ERISAnut

Not necessarily, depending on who the compensation is paid from. Anyone can be a fiduciary. The employer will always be a fiduciary; and within that responsibility they may appoint other fiduciaries (i.e. you). Stated loosely, the term itself is merely anyone who exercises discretion or control over the administration of the plan (or assets). Now what type of services are you proposing to render? Who is being proposed to pay the fee for these services? (If the plan is being proposed to pay the fee, then you are a dangerous person.) Also, as an employee of the employer (who is already fiduciary and likely plan administrator), your actions on behalf of the employer already has this employer bearing the risks of your actions. (Therefore, you are still a dangerous person). But, give us some exact details. There are some strong individuals here that can dissect your situation and give you every angle to consider. Also, please clarify whether you are a Registered Investment Advisor (RIA) or Investment Advisor Representative (IAR). Many individuals get this confused when taking the Series 66.

Yes Yes & Yes Any or none of a qualified plan may be self directed or not. There is no rule that states the employer must allow participant to self direct any part of any qualified plan.

I think the bigger issue here is that the participant is subject to income taxes on the total taxable amount regardless of whether or not the 20% withholding. That same participant has to cover this with the IRS. The Trustee's (or payor's) issue is with the IRS as well; irrespective of what the participant feels he is entitled to. Even if there were a 'pony up' amount, such amount would be taxable to the participant as well. So, there are two distinct issues, both with the IRS; And the IRS will hold the respective parties accountable.

Randy, I'd take a minor shot at this one as it does bring up interesting points: 1) Since the plan is not subject to ERISA, then the it may be able to refuse to accept a QDRO, but only to the extent the state law does not require the plan to accept to QDRO. This has always been the case and had not changed. 2) It has always been the case that employers (in such instances) placed the burden on the legal team of the product provider to make the determination. This functionality may still be an option (with the only change is that there are information sharing agreements in place). 3) When speaking to whether passing the responsibility off to a TPA (or other service provider) to make the actual determination, it does seem consistent when the TPA would actually accept this responsiblity. However, employers have typically pawned this responsibility off to the product carriers. Hope this helps.

Laura we merely quoting the rule that a person with 2 years of service under the 5 year graded schedule is 40% vested. Next year, he would be normally be 60% vested, but the plan is amended to a 6 year graded schedule, 0,20,40,60,80,100. Even though the participant with 2 years of service is entitled on only 20% vesting under the NEW schedule, he remains at 40% vesting because it is protected. So for him, his vesting is 20 after year 1; 40 after year 2, 40 after year 3, 60 after year 4, 80 after year 5, and 100 after year 6. Notice how 40 gets double years.

Not viable... This speaks to benefits, rights, and features as well. While the doctors entering the plan are NHCE due to no compensation in the prior year, you must look at the "CLASS" of doctors. It is an entry date option provided to this particular "CLASS" that is not provided to other classes of employees. How many HCEs are in this CLASS of doctor? How many NHCEs? How many NHCEs are in other CLASSES that are not doctors? How many NHCEs? You likely fail benefits, rights, and features be providing more favorable entry date options to a discriminatory CLASS of employees. As far as testing under an average benefits test while using the least restrictive date, you are still allowed to separate test the early entrants who are NHCEs. I would not bring this into the equation. Purely BRF by providing a entry date to a class that is predominately HCE.

I agree with Sieve and will elaborate on his last statement, then the first. In order for safe harbor to exist, you are only required to provide it to NHCEs. Providing it to any or all HCEs is optional, but must be correctly reflected in the plan. This is an exact repetition, but worded differently.

Must allocate the SHNEC on any compensation that satisfies 414(s). Your definition likely will. Because it is a Safe Harbor only plan, it is deem to satisfy top heavy. Do not see a problem.

I think the document will primarily govern whether the 401(k) is an amendment of the PS plan. Each document (at least adoption agreements) poses the question of whether it is a new plan or restatement of an existing plan. If it is a restatement of an existing plan, you will list the plan name and also the original effective date. If it is a new plan, then you will select the new plan option. I am speaking primarly of adoption agreements. So, there should be no question as to whether this was a new plan or a restatement of the profit sharing. Just find this provision on your document.

Damn, I see your point. At the time in question, the termination had already occured; and therefore the right to receive a distribution is arguably set in stone. In this case, I would agree with you as this is more of an issue of amendment timing to take away something that is already in process. My argument (I may not be able to speak for others) is that the when termination of employment is not made with the expectation of a distribution being available, then there is not a prohibited cut-back issue. Amendment timing appears to be an additional consideration for non-discrimination and taking away benefits. But, let's take this further. Suppose the participant has completed a request for a loan or hardship, and the plan is amended after the requested has been received? This is the same scenario. It would be more of an amendment timing issue rather than a cut-back issue. For what it is worth, I like the way you think. You also posted while I was typing this one. But, yes, we will agree to disagree while knowing exactly what we disagree on.

