QDROphile

Let's not lose the big picture here. Disclosing a payroll period match without a true up IS A BIG DEAL. How many times have I received a call from an HR manager who had a footprint on his or her buttocks from a kick from a BSD executive who figured out that he or she did not get the maximum match despite a maiximum deferral under the plan? If the disclosure is not in the SPD (and the election form and every other communication about the match) someone will get shortchanged and will be justifiably angry and possibly will have a legitimate claim. So don't even talk about the deadline for publisheing the SPD or SMM. Get out there and disclose OR do the right thing and reinstate the true-up. By the way, you should check carefully to make sure you don't have a document problem. A pay period match without a true up has to be very carefully worded in the plan document.

Turning money over to the state should be considered as a last resort when the plan is terminating and the employer is dissolving and all reasonable efforts have been made both to locate the participant and establish an IRA for the participant..

This discussion has become far too chaotic. It appears that the bond is a fidleity bond for the benefit of the plan. The insured is State Street, as trustee of the plan and legal owner of the assets of the plan; that makes the plan insured. Some fiduciary has the obligation to make sure that the plan has the appropriate bond coverage. the fiduciary might be stat stree or someone else. State Street does not have to be bonded because it is a bank or trust company. All fiduciaries and those who handle plan funds must be bonded, Evidently the plan sponsor is a fiduciary, whidh is a common bad practice. The plan sponsor is bonded. Employees of the plan sponsor are fiduciaires or handle plan funds. Those people are probably bonded, but the terms should be examined to make sure. If the plan sponsor is a fiduciary and a corporation, all of the directors are fiduciaries (or at least the Department of Labor will say so) and the bond should cover them, but check the terms. It is appropriate for State Stree to use plan funds to bond everyone as described. Anyone with questions should start over from this context, including a criticism or correction of the description.

You might take a look at the Field Assistance Bulletin concerning demutualization proceeds for some applicable principles.

Now you have to wonder if the use of plan assets to purchase protection for the employer sponsor is a permissible use of plan assets.

Expect error. Attention to this matter is rare until there is a real question. The plan terms and plan operation problaby will not match or there will be no record of application of plan terms. The regulations speak to circumstances in which the employer does not actually record hours.

What do you mean by universal coverage? See IRC section 403(b) (12), usually referred to as universal availability. Note that this is not ERISA.

Possible economies or critical mass for certain services such as fiduciary and investment management. I don't favor MEPS of truly unrelated employers, MY point was more that that they are feasible and not to be feared. The question was "Can we have a MEP?"

What requirement is there for a binding factor other than a desire to particpate?

For defined contribution plans and participants who are not owners, the first distribution calendar year (a calendar year in which a minimum distribution is required is a distribution calendar year) is the calendar year that is the later of the calendar year in which the particpant attains age 70 1/2 or the calendar year in which the participant retires. Treas. Reg. section 1.409(a)(9)-5(b). An elligible rollover distribution is any distribution, subject to certain exceptions including distributions "to the extent required under section 401(a)(9)." IRC section 402©(4)(B). It is true that any distribution in a distribution calendar year is to be first attributed to the minimum amount required to be distributed for the year, even if the distribution is before the required distribution date for that distribution calendar year. But if no distribution is required for the year because the distribution is before the first distribution calendar year, no distribution is required under section 401(a)(9) and the distribution may be rolled over, subject to the other exceptions. I cannot answer your next question: If a particpant is age 72 and receives an in-service distribution during the year, how does the plan know that the particpant will not retire later the same year, making the year the first distribution calendar year and the first dollars of distribution attributable to the required distribution amount and therfore not rollable? The answer to that question may validate your statement that employment is not relevant when a certain age is attained..

Correction of citation: Treas. Reg. 1.401(k)-1(d)(2).

Please double check the point about being subject to RMD requirements based on age without regard for employment.

This analysis is similar to the analysis under that allows termination of a plan immeidately before a stock acquisition and not have the plan of the buyer be a successor plan. The target company controlled group (a one company controlled group) is not the same employer as the post-acquisition controlled group (a two company controlled group). The plan of the post-acquision controlled group is not a sucessor to the plan of the target company controlled group. This is an imperfect analysis, but a practical one that the IRS believes. Your circumstances work backwards. The post-acquistion controlled group that includes the plan sponsor is a different employer than the post-acquisition controlled group that includes the participationg employer (a one-company controlled group). If the participating employer no longer maintains the plan and is not in a controlled group that maintians the plan the employees have a severance from employment. Treas. Reg. 1.401(k)(d)(2). They cannot be required to take a distribution if the account balances are greater than the mandatory distribution amount. Confirm that the particpating employer is not eligible to particpate in the plan, which is probably tha case because most plans allow only members of the sponsor's controlled group to participate.

