QDROphile

Possible answers: 1. Section 415 limits. 2. Mistaken and obsolete carry over concept from taxable employer deduction limit.

Expenses incurred in a plan year cannot be covered by amounts deferred in a subsequent plan year, subject to some very limited exceptions. See Prop. Treas. Reg. section 1.125-5(a)(1), although you will have to get acquainted with the specialized terms used in the regulation to get the meaning relevant to your situation.

See Treas. Reg. section 1.409(a)(9)-8 Q&A-6 and Q&A-7

Assuming no sham termination issues and assuming that plan terms do not speak to the situation, I would treat the second distribution as a tail to the lump sum distribution and not a separate distribution. The distribution occurred based on termination and is not an in-service distribution. The rehire is irrelevant. The distribution was set and locked before rehire. A good plan document will have provisions about tail distributions, but good plan doucments are obsolete. Sniff.

Yes, subject to a two part legal analysis: 1. So what? 2. Who cares? The response is expressed in a flip way, but the substance is serious.

Good one! You may have to hesitate a moment in that location.

A better riddle: What is the difference between a cat and a comma? Hint: "tail" is not involved in the answer unless you come up with an unexpected answer. Sorry, I am out of match riddles/jokes that are fit for public consumption.

Prohibited transactions.

Do the account owners or their family members have any other interest in the franchise, such as personal share ownership, or do they participate in or have any other relationship with the the franchise's business? The combination of retirement plan and investement in a nonpublic franchise is highly suspect.

Old riddle. A cat lights on its feet. A match lights on its head.

I have always designed forfeitures to to offset contributions. Under that approach, you have correspondence between deferral and match. See Treas. Reg. section 1.401(m)-1(a)(2)©. I think that says you have to have to allocate on the basis of employee contributions, deferrals or matching contributions. A participant with no contirubutions or deferrals will not have matching contributions either, so no allocation of forfeitures would be a matching contribution. Q: What is the difference between a cat and a match?

Is nothing sacred?

Because of the exclusive benefit rules of section 401(a) of the tax code and of section 404(a)(1)(A) of ERISA, the plan terms should not have any provision that allows plan assets to be returned to the employer, except in limited specified circumstances, and the plan terms may have stronger prohibition language. If funds have been delivered to the trust, it is not a matter of finding authority that forbids plan assets from reverting to the employer, it is a matter of finding authority that allows assets to be delivered to the employer. The employer made a contribution. A defined contributin plan will have terms to determine how contributins are allocated. That will dispose of the amounts contributed unless the plan has other terms to cover some other disposition of the funds.

You get what you pay for with prototypes, including faith that everything works out right despite documents making no sense to a literate person and unconsciousness of the representatives of the provider. Congratulations for even reading something other than the adoption agreement.

Correction of mistakes is lore. I think the lore on this type of mistake is that is is not correctable unless the the plan limited the election to $2500, so it was also a mistake of the plan rather than a mistake of the individual's understanding of tax law. Certain types of mistake by an individual are correctable, such as an impossibility. An example would be an election for childcare when the individual had no children (don't start arguing about the pregnancy anticipatory elections). Other facts and conditions can be important, even for a type of erro that can be corrected. Lore is hard to pin down, but some of it rests on informal IRS represenative comments. I am not aware of any particular documented comment on your situation.

What does the plan say? Even if the law would allow an election based on the event, the plan has to allow it. Perhaps you can get an adequate statement, or absence of an adequate statement, for your answer from the plan terms. Besides, there is more latitude for interpreting plan terms than determining the law. But you have to be careful if you conclude that the plan allows the election. Then you have to determine that the terms or interpretation of the plan is consistent with the law allows.

Distinction intended.

Adopting an investment policy is a fiduciary function.

What does the fix-it guidance say?

The failure would have to be corrected under EPCRS and I doubt that either current or retroactive "withholding" would be acceptable. VCP is not necessary if the conditions for SCP are met depending on you view about SCP. Some people are SCP-phobic unless a prescribed fix in Rev. Proc, 2008-50 fits exactly. The IRS has informal guidance on its website about acceptable correction of disregarded deferral elections. The guidance is different from the guidance in Rev. Proc. 2008-50 concerning overlooked participants.

Maybe you could do it if the individual did not want the payment early. ;-)

The situation is different because the plan can quantify the mistake. With employees who were not given the opportunity to defer, the plan has no idea what the employees would have elected. I think the IRS has some guidance about the situation under a "fix-it" piece on the web site. A search for "fix-it" might turn up the document. There is other "fix-it" guidance on the web site, too.

Wow. They are easy to console. What other critical business or legal advice do they rely on from unaccountable anonymous strangers based on twitter-depth descriptions? ERISAtoolkit's response is probably corrrect and the way it should be in most relationships. But there may be some other factors to consider, especially if you provide other services that might make you a tax return preparer or involve you in some way with reporting. Apart from facing the potential liability of the preparer or reporter, you might want to warn the client that you might not be able to perform the services or that you would have to report something that would be adverse to their scheme.

So are the Powers That Be now sure that they are covered?

Assuming that you have have taken into account the universal availablitity rules applicable to elective deferrals in section 403(b)(12) and are talking about ERISA coverage requirements, extensive regulations address how hours are counted.