movedon

I agree it's gray, but I lean toward the first interpretation. However, I think there's an exception in the 415 crediting deadline rules about make-up contributions to correct failures. Not sure that's really defined anywhere, but if you take the position that the top heavy allocation is such a corrective type allocation, then it would be an annual addition for 2009. I believe I'd hang my hat on that.

And that assumes it's not a non-electing 403(b) plan, which may not be subject to any coverage requirements. Oh, and laila is a spammer. Watch where you click.

My first thought is the resolution that contains the ERISA reference was just a boo-boo - some TPA provided the resolution for plan document adoption or whatever and failed to remove the reference to ERISA from their boilerplate resolution. I agree with you that a resolution that mentions ERISA doesn't by itself make the plan an ERISA plan. I assume the sponsor is a non-profit. I know there are people in this business (mostly lawyers, I'm guessing) who feel pretty strongly that there are deferral-only plans out there where the sponsor has enough of a hand in the plan that the plan is subject to ERISA. Maybe someone like that has been in their ear. I personally have never seen a deferral-only plan that I felt met that threshold for ERISA coverage, and besides my general advice to any non-profit client with a deferral-only plan that they need to be mindful of staying "hands-off" (and that it might be a good idea to offer more than one vendor), I confess that I don't spend a lot of time worrying about it. In my world, non-profit sponsor + deferral-only 403(b) = not covered by ERISA.

AndyH said what I meant to say, but he said it about twenty times better.

If I recall correctly, the 403(b) plan may permissively aggregate with the qualified plan to demonstrate compliance with coverage, but the 401(a) plan may not permissively aggregate with the 403(b) for same.

Will do. I do intend to talk to them (lawyer and consultant from big firm) about it and find out why they think this is OK - assuming the client is willing to pay the three of us to have the conversation! Thanks, again.

Thanks, Austin. I'm looking for angles to consider how it is that one of the big actuarial/consulting firms is (according to the client, anyway) telling them that this would be OK to do. I just don't see it.

This is a good one. ERISA plan. Client wants a discretionary last day rule for matching contributions - something like, "Employer reserves the right to make a matching contribution only for folks employed on the last day of the year." 1. I say no way, either it's impermissable discretion under 1.411(d)(4) or not a definite allocation formula, probably both. 2. Furthermore, even if such a provision was permitted, when would the decision about whether or not to impose the last day rule have to be made? Before the plan year starts, I would think, since there's no hardwired hours requirement or last day rule. I guess you could make an argument that the discretionary last day rule is a last day rule for purposes of timing the decision, but that's pretty circular. Anyway, I'm good with "no," but I'm not really finding clear guidance on this, and I'm hedging just a smidge. Anyone got any thoughts on it? Thanks.

I like the sound of that advice, Sieve. I have always taken the position that if there's money in the plan it's not terminated and would thus need to be restated, but your point seems pretty reasonable. I know that given the opportunity I'd try to get the money out by the deadline, but I might consider this discussion if I ever find myself with a client in this pickle.

I'm not sure about the OP, but my gripe here is not just in losing a client to a bundled provider, but losing a client to a bundled provider that we have a TPA "alliance" type relationship with. I.e., I'm the TPA for a plan, Company X provides recordkeeping and investments. Company X and I have a sort of relationship (pretty loose, varies from provider to provider). We communicate with Company X independently, they provide us data to do our work, there's revenue-sharing, they may even send out a wholesaler to visit me from time to time, etc. Then Company X comes in and prospects the client to ditch us and let Company X take over the administration services. Me no likey. What I'm talking about is along the lines of what R. Butler and tpa555 mentioned above. EDIT - I'm not talking about Hancock. I have not had this problem with them.

Hey Sieve, do you mean if the termination amendment was adopted on or before 4/30/10 with a term date declared as 4/30/10 or earlier that the plan wouldn't need to be restated even if the assets were not paid out on or before 4/30/10?

I think if there was a dollar in the plan on 5/1/10, it needs restating. VCP.

