E as in ERISA

I assume that you are doing ADP testing and are using the alternative where you don't include otherwise excludable employees in the test?

If you want to prevent this in the future, warn the client that there is a $3,000 per participant penalty for making the late deposit. The 401(k) contributions are plan assets as of the date that they should be deposited. Participants' rights to direct the investment of the assets, to take it as loans, and to take distributions on it is temporarily suspended during the period it is not deposited in the plan. They should potentially receive a Sarbanes Oxley 30 day notice about the suspension of rights. There is a penalty for failure to provide notice of $100 per day for the 30 days for each participant. Not kidding. Heard the DOL had taken that position...

If he's a recordkeeper, I would think that there is no risk. If he's a trustee, there is risk that I hope would be mitigated by the nature of the relationship and the contractual terms. But there is a difference. I would be more concerned about terminating the relationship if I were a trustee. There is a lack of guidance about what a trustee does in this situation. Compare the recent Field Assistance Bulletin on employer stock. It suggests that a directed trustee's primary responsibility is to make inquiries of the fiduciary when there appears to be a violation of ERISA. But some of the answers are in development in courts.

Are you simply a recordkeeper or are you a trustee?

It's done for Form 990s, which is the filing for an exempt organization. Maybe some states rules are broad enough to appear to cover filings for the trusts of benefit plans. But 5500s are for the plan, not the entity. The Schedule P is the exempt organization filing in this case.

See the second page of the "Mark Iwry letter" that indicates increases can occur, provided sufficient notice is given: http://www.americanbenefitscouncil.org/doc...cenrollment.pdf

I have had a long-standing concern with these Boards that there are some people who think that they can come here and get advice that they should be getting from legal counsel or other service providers. (It's mostly non-practioners -- those who aren't regulars -- who I'm primarily concerned about. This is not aimed at anyone on this post). I think that the Boards should be plastered with messages reminding people that any comments made here should not be considered legal advice (same as what you would see on any practitioner's web site). On the other hand, I think that the Boards are an invaluable tool for sharing news, thoughts, practical experience, opinions, interpretations among practioners with a variety of experience. And in that context, I think that a certain amount of friendly banter is to be expected. SWH&WTBFFTWKT!!! (Stop wasting Harwood's & Willie's Time But Feel Free to Waste Katherine's Time!!!)

It's potentially a prohibited transaction -- a loan from the plan to the employer. Similar to late 401(k) deposits.

My understanding is that they hadn't realized that it was an issue before.

I agree with you unless a special rule applies. See rules for "nonaccount balance" plans at http://benefitslink.com/taxregs/31.3121v2.html.

My point on independent contractors v. employee is that IRS rules and WC or UC rules are not always consistent. A person could be considered an employee for WC purposes but still be classified as an independent contractor for IRS rules. (If someone who is hired as an independent contractor to mow the lawn for a business hurts himself on the job, the WC examiner might come in and say he meets their 4-prong test for an employee because the individual used the company's lawn mower and require the company to pay. But that doesn't mean that he has to be put in the retirement plan the next day under the IRS' 21-prong test for independent contractor v. employee). In regard to the question of the employee whose last day on the job is December 31 and has a week of vacation: it seems like you're being inconsistent in saying that his last day is now January 7 (if you add the one week to his last day) or January 10 (if he gets paid for a January 3 holiday) but then saying that he doesn't have hours, earnings or forms. What about the vacation hours you say you're using to move his term date out? The earnings for those hours that he's getting paid? Under your theory, shouldn't someone give him the necessary forms? What I'm saying is that I not aware of anything that would require vacation paid at termination to be used to extend his term date for purposes of the last day rule. But I don't see how you're extending his term date but then not acknowledging the hours or earnings.

