E as in ERISA

Yes. See Reg Sec 1.401(a)(4)-11(g)(3)(vii).

It sounds like the board paid out more than it should have, based on what your father selected (e.g., if they were paying out 16,500 per year, when they should have paid out 15,000 based on his selection of a 100% survivor annuity). That is potentially an operational failure (failure to follow your father's election) and needs to be corrected somehow. The technical way to correct an error is to put everything back to how it would have been had the error not occurred. That would require that your father restore the overpayment. However, that rarely happens. The IRS generally works with employers and frequently permits the employer to correct the error -- by having the employer restore the money that was overpaid. But the employer is not necessarily required to do that. The employer might do nothing. Then you have a 403(B) with an uncorrected operational error. There could be tax consequences to your father and/or your father's payments could probably be reduced even further (e.g., reduced to 14,250 if he has been overpaid for five years and his 403(B) balance is lower than what it should have been at this point because he has been overpaid). The final resolution depends on whether this is an IRS audit or CPAs plan audit or an operational audit, etc. It also depends on how many employees are involved and what is the incentive to the Board for correcting the problem itself.

The employer must make QNECs for the persons who are added back in -- the rate of QNEC is based on the other NHCs average for the year. See Reg Sec 1.401(a)(4)-11(g)(3)(vii)

It's easier if the bank pays the costs directly. If they go through the plan, then they are subject to the prohibited transaction rules and the fees probably have to change because the plan can only pay the bank for the direct costs (no overhead and no profits).

Are you using current year testing (comparing current year HCE ACP to current year NHCE percentage)? Do you qualify to switch to the prior year method (comparing current year HCE ACP to prior year NHCE percentage)?

The difference generally relates to amounts realized on the the exercise of nonqualified stock options and distributions from nonqualified plans (both of which are generally includible in W-2 wages).

One is issued at the Treasury level and one is issued at the IRS level? And they are two different types of rulemaking with different purpose and effect?

Then what do they need the options for? To be entitled to purchase the stock? If only the ones with options can purchase stock in the plan, then I would definitely say you have a problem!

I don't that a plan should accelerate a loan based on bad credit. But I have seen loan policies drafted that way (I assumed that the author used a commercial loan policy, or something like that in order to draft the terms). I advised that is not common language for a loan policy.

I assume that what they are trying to do is buy stock in the plan at the exercise price of the option (which I assume is lower than fmv)? I agree that sounds like a problem.

To obtain a complete understanding, you might need to start with an "administrative law" course that explains different types of agency actions and what is required for each type.

Good job! You saw my trap! If you had answered that it was your "in-depth knowledge of the QDRO rules," then I would have said you were making a legal interpretation!

Do you reach that conclusion because it is inherently obvious to anyone who reads that statement that it does not apply to QDRO benefits, or is it based on your in-depth knowledge of the QDRO rules?

Try entering "purchase additional vacation" (in quotes) as a search term on a search engine like Yahoo! (that recognizes phrases in quotes). You should find some links to sample statements on HR web sites (and some links to timeshare sites).

I think that one needs to read the actual provisions of the plan in order to determine whether the QDRO distribution or standard distribution provisions apply in this case. It appears from the stated facts that the provisions do not overlap and that the likely outcome is that the QDRO provisions prevail here. But what if they are actually a little more ambiguous -- e.g. what if the standard distribution terms provide something to the effect of "a participant may not receive a distribution of any benefit under the plan until retirement or termination." Then it may be necessary to determine whether that provision applies not only to the spouse's interest as a participant, but also to the spouse's interest as an alternate payee.

The parent and subsidiary will become subject to the discrimination requirements of Section 125, with both treated as a single employer. Read Section 125 (g).

I have seen someone write a loan policy that provides for acceleration of the loan if the person's financial condition becomes bad (obviously including bankruptcy, but also a lot of other factors). That might justify the company to monitor the person's financial status. I don't think that is required by IRC or ERISA. But I don't know that it is prohibited either.

