E as in ERISA

I agree that they should do an amended filing. But it is also equally, if not more, important that they respond timely and completely to any notice that they might receive -- with a copy of the full Form 5500 that includes the audit. (I don't know if it's still true, but in the past the tracking wasn't very good and they might send out a notice months after the amended return was filed. And problems can be created once you have several different versions of the same filing floating around.)

I agree that the ESOP can't pay $200,000 for a worthless business. But maybe he just has the facts wrong. Maybe the business will be bought first -- on credit -- and then sold to the ESOP? But I still have a problem with the transaction. When someone says, "[H]e has $200,000 in retirment accounts he wants to use for the purchase of his own business," I say, "You're telling me right there that you can't do it." ERISA 404 requires that fiduciaries act "solely in the interest of participants" and "for the exclusive purpose of...providing benefits to participants." He has to do the deal because he thinks that the investment is a good idea from the benefit plan's perspective, not his personal interests outside the plan. If the business isn't even in existence yet, he can't possibly make the judgment that this is a good investment for the plan.

Why don't you just send it certified mail? Why send it Airborne?

What are the ownership interests in A and B? You don't have to worry about common ownership unless it is significant enough to be a controlled group or common control. In general, there must be 80% common ownership between the two, and at least 50% of that must be identical ownership. Even if the businesses are under common control, they don't necessarily need to have similar benefits. If each plan passes coverage separately, each can generally have its own benefit structure. They would generally pass coverage independently if the percentages of nonhighly compensated employees in each plan are similar. (Or if company A has more nonhighly compensated employees, that works too).

See 1.414(v)-1(b)(1)(iii) Actual deferral percentage (ADP) limit. In the case of a section 401(k) plan that would fail the ADP test of section 401(k)(3) if it did not correct under section 401(k)(8), the ADP limit is the highest amount of elective deferrals that can be retained in the plan by any highly compensated employee under the rules of section 401(k)(8)© (without regard to paragraph (d)(2)(iii) of this section).

They could amend the distribution terms. The profit sharing money is not subject to the same distribution restrictions as Section 401(k) money. They can make the money available after a fixed number of years (at least two), a stated age, or a specific event. It might not make the money available to everyone currently, but it would probably be cheaper than doing a spin-off, termination and distribution.

See the regs. It doesn't matter who gets the distributions. You compare the $6,000 to the highest amount that ANY highly compensated employee can defer. What is that amount?

I think that if one employer fails to satisfy top heavy, then the whole plan is tainted. But I don't think that requires that each employer make minimum contributions. Not 100% about the latter, though.

When "income in respect of the decedent" ("IRD") is a large part of the estate and there is a lot of money involved, then you generally want to do some planning with a knowledgeable tax advisor. IRA money (and qualified plan money) is generally "IRD." The owner (or participant) has not been subject to income tax yet, so the income tax will still be due after the owner s (participant's) death. But the issues of when the tax is due and who pays it depend a lot on the planning. E.g., there may be a big difference if the IRA itself is left to a specific person(s) versus a dollar amount is left to the person and the IRA is used to satisfy that bequest.

February 28, 2002 for individually designed plans.

I don't know the answer. But the fact that its a "fee" does not mean its automatically payable by the plan. Some fees must still be paid by the settlor. I think that the DOL has previously indicated that an amendment that helps a plan maintain its qualified status benefits both the settlor and the plan, so the settlor must pay part of it. You could try and make the same argument here -- that it benefits both and the fee should be split. Realistically, if the VCP was not filed and the plan was later audited, the sponsor who probably end up paying a sanction under CAP in order to avoid disqualification. So the fee is in lieu of possible sanctions. So under that logic one could argue that only the sponsor benefits from going through VCP. Especially if the sponsor is responsible for the disqualifying error.

See Pub 502 for a description of what is a deductible expense. It describes the following: "This includes fees paid to dentists for X-rays, fillings, braces, extractions, dentures, etc."

My understanding is that this is the first time that d-letters are actually required for a plan to be considered a timely amender -- but I'm interpreting it the same way as KJohnson -- that the rule applies only to modified prototype or volume submitter documents. Question to Lynn Campbell: Was the modification operational for any period of time? If that is the case, then I think that you might want to consider filing (although I don't think the rules are clear). Or was it removed because it was an incorrect modification? In that case you might argue that you never had a modified volume submitter?

The law does not limit participants to one loan at a time. So this is only a plan limit and it depends on the exact language of the document or policy and how it is interpreted.

I.e., They are not reported in the income box.

What is the purpose of the survey? Sometimes the company is just looking for "nice comments" to put in a brochure. But some clients may also note areas for improvement (and may continue to notice them after the survey is done...they will mentally check their responses against your performance on a going forward basis). How will the company respond? Does the company plan to do followup, including spending time and money to correct any deficiencies that are noted?

What I'm saying is that I don't think that you can throw all plan amendments -- including an amendment merging an MPPP into a PSP- into the GUST remedial amendment period. You can't do a cutback amendment retroactively unless there is a specific provision for it. And the GUST provisions wouldn't cover that type of cutback.

The Schedule P has to be signed by the Trustee, so you usually obtain that from the Trustee not the Form 5500 preparer. Maybe there are some trustees who don't consider themselves as holding the loans, so the service provider prepares an unsigned Schedule P so that a company fiduciary can sign?

I don't know that all of your questions are definitively answered. The IRS informally answered some questions at the 2001 ASPA conference. See Q&A 16, involving a 7/31 termination. The question was "Does the distribution of the plan's assets before the plan’s normal year-end create a short plan year for purposes of 401(a)(17) and 415©?" The IRS' answer was: "The 401(a)(17) amount will be pro-rated. There is still a full limitation year so 415© is NOT prorated. The distribution of the assets is not relevant." Some take a different position and apply the full year 401(a)(17) amount. But that is considered an aggressive position. Vesting is never prorated. If you do have a short plan year, you consider service during the 12 months ending at the end of the short plan year (so you will double count some months). I'm not sure if the fact that the busines "no longer exists" affects any part of the answer. But note that there is a difference between the doors being closed and the business being in existence. There is generally a winding down period while the business pays off debts and liquidates assets, etc.

From whom is he planning on buying the real estate from? Is he buying it because it's a good retirement plan asset, or because he is helping someone out? Remember that the plan must satisfy the "exclusive benefit" rule that requires that the decision to buy the real estate must be exclusively for the purpose of providing retirement benefits. The fact that you are saying that the real estate is "subject to a mortgage" raises these questions. It sounds like the current owner has a mortgage. But that doesn't mean that the plan has to assume that mortgage (or that the mortgagor will legally allow it to assume that mortgage). If the plan has sufficient assets, it can pay the full purchase price in cash and extinguish the mortgage. If it doesn't want to do that, then is there a question of whether this investment is as good or better than the alternatives? Or is the debt a good idea for the plan? (Debt must also pass the exclusive benefit rule).

I don't think that the IRS' answer is correct.

A 401(k) plan can have an eligibility requirement -- e.g., one year of service with 1,000 hours. Once an employee meets that requirement and enters the plan, there would be no further hours requirements for continued participation.

I generally agree that an offset cannot be made and the default is of the type that would generally result in a deemed distribution under the 72(p) regulations and this would cause a 1099 to be issued. However, you might want to check the applicable date of those regulations. I think that you are only required to apply them to plan loans that issued after January 1, 2002.

When I first read this article, I thought that it was done in satire.....

The only time I've seen the employer-level reporting you're talking about was when a group annuity was used.