What is it that requires consistency across the board for all purposes? A worker's comp examiner is not going to allow you to use the IRS' rules on independent contractor v. employee if that produces a better result for the employer. They are going to use their state rules, which can be different. If someone has their last day at the job on Friday July 1, 2005, and they have two weeks of vacation accrued for which they get paid, I think that the payment is treated similar to a severance payment. It is something that is getting paid to them in cash based on not only their service but also due to the fact that they are terminating. Otherwise, if you count their last day as two weeks later, do you now pay them an extra day because there was a holiday on July 4? If employees accrue vacation pro rata every two weeks, does the person get another 6 hours of vacation for that two week period? Also, if a plan had a year of service requirement and a person who started on December 26, 2003 and had their last day at the job December 31, 2004, with one week of accrued vacation, then would they enter the plan on January 1, 2005?

But I think that what is given to TPAs as "term date" is last day of service. I don't know that anyone is applying general liability, worker's comp or unemployment comp rules for retirement plan purposes.

What does the SPD say? Once you communicate erroneous information to participants, the IRS is less likely to buy "scrivener's error." If the only place it says there is a match is in the formal plan and everything else says that it is discretionary, then you have a better argument.

I think that for over-the-counter items some plans provided a list of what is/isn't eligible under the plan (based on the plan's interpretation of what is/isn't deductible). It was done outside of the SPD or any formal document. It might not overrule plan terms, but just be helpful to an employee in deciding what form of remedy they should buy.

The one fact situation that I might question is the person who terminates on 2/23 and is paid for two weeks vacation. I think that some (many? most?) employers would consider 2/23 the term date.

The only thing that I don't like about the outline book is the index. A problem with publications that don't have an larger editorial staff. You have to know what term Sal would file the issue under. For example, if you want to look up QJSAs, there is nothing in the Qs (even though QMACs, QNECs, QSLOBs are there). But you have to realize that everything is there somewhere. So you keep looking and go to "Joint and Survivor Annuity," which will point you to "J&S rules." It reminds me of what a friend called the "Irma approach." A reference to a little old lady clerk sitting in a room making up filing categories into which to sort information. And you have to figure out how Irma thinks...

I thought I was saying the same thing as what you said in your original answer. Now you seem to be disagreeing? For purposes of applying 411(a)(11) and determining whether you have an account subject to mandatory distribution, you can choose whether to include or ignore/disregard prior rollovers in the calculation of the account balance (whether it is $5,000 or $1,000). In the facts given, if the plan ignored rollovers, if the plan ignored prior rollovers there would be only a $500 balance and the account would be subject to mandatory distribution. For purposes of applying 401(a)(31)(B) and determining whether the mandatory distribution is in the form of a cash out or rollover, you cannot ignore the prior rollover in determining whether you are over $1,000 or not. In the facts given, the account would be $4,000 or $10,000 and would be subject to automatic rollover. Therefore, if you want to avoid automatic rollovers, you need to reduce the mandatory distribution limit to $1,000 or less AND make sure that your plan includes prior rollovers in making that determination. Otherwise, if you continue to exclude prior rollovers in the determination of whether the mandatory distribution rules apply, then you will likely have to make some of those mandatory distributions in the form of an automatic rollover.

So if you want to avoid automatic rollovers, you not only need to reduce the cashout limit to $1,000 or less you also need to get rid of any provision to ignore rollovers. If you don't get rid of the provision you'll end up having automatic rollovers.

http://www.sungardcorbel.com/News/Docs/IDPRolloverAmend.doc

The consent requirements do not apply after death of the participant. It's another exception to 411(a)(11) in the regulations.

But the main issues are compliance with ERISA reporting requirements, etc. Not all the fiduciary issues.

Employees' total compensation gets subtracted. So if their total compensation is $200,000 and out of that they deferred $10,000 and took $190,000 in cash, then the total $200,000 would be deducted from the self-employed person's income somehow. The presentation could vary but the total amount paid out should be recorded.

Is it a corporation? Do you have the corporate book with minutes and resolutions? Possibly a board resolution adopting the GUST restatement?

That is how I interpret it.