masteff

Why not simply suspend for 6 months now? The IRS says they don't prefer that solution but they have not said you can't use it. The main issue is if it would result in the EE receiving less match than they would have if the suspsension had occurred at the correct time (or if the EE has terminated). See slides 25-27: http://www.irs.gov/pub/irs-tege/epcrs_plancorrection_phoneforum.pdf

My actual experience is for a change in the number of payments per month: for biweekly to semimonthly payroll tranfers or for termed ee from payroll deduct to monthly coupon book. Our loan policy stated it could happen and the ee got notice of the revised payment. But the OP does not state anything about a change in payment frequency.

What BG said. Reamortize for what purpose?

The thread you linked fails to address how the exception would actually apply to an insurance agent. You can't extract any conclusion from it what so ever as applies to your situtation. Whereas you can extract a conclusion from PensionPro's statement and from the 3rd post in the thread that I linked.

http://benefitslink.com/boards/index.php?/topic/9383-statutory-employee-issue/

What does the employer want? Personally, I'd run it thru payroll as a negative health insurance deduction. It's no different than any other medical insurance rebate or refund.

Huh? I'm at a loss for what "product" could be better suited for them that's not readily available in a perfectly good 401(k) that permits (or can easily be amended to permit) them to do exactly what you're asking. Please clarify/expand on what you're talking about.

Suggestion: Retroactive amendment to the date of that distribution and make everyone currently in the plan 100% vested. You then fix that one distribution and hopefully then don't have to worry about orphaned forefeitures.

Some employers confuse what the insurance provider permits and what Section 125 permits. I would bet that a current or former insurer had the rule about dropping now but waiting to rejoin so that's what the employer adopted.

See the links in the 2nd post in this thread: http://benefitslink.com/boards/index.php?/topic/52884-401k-hardship-withdrawal-deposit-to-hsa/ Also see "qualified HSA funding distribution" on page 6 of IRS Publication 969 http://www.irs.gov/pub/irs-pdf/p969.pdf

I only-half-tongue-in-cheek suggest you find new/different pension meetings to attend if that's quality of advice you're getting. BG's correct. Although I wouldn't blame someone if they took the easier route of applying the default as of the first day of the current year. The participant can continue making payments but they'll be made on a defaulted loan which means they'll create basis which needs to be tracked in an after-tax source. Until repaid and/or otherwise offset, the defaulted loan will count against the participant's ability to take other loans.

Susan- Both correct (but you're more correct) because he has to take 2 distributions this year, one by 4/1 for 2012 and one by 12/31 for 2013. TPATC - Terminated on 12/31 (and thus needs to take an MRD for 2012 by 4/1).

2013-12 http://www.irs.gov/pub/irs-drop/rp-13-12.pdf

So was 1/2 of the money you contributed in 2012 actually for 2011? If not then your bigger issue is an excess contribution. If 1/2 was for 2011, your options may be restricted since you're more than 6 months past the due date of your 2011 tax return.

Try PTE 77-9 http://benefitslink.com/boards/index.php?/topic/19048-using-403b-contract-as-collateral-for-a-participant-loan-under-an-er/

Why not just specify in the accrued vacation & PT policy that unused time will be paid as a post-death benefit? It's semantics but it arguably puts this outside the exception for post-termination deferrals in the 1.415(c )-2 regs. Which actually raises a good question... how is it being paid?

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I agree w/ your analysis and will add... Having been down this road (had EEs move to both classifications), an essential and critical element of a 414(n) "leased employee" is the 3rd party "leasing organization" who is payrolling the worker. (Note: I did error on the side of being conservative and found a few nonstandard 3rd parties as counting; in rare situations, employees of contractors (but not the owner of a vendor firm) can become leased employees if the element of "primary direction or control" was met.)

Depending on the investment firm they're using, they could amend the current plan (if needed) to permit in-kind distribution, which would mean they wouldn't even have to liquidate assets to rollover out of the terminating plan. I think the real question is what would they gain by paying 5 years of plan fees. Only thought is if one or both have an outstanding loan and can't afford/don't want to repay it currently. I suppose the calculation is ( cost of 5 years admin + 2 amendments to freeze/unfreeze ) vs ( plan termination + new plan setup ). You might show the breakeven of how many years of admin is cheaper than termination. Anecdotally speaking, I can point you to two plans (one DB and one DC) that were frozen in 1997 and are still in existence. Of course those employees are unionized and now actively participate in other plans of the employer. The 401(k) continues to permit loans and other distributions.

A google search term to try is: backdoor roth ira Also refer to IRS Publication 590 and Form 8606

The trick is to find the more precise definition than the semi-vague "benefiting". IRS Code 401(k)(11)(C ) "Exclusive plan requirement The requirements of this subparagraph are met for any year to which this paragraph applies if no contributions were made, or benefits were accrued, for services during such year under any qualified plan of the employer on behalf of any employee eligible to participate in the cash or deferred arrangement, other than contributions described in subparagraph (B)." My opinion is that loan payments are NOT contributions nor accrual of benefits and therefore would not violate this rule.

http://benefitslink.com/boards/index.php?/topic/50562-illegal-alien-with-false-identification-in-profit-sharing-plan/

Did some more reading... DOL issued the following FAQ in January: http://www.dol.gov/ebsa/faqs/faq-aca11.html In the 2nd part of Q-1, they address HRAs. They emphasize the distinction between "integrated" and "stand alone". They do not put any other qualifiers on "stand alone" plans. They do state that further guidance on HRAs is anticipated.

It's a union plan in the situation your client would like to be in (HRA with full carry over year to year and they note that a participant can use 100% of their balance in any given year) that submitted comments to the DOL on the problem that Chaz is discussing.

In light of the above discussion, I found this of moderate interest. http://www.dol.gov/ebsa/pdf/1210-AB43-0074.pdf