E as in ERISA

Was any action taken prior to September 2002? E.g., any chance the board of directors had a copy of the plan document before it and authorized the amendment prior to that date? The corporate resolution can be used for a "signature" provided that they had the document before them.

In my experience, the IRS rarely if ever assess penalties for delinquent filings. Most of the time they don't even send an actual penalty notice. The one time that someone did get that notice (because they ignored every single letter that had been sent before), the penalty was abated after a "reasonable cause" letter was sent. (If I recall, that "reasonable cause" was nothing extraordinary -- just confusion relating to changes in personnel). But the IRS may have changed it position...

I believe that I have seen specific guidance on an operational issue (maybe funding for DB plans?) that said that the deadline wasn't extended if the 15th fell on a weekend.

It might not matter if she is saying that the recordkeeping system is "smart" and won't track a loan that is greater than 50% of the balance on the recordkeeping system.

I think that you have mitigating considerations. I would ask legal counsel what you should do in this specific instance.

In general, when a distribution is made without required spousal consent, the spouse's portion of the benefit must be restored to the plan. It depends on age and other factors, but it wouldn't be surprising for the spouse's portion to be in the range of 10% or so (assuming a 50% benefit paid for a limited number of years after the participants death). Then you go after the participant separately.

Fredman -- But do they then turn around and sell the e-mail address that you give them there?!?!?!

As long as the loan complies with the ERISA 408 rules (which do not contain the same amount limitation), the loan should not be a prohibited transaction.

This type of error is easily detected in an IRS exam. The IRS can download payroll and benefits data and run reports that identify discrepancies in eligibility dates. The IRS frequently forms a judgement about how good the employer is in overseeing and monitoring the plan. If it thinks the employer does a bad job, it may scrutinize the plan more closely and be harsher about assessing penalties. If the IRS finds that the employer has a policy of detecting and correcting errors, it may be more lenient

My guess: Code the 1099-R as "4" -- for death. I don't think "L" applies because it an actual distribution (in the form of a offset) not deemed distribution. She didn't violate the rules or default. She had a distribution event (death) and an offset occurred. If no cash is distributed at the time of offset, then withholding is generally not required. However, when the return is filed, there will be regular tax paid on the offset reported as a taxable distribution. There shouldn't be any 10% additional tax, because death is an exception.

If the employer wants the plan to remain qualified, then the employer would generally restore C's portion of the benefit to the plan and then have it paid out to C. The ability to get the overpayment back from B is a separate issue.

I agree its probably much less risk if the facts are as you say. But if the DOL audits the plan, it would probably scrutinize the transaction more closely. And if real estate goes south in a few years, then participants still probably have a few facts they could use in a lawsuit. Nevertheless, if the facts justify the transaction I would probably document the basis for the decision and move forward.

Deferred compensation is generally W-2 wages.

Purchase of non-traditional assets frequently raise questions of "exclusive benefit" and "prohibited transactions" in any context. But when three "unrelated" employers simultaneously decide that purchase of a non-traditional asset is a good idea, I think that it would tend to raise even more red flags about the basis for this decision -- i.e., there are even stronger suggestions that this decision may have been a good idea for some personal reasons as opposed to a good idea for the plans. It is certainly possible that they are in fact acting primarily on behalf of the plan when they make this decision. But it would be interesting to hear their "story" of how they decided to make this purchase.

I agree with Mike that under the old rules, the individual participating in a 403(B) typically had to aggregate that plan for purposes of 415 with any plans that s/he sponsored in other businesses which s/he was in control of. I don't know how the changes in the rules have affected that. But it is worth following through on that analyses to confirm that it no longer applies.

See IRS Notice 99-1, which indicates that the Code and regulations do not require any specific method for enrolling in a retirement plan.

A standalone "125 arrangement" in and of itself is not an ERISA plan. It provides neither a pension benefit or a welfare benefit. It only allows the employees to choose between cash and other nontaxable benefits (most of which are ERISA plans) without constructive receipt.

I've seen plans with determination letters that have an eligibility requirement something along the lines of "1 year and 1,000 hours, but immediate entry for those regularly scheduled to work 1,000 hours during the year"

My brain must not be working this week!

The 501©(3) generally has to make the 403(B) salary reduction available to all employees over the dollar threshold (the $200 as indexed). I believe that the only 20 hour a week exception is for students.

I agree with JanetM's approach. The instructions provide "The separated participant must be reported no later than on the Schedule SSA filed for the plan year following the plan year in which separation occurred." So if they termed in plan year 2002, you can wait until July 2004 when you file plan year 2003's Form 5500 (and a lot of the participants would have been cashed out during that time).

There is an old GCM (general counsel's memo) regarding "controlled group" status for these situations. If I recall correctly, it usually depends on the degree of control that the board or employees of the exempt organization have over board of the taxable entity. If there are no outsiders, it is likely that they would be considered controlled by the exempt organization.

You primarily see multiple employer plans when the companies are related (but just don't meet the 80% rule) and one party is managing both plans. If that is not the case, it's probably a good idea to separate the plans -- e.g., do a spin-off. Otherwise problems with one employer can taint the entire plan and trust.

The IRS has a 125 audit program that was started a few years ago by payroll tax examiners. And if I recall correctly, the particular auditors were in the Southwest (or maybe Southeast) and those were the areas heaviest hit by audits. However, they have been training other examiners. A copy of their 1998 training is located at http://www.irs.gov/pub/irs-tege/lesson4.pdf . It was my understanding that when the program was initiated, they were primarily looking at issues like whether a plan document existed as opposed to discrimination issues, etc. In other words, since they were payroll auditors -- and not EP auditors -- they were focusing primarilyl on whether the payroll deductions were truly pre-tax. So if a plan was audited, the examiners were closely reviewing the plan document and the payroll records. I think that most or all of the issues that you are describing would be discovered by the examiner. Your chances of getting audited probably depend on whether you are in targeted industry. The greater risk might actually be with the insurance company...

Don't look on the "ordinary income" line. Look on the "earnings from self-employment" line.