E as in ERISA

NAF -- People are going to stop responding because you don't know what you're talking about, but you're insulting everyone. A court generally issues the DRO (domestic relations order), which is any judgment or decree or order made pursuant to domestic relations law and relating to child support, alimony, or marital property. If that DRO assigns rights in the participant's plan benefits and meets a list of requirements (certain facts must be stated in the order and it can't alter plan benefits), a plan administrator can consider it a QDRO (qualified domestic relations order) and make distributions from the plan pursuant to that order. In reviewing the DRO, the plan administrator does not compare the DRO to the rest of the decree. It simply looks at whether the DRO contains all the required facts and does not provide the alternate payee with benefits not provided under the plan. The rest of it is all process, which may vary state by state and court by court. The court probably isn't going to issue the DRO unless the parties have both first agreed to it. But everyone on this board can probably tell you that courts will definitely issue DROs without plan administrators input first. Which is why they remain DROs (and not qualified DROs) until the plan administrator tells the participant and his attorney what to fix. And then they go through the process again and a new DRO will be issued. And the plan administrator will okay it as qualified.

? No requirement to make qualified Katrina distributions available. But if you do make them available, then you're required to amend plan to provide so.

This is not my area of expertise. But as far as I'm aware, trusts don't have a blanket exemption from receiving 1099s (like corporations generally do -- with some exceptions).

Schedule C is used to report income earned as a sole proprietor, not incorporated or not as part of a partnership. His S-Corp income would be on a W-2 and Schedule E. But none of the income on Schedule E would be self-employment income. Only the W-2 income would generally count -- and only for purposes of the corporation's plan. It's not self-employment income.

Technically the 401(a)(31)(B) requirement to automatically roll applies only to plans that have a provision to force out amount less than $5,000 under 411(a)(11). So you could interpret that to mean that it only applies when you force out an amount without the participant's consent pursuant to that specific provision of the plan. And that it doesn't apply when you distribute without consent pursuant to a different plan provision such as a termination. But it's not worded that clearly. And 411(a)(11) and the regulations under it aren't that well drafted either. 411(a)(11) just says you can't distribute amounts over $5,000 without consent. And also mentions ESOP dividends. But then the regulations under that section also acknowledge that you don't have participant consent on death benefits, QDROs, RMDs, plan terminations. Notice 2005-5 junked it up by specifically exempting payments to surviving spouses and alternate payees from the automatic rollover rules. As if death benefits or QDRO payments would otherwise be subject to the rule? So that leaves open the question of how much of 411(a)(11) and the exceptions to consent are really subject to the rule. IRS was going to issue guidance. But haven't seen any.

Is the issue partly one of how to withhold it? The employees gets paid minimum wage (which is sometimes half or less the regular rate for wait staff). Some days they may make hundreds. Other days it may be slow. They supposedly report the tips to the employer so it gets counted for withholding. But that cash doesn't actually run through the payroll system. So ultimately it becomes an issue of how to withhold both taxes and 401(k) from the small paycheck? What percentage are currently participating in 401(k)? 0 percent? Why not do an aggressive campaign to encourage them to voluntarily contribute, but not actually use automatic enrollment because of the administrative issues.

Proposed legislation only requires 70% coverage for the discrimination safe harbor.

It depends on each plan's formal or informal policy with regard to the timing of mandatory distributions. I think that most are informal. A plan that does them once every year in March (balance forward plan) would be able to delay to 3/2006. But a plan that has been doing them monthly should try and be up and running again and caught up by the end of the year. Technically you have an operational violation (failure to follow plan terms) if you don't. But the correction would be to make the distribution. I think that you're safer the sooner you get caught up. Best by 12/31. But unclear what the ramifications are for going beyond that by a month or two or more.

Under the elapsed time method, you usually span service when the period of severance is less than twelve months. So, generally, yes.

One of the key differences between 457(b)s and 457(f)s is that 457(b)s has a number of rules relating to contributions and distributions that you have to follow. (The rules make them look more like qualified plans). If you don't want to have all those rules in your plan, then you need to follow 457(f) where the only rule is generally that it has to be subject to an SRF. So that is another key difference -- that 457(f)s have SRFs but 457(b)s don't have to. If you do NOT want to condition benefits on performance of services (an SRF), then you generally WOULD want to go the 457(b) route. If you don't follow either 457(b) or 457(b) then the compensation is currently taxable.