A little thought exercise: What if the employer allowed the employee to start vacation on June 10 and terminate at the end of the vacation? Same compensation, although I imagine that the vacation would have been paid as regular payroll while payment for accrued but unused vacation may have been a special check.

A multiple employer plan is feasible and not that much trouble. Some testing and reporting is done employer-by-employer, so some ecomomies of scale are lost and the serivce providers have to know what they are doing. The plan and trust documents will have to be amended. Spin off works, too, and will give each employer complete freedom and responsibility with respect to their plans.

How about an incentive to roll over directly? How about minimizing ability to try to cheat on taxes? Why do you think we have withholding anyway? We don't want the wage slaves to have too much opportunity cheat, only the masters and capitalists get that privilege.

There may be more elegant solutions, but if you want a step-by-step approach that is essentially self-explanatory, you would spin off the participating employer portion of the plan and terminate it. Except for the amendment to spin off and terminate, the particpating employer should not need additional plan documents. The trustee might insist on a separate trust document for the spun-off plan. A determination letter would be a good idea. It is a shame to terminate the spun-off plan. Someone should reconsider.

Next time (including the amendment suggested by BG5150) adopt terms that allow the plan aministrator to determine the effective date based on administrative practicality.

I don't think you can transfer between 403(b) and 401(k) plans. If you could, the you should also be able to merge.

I stand by my comments from the perspective of a plan adminstrator and what was in the post. As an ERISA attorney, you understand that the primary function of an advisor is to solve client problems, not to come up with accademic answers. The plan admnistrator has a problem and a standard. The problem is to determine an interest rate. The standard is what a commercial lender would charge. If that is where the question is coming from, a conclusion by the bank that there is no comparable loan in the lender's normal universe is unhelpful.and all of the efforts and technical work that went into the conclusion were narrow and formalistic. I might concede "facile," but the effort missed the point and failed to do the job insofar as you described it. You did not say in your descriptions what you said in your last sentence, "we justified *** use [of] *** rates of prime plus." That is the point and that was useful, assuming that the "we" is the bank. It meant that a commercial lender had determined a rate that was reasonable to charge for a plan loan. A plan adminstrator can use that conclusion to meet the standard. If the "we" is the plan administrator, you did a fine job and made the most of inadequate service from the bank. Also, If the question came from another angle or had another purpose, then the effort may have been brilliant and herioc. In fact, I agree with the academic conclusion. A plan loan as usually provided under 401(k) plan is an artificial anomaly that the the regulations try to dress up with some conventionality, with resulting illusions, confusion, and contradictions.

Perhaps I am misinterpreting. If the request was, "I am trying to determine how to set a plan loan rate and the ERISA standard is the rate a commercial elnder would charge for a loan like the plan loan," Key Bank gave a facile, narrow, formalistic answer that did not help to achieve the goal of setting an interest rate. The facile, narrow, formalistic answer could have been a legitimate prelude, accompanied by some laughter, followed by a serious answer about what interest rate should be used. If the question was, "What would be the interest rate on a commercial loan that has exactly the characteristics of a plan loan?'" maybe you got a helpful answer. In any event you felt like it was helpful. So what did you then do about interest rates with all that help? You did not have an interest rate that you could defend by saying that in fact you had consulted with a commercial lender.

If it is a defined contribution type plan. A SERP that is a defined benefit type plan operates under different rules.

I can see that Key Bank was helpful with a decision not to have plan loans (whixh is not a bad thing), but I don't see any help with determining rates.

You are gettng confused information about "risk of forfeture" under sections 3121 and 409A : " there must be a substantial risk of forfeiture to qualify under 409A" is not true. For FICA withholding purposes, look to 3121 and forget about 409A unless you are somehow responsible for compliance issues under section 409A. Section 409A relates to income taxes. The two can interact, but don't start there.

Keybank was not being very helpful -- this is not a question to which there is no answer or only a negative answer.. The trick is to find a a helpful commercial lender and get support. Some lenders will provide a methodology for determinining a rate based on puublicly available information so the plan administrator is able to keep up with changing interest rate without having to consult the lender each time. The pan administrator wll have to check with the lender from time to time to make sure that the lender continues to support the methodology. When the regulators ask, the plan can give a compliant answer. An open question is whether or not a multiple-lender survey is expected, but I think an agency will back off if the plan can show support from a lender on the rate.