Do I understand correctly that this is a trustee-directed, pooled kind of a plan that the participant has chosen to roll his previous employer's plan's balance into? If so, then yeah, I think selling the shares and dumping the cash in the pool is the way to go, unless the trustee of the recipient plan wants the shares as an investment of the trust. If, however, the recipient plan is a participant-directed type plan with individual brokerage accounts, I would think the shares could just go into the individual's account. I don't think there's any tax advantage to the in-kind transfer. I have known participants to want an in-kind transfer of a large holding (where they want to continue to own the investment) just to avoid losing out on any gains that happen while cash is in transit between the selling (distributing) plan and the buying (recipient) plan.

I haven't read the article, but I would imagine it goes into the complex analysis (to me, anyway) of the tax consequences of various options. While the interest is double-taxed, in theory the proceeds of the loan, to the extent they earn any return in their use, create currently taxable earnings outside the plan, while the deposited interest goes on to create tax-deferred earnings inside the plan. I've considered this, and I think the entire analysis becomes one of too many variables - assumed rates of return, tax rates that may change over time (both personally and policy-wide), interest rates, etc. Hopelessly unpredictable if you ask me. This could detriorate into a conversation about whether pre-tax savings is even a good idea in the first place, given unknowable details like the above. Perish the thought! The bottom line, as far as I'm concerned, is that taking a participant loan is likely an option worth considering if you need a loan and your alternative is going to the bank - interest double-taxed is still better than interest paid to the bank. Of course, even there we have to dismiss (as BG pointed out above) the lost earnings you endure on the money removed from the plan. In any event, taking a participant loan is probably never a strategy to improve your retirement savings, even in a Roth account. Theoretically you put the money in the account in the first place to create retirement savings down the road, on the assumption that the contributions would earn returns over time. The money isn't earning a return if you take it out to buy a boat. IMHO.

How about a taxable in-kind distribution of the shares of the LLCs, along with enough cash to cover the withholding?

And in any event, if your choice is between a loan from a bank or a loan from the plan, you are better off "paying" interest in to your plan account and losing a little of it to tax later than paying the interest to the bank and losing it all now.

Well, you can't top me in the laziness department, so I'm working from memory here and not from any actual looking... Seems like the first thing the plan would do is ask for the money back. Assuming the guy says no (and that the money wasn't rolled somewhere from whence it can be retrieved), I guess then the plan should issue a 1099 and head on down the road. Wouldn't make sense for the employer to put money in the plan to "restore" the plan, since it's an individual account type plan - that would be a windfall to the participant. Can't go back and withhold on the distribution since the money is already gone (and it might not be an eligible rollover distribution, anyway). I think this could be done via self-correction. Is there a retroactive amendment that could be adopted to make the distribution OK - some kind of in-service distribution or loan provision? That might technically be a VCP solution, although if it happened during the current plan year, maybe the amendment could be dated the first day of the current plan year as a discretionary amendment?

Duplicate post - http://benefitslink.com/boards/index.php?s...c=46100&hl=

What Austin said, plus there are practical reasons not to put illiquid and difficult to value assets in a plan. There are other fiduciary and discrimination pitfalls that would only apply if there were employees and the plan was subject to ERISA.

Sorry, right - I assumed ps plan. Pension plan has minimum funding deadline of 8 1/2 months after end of plan year, and it's not extended by tax return extension.

Yes. October 15.

Yes, as long as it's a nonelecting church plan under 410(d).

Yes, I've done it. No, I've never had it scrutinized. I have mixed emotions about the whole thing, but in the end I think the rules are pretty clear that this can be done and that no one really has any authority to say otherwise. On the other hand, it obviously is about avoidance (although ostensibly for non-nefarious reasons, i.e., cost), so it's hard to argue that, at least conceptually, there isn't something a little wrong with it. I think if the DOL wants to stop this practice they need to change their interpretation of the law and the instructions to the 5500 or push for a change in the law.

If I was making the argument after the fact, I would contend that limiting the plan to one vendor and the presence of some errant boilerplate language in an SPD-type document are not enough to make it an ERISA plan - if, in fact, the employer never did much more than send deferrals to TIAA CREF.