Bird

We leave them all blank for a rollover.

Depending on demographics, a profit sharing contribution formula might be designed in a way to get most of the dollars to the owner. This usually works best as the second step after using the 3% nonelective safe harbor, where the owner is trying to max out total contributions at $52,000. But it might still look pretty good if he only has a couple of employees. The safe harbor match might be better if is content to max his deferrals at $17,500. Unfortunately adding either SH back to an existing plan in 2014 is not permitted.

I'd have no problem letting payments continue until assets are distributed.

mmm, I guess, but herding cats and all that, at least Dec 31 is a date to get their attention.

I don't always give full answers to clients. On this one, I've always said "it's best to get it in right after the end of the year, since that's when your income is determined." But the truth is, that for tax purposes, those contributions are due by the due date of the tax return. For DOL/plan asset purposes, the article is saying it's tied to the distribution date of partnership income, which is a little looser than the last day of the year, and sounds reasonable. (But I'm not sure I want to try to explain that to someone who just wants a simple answer, and will probably continue to advise that they make deposits right after the end of the year.)

I think it depends on what the bene elects. If s/he takes it all in cash, then I think only one 1099-R is required, Code 4, and you indicate how much is taxable and how much is tax-free. If the taxable part is rolled over, then you need two, one for the rollover code 4+H, and one for the tax-free part, code 4, where you report the total distribution and say none is taxable. What I'm not sure of is if the bene gets to recover accumulated PS-58 costs tax-free as well, as a participant would - I think so; I don't know why not.

I'm pretty sure investment company minimum requirements do not create discrimination issues for a plan. So, the plan couldn't say you need a minimum balance (or net worth) to self-direct, but investments in a menu (or under a brokerage account option) could have minimums - I'm just about sure of that. A pretty well-known pension guy advocates, or used to, setting up separate plans - the key is that each is trustee directed, not participant directed, so they are all identical. Personally, I'd rather not have to explain that on audit, and can't imagine how it could be cost-effective.

Yeah, I looked it up in an old but reliable book and it says the designation must have specified the start date, payment method, term, and death beneficiaries. Notice 83-23. I doubt that many of those elections really are/were valid, but this one sounds particularly weak.

I agree; this is simply an RMD on account of death.

Correct. If you really want to minimize your tax filings, having a combination will help you b/c the 401(k) will only hold deferral contributions, and will take longer to get to the $250K minimum filing for a 5500-EZ (or SF). Note that you are supposed to file a 5500 in the final year of the plan no matter the amount of assets.

Off the top of my head, I thought they had to be specific about when the benefits would commence. That's pretty vague.

Pretty much. I always interpret that as "...if possible, but we'll take a check if we have to."

Of course this is the crux of the problem. The employee is a participant after he has satisfied entry requirements and passed the entry date. The last reasonable thing is to ask them why they think the language about changing deferral elections is in there at all. The nuclear option is to have the employee submit his change in writing (presumably he has already) and make it very clear that he intends to follow through with the DOL on this as a denial of an opportunity to defer. Do this at the plan sponsor level, not the TPA. I'd print out this thread; delete the names I suppose although I don't care about that, and make it crystal clear that the TPA's position TPA is dead wrong. Good luck.

What is the argument against the clear language? Deferrals changes are allowable on monthly basis, or the next administratively feasible payroll date. As noted, 12/1 would be the worst-case scenario. The entry date was 7/1. Failure to enroll has nothing to do with being a participant; this employee is a participant on 7/1 and the quarterly entry date ceases to be relevant in any future admin issues for this person. Maybe explain that failure to implement a deferral election means the company has to contribute half of what the participant wanted to contribute, at least under the self-correction program.

The technical answer is probably yes, for a corporation - it needs to have some authority/approval to take actions. My accountant tells me to put the amount of my PS contribution in a year-end resolution, and I do, with catch-all language that whatever actions were taken during the year are deemed to be approved, or something like that. But on a practical level, I don't remember the IRS ever asking to see such a resolution. It might be one of those things where it's only a problem if someone wants to challenge it, and that's probably never going to be an issue.

Good point. I may have been reading into the post that the entity itself changed.

Like so many things, this depends on the plan document. I looked at my documents, and they define Employer thusly: "Employer" means the Company or any other employer required to be aggregated with the Company under Code sections 414(b), ©, (m) or (o); provided, however, that "Employer" shall not include any entity or unincorporated trade or business prior to the date on which such entity, trade or business satisfies the affiliation or control tests described above. In identifying "Employer" for purposes of Section 5.05, the definition in Code sections 414(b) and © shall be modified as provided in Code section 415(h). But, significantly, Plan Sponsor is defined like this: "Plan Sponsor" means the entity described in the Adoption Agreement. So, we do amendments to change the plan sponsor. (And to be honest I think it's required more often than prior comments would indicate...I looked at an older document from another provider that we used to use and it says "SPONSOR: The term Sponsor means XYZ, Inc. (and any successor thereto that elects to assume sponsorship of this Plan)." (My emphasis - not any successor, but any successor...that elects...). I'm not sure that "successor" is defined or otherwise clear...suppose you go from one person owning 100% to 99% with 1% to another; is that a successor that automatically sponsors the plan? As to the name of the plan, which wasn't part of the original question, I agree that you don't have to change it (and maybe/probably don't want to). If a business incorporates, I'm happy to leave the plan name as "ABC Plan" (as opposed to "ABC, Inc. Plan") so I don't have to tell the investment company and the IRS teletin unit about it, as you are supposed to.

We do it with some frequence and typically merge the old plan into the new as of the first day of the next year.

And if you are going to make it, you're going to decide before the beginning of the year? I still don't get it.

Probably, if you're not using the maybe notice. (Why doesn't/didn't EVERYONE use the maybe notice?!)

That's correct. It's a pretty long list, so maybe the requirements aren't too awful to get certified - you might look into that.

I'm used to seeing it in the document as you say, but technically the plan is "amended" to use the safe harbor so I guess it would be ok to issue the notice before the SH language is in the plan and amend it in later. I guess it would just be a longer amendment.

If it is spelled out clearly in the document, then I don't see a problem. He's in the group but he's not sharing, and gets the special allocation under another plan provision. I'm not sure about the "most documents have this" or "should have this" comments. (I think) documents just have to have language that the plan has to comply with 401(a)(4) and the regs thereunder. If I'm reading ours correctly, Ft. William does it that way (there is also a provision that the administrator can waive the allocation requirements under certain circumstances, which usually takes care of it). If they don't have specific language about how to do that, then a retroactive amendment might be needed.

I've been following this with some bemusement - I mean, what was he thinking, and what screwball lawyer wrote this up? (or is this a hoax, but how is this any fun?!) I suppose the proverbial ERISA attorney route is the way to go, but I can see why you posted it here. I think it's worth noting that the original post says the money goes the company's defined benefit plan, which no longer exists. IMO, it's more than a stretch to say that it should go to the qualified replacement plan - the word "replacement" does not mean it is a continuation of the same plan. Original intent (misguided as it may have been) may have been to assure adequate funding of the DB plan; this is a whole 'nother result. There's a very strange mix of precision and vagueness in all of this...

I don't have a problem with prepayment of expenses.