I don't have a lot of experience with government plans and I'm not sure how the IRS applies discrimination requirements in a government setting like this. However, I will add a couple of comments (since no one else is). Section 125 (g)(3) basically provides that eligibility requirements are not discriminatory if they benefit a nondiscriminatory classifcation of employees and the service requirement for all employees is the same. Most "class" exclusions I've seen involve part time employees, etc. (because they are often excluded from underlying benefits). However, that is generally not a nondiscriminatory classification of employees. My rule of thumb is that the 125 plan should be available to all employees (even if many can't use it because they are eligible for underlying benefits). However I would note that it is my understanding that the IRS 125 auditors are not looking at discrimination testing. They focus on the plan and payroll aspects. (But we should probably expect expansion of the program in the future.) I would also note that, until recently, the IRS had not even focused much on controlled group issues during qualified plan examinations. Some considerations: 1. Look at whether the agencies have similar demographics in terms of percentage of HCEs and nonHCEs -- so that if they must be counted as one employer, you have a nondiscriminatory classification covered by the plan. 2. Make sure the plan identifies the class to whom the plan is available ("all employees of Agency A"). 3. Consider the impact of using two EINs and payrolls. 4. Consider the impact of allowing Agency B employees in the 125 plan (not only the administration, but also look at whether the underlying benefits are the same -- or might you have additional nondiscrimination issues if you do that?) 5. Consider hiring an attorney who is an expert with nondiscrimination issues in 125 plans (if one exists!).

If the companies are in the same controlled group, I would not look at this as a rehire. I would look at this as an employee who changes from a classification that was not eligible for the plan to a classification that is eligible.

But make sure that he is aware of what happens at normal retirement age (e.g., 100% vesting, distributions become available, etc.) And note that someone might be subject to 72 excise taxes if they take a distribution before 55 or 59-1/2.

I don't know the answer. I'm sure that it's doing that because it anticipates that repayment of the loan will be accelerated if the participant terminates at normal retirement, so it is denying the loan in the first place. But note that the "reasonably equivalent basis" rule in Labor Regs. Sec. 2550.408b-1(B) requires that loans be available to all plan participants without regard to the individual's age. I don't know whether under age discrimination laws you are allowed to assume that the participant will terminate employment at the plan's normal retirement age.

I lean toward answering the question in the way that is legally correct ("No," there has not been a resolution to terminate), and only changing the answer to "Yes" if you can't get the DOL to accept that answer (I believe that they will accept the "No" on a final return that shows transfers out to an identified plan).

If they are treated as a single employer for plan purposes under 414(B) or ©, then her service with Company A counts for purposes of Company B's plan. So you have to look at service from her start date and see if she met the hours and passed an entry date while she was still employed with Company A. If so, then she may enter the plan on her hire date -- October 15. You will then have to determine if she qualifies for an allocation.

This isn't really an issue of employer contribution v. employee contribution. It is really an issue of the definition of compensation -- i.e., what is included in taxable compensation. 1) Unless there are facts missing, the current contribution is an employer contribution. You have a profit sharing program that pays out in cash (i.e., it's not a qualified plan). The company calculates how much it wants to set aside each year (e.g., $100,000). The program provides that 90% of the amount is paid to the employees in taxable cash (e.g., $90,000). The other 10% automatically goes into the qualified pension plan without any election on the part of the employees (e.g., $10,000). This formula satisfies the requirement that the employer make a pension contribution equal to 11.11% of the $90,000 additional taxable cash. 2) Giving employees the option of contributing some of the profit sharing amounts would complicate things, because of the fact that the employer contribution is based on taxable compensation. If employees reduce their taxable compensation by making a 401(k) contribution, they will also reduce the amount of employer pension contribution that they receive. Example. Employee currently receives $90 profit sharing in cash and $10 in pension plan. If employee makes a 401(k) contribution of $45 of the profit sharing, then the employee will only get $5 in the pension plan, because the pension contribution is 11.11% of TAXABLE compensation. It sounds like the managers want to make sure that the employee will be made whole for the other $5. Would they consider changing the definition of compensation to taxable compensation PLUS profit sharing bonus? (That is not a safe harbor definition). Note employees who are deferring portions of their regular compensation may already be losing out on part of their employer contribution. (An employee who makes $20,000 regular wages and contributes $2,000 to the 401(k) is already losing 222 of the employer contribution to the pension).

I'm not aware that any clients have had a problem reporting it as a merger and reflecting the transfers. I think that is the correct way to report it.