QDROphile

A plan can be amended prospectively by following the amendment procedures of the plan, making sure that no accrued benefits are reduced by the amendment. The amendment will do nothing to remedy failure of the plan to operate in accordance with its terms prior to the amendment. One cannot tell from your post if the plan failed to operate in accodance with its terms, but periodic matching contributions are often not in accordance with plan terms if the plan provides for matching on an annual basis. How can the plan administrator continue the periodic match if the employer does not deliver funds periodically?

Most references to "ESOP" mean a plan that is a qualified retirement plan, and your indirect description fits. Sometimes people use the term "ESOP" to mean something else. Contributions to a qualified retirement plan for your benefit and payment to you from a qualified retirement plan are not treated as wages for FICA (Social Security) purposes. Section 3121(a)(5)(A) of the Internal Revenue Code. The inclusion of the ESOP distributions in your income for income tax purposes is a matter separate from FICA taxation and Social Security payments. This goes beyond your question, but the elective deferral amounts under a 401(k) plan are included in wages for FICA purposes even though they are not included in income for income tax purposes in the year of the deferral.

It is purely an administrative issue. You do not have to accommodate, but someone else will be willing.

I think you should think more. The distribution is one thing, and the exemption applies to the extent the distribution is a prohibited transaction. The transaction that generates the cash is a different transaction; it does not involve the disqualified person and the same concerns attend for distributions to persons who are not disqualified persons.

The sale of shares by the plan to the company is a prohibited transaction and must find an exemption no matter who the distributee is. In other words, a contemporaneous valuation is required. If the ESOP holds cash and exchanges shares allocated to the participant for the cash in other accounts (if that is what you mean by liquidation within the plan), there is no prohibited transaction.

I think you may take some comfort from the application of of 457(b) to an "eligible deferred compensation plan" and the application of 457(f) to a plan that is not an eligible deferred compensation plan. Also, I think the regulations in question relate to eligible plans. Compare 1.457-11.

The answer may not be apparent in the 415 amendment because of the choice made about the option described in the 415 regulations. See other posts on the subject.

What aggregation rules are you concerned about?

The factual determinations in the arbitration may help. The use of informal correction is subject to a lot of judgment and not all errors are elgible, to the extent we have indefinite informal guidance from the IRS.

What is the "catch-all" exception? The plan has to follow the law or suffer the consequences. An arbitration can order an employer to do something, but it cannot change the the tax consequences of circumstances. In order to comply with the order, and employer might have to provide the economic equivalent of the impossible literal terms of the order and incur unanticipated (by the arbitration) cost to comply. The arbitration may have included some factual determinations that the employer could work with to give effect to salary reduction elections that are delivered after the beginning of the year and be tax-compliant.

The ESOP and the sponsor should get competent professional advice about options and requirements. Most people believe that intallment payments of the purchase price for shares under a statutory put option must be secured by tangible assets or thrid-party credit support.

Reg. section 1.415©-2©, Items not includible in compensation. Subparagrah (1). Depends on plan terms. Amounts paid after termination of employment are addressed separately under paragraph (e).

Given that the IRS has stated that 457(f) arrangements are subject to 409A and the the principles of 409A will be reflected in the 457 regulations, it is risky to use a coventant not to compete, not to mention scumbag behavior that that was part of the reason we got section 409A. But scumbags can probably still take some refuge in audit and policy roulette.

Or you can be part of the population that wants to engage in improper transactions, as the original post suggests.

First, this is a matter for the plan administrator, not the employer or sponsor. The employer might be the plan administrator if it is not well advised. Second, the agency order might be a domestic relations order, so it might need to be treated with the appropriate formalities, and the order might be revised to cover all the qualification requirements and be effective as a QDRO. Hint: The definition of domestic relations order is not limited to court orders. The agency might not be savvy enough to work with all of its available tools, but the plan had better be receptive to appropriate extraordinary approaches.

Go back to rcline's advice and take it seriously. Maybe your plan overlooks the point, but the 415 regulations speak to it.

Incomplete answer if you want the "best" fix, but you will find what you need in Rev. Proc. 2008-50.

See section 72(t)(3)(A) of the tax code. No cheap exit if you are starting in an IRA.

"top hat" and "qualified" do not go together. Sorry, fat finger premature send, and rereading of original post before resuming indicates that the point would not have any new ideas.

If your question relates to what your rights are now, it appears that your account has no stock in it and you may "withdraw all or any part of the excess of 25% of [your] Adjusted Account Balance (as defined below) comprised of stock ***." You may withdraw 25% of zero. It is tough to get a good answer to a question like yours in this forum. You could apply for withdrawal. If withdrawl is denied, the plan's claims procedures probably require that you be given an explanation for the denial, with reference to the relevant plan terms. You will need to follow the formalities of the claims procedure, which probably means you have to submit your claim in writing. The procedures are explained in your summary plan description or a separate document that you can get from the plan administrator. The plan administrator should give you an informal explanation of what you can do if you ask, but is not legally required to do so, and the explanation might not be reliable.

It looks to me like the LLC is a disregarded entity, which would mean that for purposes of the ESOP the employee is an employee of the bank. No problem with participation.

So how is it that the bank is the sole member of the LLC and there is no affiliation or control?

You don't need to deal with any of the joinder garbage unless the plan adminstrator or the lawyers are mentally disabled.

An unaffiliated employer cannot participate in an ESOP. An LLC employee cannot participate in an ESOP unless the LLC is a disregared entity and a corporation is the sole member. Two strikes. In this game, one strike and you are out.

Assume that an employee's gross pay amount is $1000 per month. Looking only at the insurance benefits (forget FICA and income tax withholding and other payroll amounts), assume the employee "pays" $100 per month for the benefit. That means the employee actually receives $900 per month in dollars. What happens if the employee does not take insurance benefits? Does the employee receive $900 per month or $1000 per month in dollars?