, not capital gains rates. There is a real question about tax efficiency. You should do some modeling based on tax rates (including effect of deductions), expected returns, and time frame. The after-tax scenario is probably not that appealing. All you are getting is tax deferral on investment returns (at a rate cost) and you are giving up deductions. Ask yourself why the design is not seen or promoted.

I am no gentleman, but (1) there has been no specific text in the post to evaluate whether an interpretation is needed or the text is unambiguous, and (2) an interpretation of text that you partially supply and partially imply would not be unreasonable if it concluded that deferrals are permitted for compensation that has a pay day on or after the first day of the month in question.

If the document states the terms, then there is no interpretation. But if the document does not, how would the adminstrator decide how to act other than by interpreting plan terms (which have proven to fall short in the detail)? You seem to be saying that not matter what the document says or does not say, the compensation with the first pay day in the quarter is subject to deferral. I do not think that is the only compliant answer.