Someone else probably ought to be filling out that form.

A merger or spin-off of a plan doesn't in and of itself require vesting, because those are just combinations or divisions of plans that then continue in existence. But you have to use your words carefully. If you do something more than pure merger or spin, you may have vesting issues. And it sounds like you have something more than that. A termination of something? If you terminate a plan after it spins off, then you would have vesting issues.

401(a)(31) requires that a plan allow direct rollover of any distribution that is an "eligible rollover distribution."

Royalties for literary works or music? If the "employer" is a small publisher, he might be paying the other for various services in an employee capacity. But if there are royalties from publications or music they've created together, he would then 1099 him for those. Not common. But that's what comes to mind. But it can be way more complicated than that.

http://www.irs.gov/pub/irs-drop/n-05-94.pdf

notice 2005-94. But not posted on their pub-drop yet.

Santo - Are they saying he is not a fiduciary -- or that if he is a fiduciary they will hold him harmless from liability. They might also want to think about prohibited transaction rules. A fiduciary to the plan should generally not provide investment advice to participants under current law. There is proposed legislation that would change that. Title VI of HR 2830. But the proposal is somewhat controversial. And one of the concerns is a situation similar to what you describe. An advisor getting asset based fees for helping the employer set up the plan and the investment funds. Then the advisor helps participants choose among funds. There is perceived to be a potential conflict of interest if the amount of fees that the advisor receives for helping the plan are affected by what funds he advises the participants to choose. If he directs participants into the funds paying the highest percentages the advisor gets more. If your facts are such that they would be governed by the proposed legislation I wouldn’t do this until if and when the legislation is passed.

I said it generally wouldn't be permissible to accelerate distribution as a result of acceleration of vesting IN A 409A PLAN. What you described is not a 409A plan. So in that case you don't want to accelerate vesting without accelerating distribution or then you do have a problem, as I said in my first post.

But you should note that tying distribution to vesting in a way that acceleration of vesting also accelerates distribution is in itself generally not permissible in a 409A non-grandfathered plan. You can't use time of vesting as the date of distribution because time of vesting is not on the list of permissible distribution events. So acceleration of vesting shouldn't automatically accelerate distribution. I think that the IRS indicated that's why they don't care much about vesting.

Per informal comments from the IRS, acceleration of vesting is generally not a concern under 409A. You can do whatever you want. The primary exception is grandfathered amounts. That is where vesting is an issue. You can't accelerate vesting as of 12/31/04 to grandfather an amount that wouldn't have been grandfathered. The other area where it might make a difference is in amounts that are excepted from 409A because they pay out right after vesting. You want to make sure acceleration doesn't affect you there. But for the most part if you have a non-grandfathered plan that you are treating as 409A vesting and what you do with it is not an issue.

I think that the IRS recognizes that you can conceptually have deferred compensation with partners. But they haven't figured out what the rules are. Deferred compensation in the context of partners is a bit more complicated because of the partnership taxation. The partnership is a flow through entity. There is generally no taxed paid at that level. The partnership is basically ignored for tax purposes and the individuals are taxed on their allocation of the income. If the income isn't allocated to a specific partner then they are all going to get taxed on their ratable share of it. So it becomes difficult for one partner to have deferred compensation. I think that you need partnership experts to help answer the questions.

I agree with them. Example. If he contributed $7,000 from 7/1/04 - 12/31/04 and $6,464 from 1/1/05 - 6/30/05, then you have no 402(g) problem. If he contributed all $13,464 from 7/1/04-12/31/04, then you have a 402(g) excess for 2004. If you leave in the plan, you will potentially have double taxation. Taxed for the 2004 excess, then again when distributed.

If the individual is wearing his "participant" hat when making the investment selection, then you'd have a discrimination problem allowing only an HCE to direct investments. But it appears he's probably wearing his "fiduciary" hat so you wouldn't have that issue. And then as JM says you wouldn't check either box.

You can't have retroactive entry on the 401(k). But there are a couple of ways this could be handled. Ideally the plan document would spell out what approach to take. One alternative is to apply the one-year break and retroactive entry only to other contributions. So 401(k) could begin immediately upon rehire (or start of the 401(k). Another alternative is that once the 1,000 is met during the year then the participant enters immediately.

It would also waive the 25%. The IRS issued guidance today on KETRA. http://www.ustreas.gov/press/releases/repo....113005.end.pdf