E as in ERISA

The legal date of merger is generally earlier than the date of transfer of the assets. Generally the date the company is bought. The final 5500 would be filed 7 months from the legal date.

Make it a payroll issue instead. The employer decided to pay the employee more. The amount is equal to premiums. Add it to the W-2 and gross up taxes too. Then no problem with the plan.

Don't like that the links to prior days and the message board are no longer at the bottom of the page.

Tell the client to ask the lawyer what the new correction should be. If I recall correctly, the new EPCRS may specifically say that you only have to contribute what people in their salary range were contributing instead of the average for the plan. Much less costly. So if these were $15000 and under employees and everyone in that range was contributing only 1% that would be a less costly correction than the plan's 3% average contribution. I can't promise that is what the proposed correction is. I didn't pay attention because it was something like this that the IRS already lets you do today. It's just not specifically stated in the EPCRS. But you can already negotiate for this result. So no down side to proceeding unless the final EPCRS is even better than the proposed. Not likely.

I think that cutback comes in when you have a set dollar amount available for allocation and the amendment changes how that amount would be allocated. If A made $25000 plus $25000 in commissions and B made $50000 and commissions were excluded in a profit sharing allocation, then B might get 2/3 of the pie. If you're allocating $9000, B would get $6,000 of that. If you later change the formula to include commissions, B would get only $4500. A cutback. If the change in the match formula will just cause the employer to contribute more then you shouldn't have cutback.

It's most likely to be deferred compensation if the payments are not commensurate with the service. If they get $X bi-weekly or monthly even when they haven't done anything, then those might be recharacterized compensation for prior services. Then you need to look at the timing to see if it meets any exceptions or requirements.

I've heard that the next version of EPCRS will provide better corrections on eligibility problems. Can't recall details. It was awaiting final approval several months ago. But hasn't appeared yet.

I think that was Tom's point? You can't divide by an unknown?

I think that they are talking about trust accounting income and that is usually prescribed by state trust law.

This describes the IRS position http://www.benefitscounsel.com/archives/001128.html

Yes. There are a lot of plans out there that exclude part timers from early entry dates but have a "savings clause" that allows them in if they work 1,000 in the year. And the plans got determination letters.

You might look to other areas to see how long they let LOAs go. Loan rules 1 year. New 409A nonqualified deferred compensation default appears to be 6 months unless participant legally entitled to get job back because of medical or military leave like FMLA or USERRA.

It's just that you're combining two separate taxable events into one series of events. Example. You borrow $5,000 for one year. Interest rate 7%. You pay back $5,350. (That $350 was potentially paid FROM after tax amounts so you possibly had to earn say $500 in order to pay the $350 if you're in the 30% bracket). You know have $350 less to use outside the plan. But you have $350 "more" inside the plan. If you take a withdrawal of that $350 immediately, you may pay $105 in taxes on that $350. The "double taxation" argument is based on the fact that of the original $500, you had to pay $150 in taxes when it came out of your paycheck and another $105 when you withdrew the $105. So you netted $245 of the $500 that you originally earned. But let's compare that to using a $5,000 loan at 7% outside the plan. You had to earn the same $500, of which you pay $150 to the government and $350 to some financial institution. So of that $500, you actually net $0. However, you still have the $5,000 is sitting in the plan and earning money for that year. If you earned the same 7%, then some other institution would be paying you $350 on that money. If you withdrew the $350, you would be paying taxes of $105. You'd still end up with the same $245 change in your financial position. Either way, you're going to pay $150 tax on the $500 that you earn to pay back the interest to yourself or a bank. Either way you're going to pay taxes on what you take out of the plan. Those are two discrete transactions that are always going to have separate taxation. If you want to call it double taxation, okay. But then you also have "double taxation" whenever you borrow from a bank. You could try and pay less taxes by only paying back the original $5000 and have the $350 unpaid interest deemed. But if you're still earning that $500 outside the plan on which you pay $150 in taxes and also using $105 to pay the taxes on the deemed amount, then you still end up with the same $245 of that $500. But the real question is what rates you can get and what the investments are doing. If you borrow from yourself, the rates you're earning and paying are going to be the same. (However, you also have to watch to see what you sell the existing investments at and what you buy them back at....You may have a gain or loss). If you borrow outside the plan at a different rate from what your money inside the plan is earning, you may gain from rate arbitrage. If you've got good investments in the plan earning 10%, 15%..., you'd end up ahead if took the loan outside the plan. (If investments are earning less than 7%, you may end up better taking the loan inside the plan to insure a 7% return on that money) Bottom line: The more significant issue is the question of opportunity cost.

Posted on today's benefit buzz an article from Principal http://www.principal.com/allweb/docs/ris/m.../pq/pq_7194.pdf

How about the participant contributed $10,000 in the early nineties, took a $5,000 loan. The other $5,000 was invested in a high risk investment that tanked and NEVER recovered. The loan grew to $9,900. The poor investment is worth only $100. She keeps talking in terms of "contributions" as opposed to account balance. So I was assuming that somehow the participant thinks that they should get their $10,000 they contributed back. Or at least the other $5,000. And that may not be the case.

I think that proposed regulations were first issued in late 1995 and then re-issued in about 1988 and then finalized in 2000. I don't think a lot of plans took action in the late 90s.

Well, they should only be able to withdraw $100, not $10,000. So they won't be able to pay the loan back with the $100. They'll just get $100, get the loan wiped off the books, and be taxed on $10,000.

This sounds like it belongs on the Montel Williams show, not the benefitslink message board.

What do you mean "withdrawing contributions"? They can get a distribution for the amount of their account balance less the amount of the outstanding loan. If their account balance is $10,000 and their loan is $5,000, then it doesn't much matter whether they have an offset or take the $5,000 and pay off the loan. Either way they're currently taxed on $5,000 and they have $5,000 in the plan, right?

It's usually your 415© definition of compensation under the plan. Generally includes any taxable amounts. Therefore, qualified moving expenses are usually excluded; nonqualifed included. Company use of a vehicle under an accountable expense reimbursement plan would usually be excluded; under a nonaccountable plan included. Excess group life insurance is usually included (but excluded if they define compensation based on that for withholding).

Non-vested would not be part of the grandfathered plan.

This web site linked to this article the first of June http://www.benefitnews.com/detail.cfm?id=7530

Didn't 2005-5 have a model amendment?

Look at the instructions for Part IV of the Form 5330 and the example regarding loans http://www.irs.gov/pub/irs-pdf/i5330.pdf

The IRS says it will issue some additional guidance on completing the W-2.