I see what you are saying, but you must first meet eligibility under the terms of the plan to be includable in any test. If the plan prescribes a 21 & 1 provision, then no one who is less than 21 or who worked less than 1 year of service will be in any test performed by the plan (because the failed initial eligibility). That doesn't prevent them from being HCE, they are just an HCE who failed initial eligibility; and are therefore excluded from all tests. If the plan, however, had immediate eligiblity then you would be allowed to test separately between the early entrants and the regular 21 & 1 employees. Heck, you may also test the 'early entrant HCE' in the group with the regular 21 & 1 employees.

That is the point. The plan certainly had the option of stating hard-fast dates such as 'date of termination', 'end of calendar quarter', 'end of plan year', but didn't. It stated 'the next valuation date following' the termination of employment. When using this terminology, then the valuation date is the reference. Now for your argument, suppose the plan is written to say the end of plan year following termination, and you change the plan year end from June to December. A participant who terminates in May would have a claim under your argument to receive their distribution in June because it was previously a plan year end. Would that make sense? Probably not. This is why the reference to the events (plan year end, next valuation date) that are not protected do not cause a prohibited cutback. There would be no reasonable uniform application, because there would alway be a situation where a detriment could be argued.

Yes, but use the date 'as soon as administratively feasible' instead of Janaury 30th. I would venture to argue that since they are the owner's of the company, no lost earnings would be allocable. However, a literal interpretation of the rules would not support this, but an understanding of who the DOL is trying to protect would. The DOL typically does not view owner's of the company as employees. However, the entitity is incorporated which may change that view. Different companies may fall on different sides of the argument. However, an attempt (in good-faith) to provide full correct of the error will often suffice (especially when considering the dollar difference between the two approaches is miniscule).

Also, to answer the question, regarding Normal Retirement, I think this itself is a protected (but only with respect to the benefits that are tied to it). The valuation date (itself) is not protect, neither are the benefits tied to it (meaning benefits that use it as a reference point).

Your position seems pretty reasonable. Hard to imagine an employee terminating and requesting immediate distribution of funds based on an argument that he previously had an option of terminating and receiving immediate distribution. But, in the event it does, you always follow the written terms of the plan. In the unlikely event the employee challenges the cutback issue, it will likely be with the IRS; not the DOL. The DOL will only challenge when employee rights under the written plan aren't being enforced, where the IRS will have to address whether the actual plan language or amendment timing will be an issue. But in all, I agree with your approach. I am also with Sieve (and four01kman) on this one. Sorry Kevin, you jumped in ahead of me prior to my post. Our disagreement is based on a frame of reference (i.e. date of termination or first valuation date following date of termination). The assessment of whether a change in the timing has occured would be based on a starting reference point. Our argument is that the starting reference point is not termination of employment, but instead the first valuation date following the termination of employment. With this application, the distribution timing did not change.

You are correct. He will be excluded from all tests because he as failed initial eligibility (age/service).

Of course he is HCE. He's just not eligible due to age/service requirements; but still an HCE. Hope this helps.

Two options, both are debatable. 1) Issue a corrected W-2 Form and correct issue outside of the SIMPLE IRA; making it appear as if the deferrals were never withheld. 2) Make the deposits as soon as possible and explore correcting under the DOL procedure for late deposits. The 30 day rule for deposit is an IRS rule (which was violated) and the ASAP rule is a DOL rule (that was violated as well). I would choose an option and move on.

Jim, For what it is worth, I agree with four01kman. The document in question clearly had the option of selecting as soon as administratively feasible after termination, but instead referenced another event.

I agree with you. The question becomes "on what basis would you not?" That appears to be the point of the accrued to date testing option. As you outlined: 1) Nonexcludable employee with 2) a benefit amount calculated under the method being used (which is an acceptable method). I do not think just because another method of calculation that would yield a zero would be a consideration when that method is not being used. Your concern is that does that fact the the participant received no accrued benefit for the year preempt this? It doesn't, because that is the point of the option to test under the accrued to date method. Hope this helps.

Susie, I agree with Kevin. I also think you are referring to the 8 1/2 month requirement for plans subject to funding requirement of 412 (i.e. Pension Plans including MPP and DB). You are correct as this is a special rule that is separate from deductibility. Hope this helps.

Or better yet, reference the provision for only those employees who were hired after a certain date. You wouldn't have to track two sets of account balances, but two sets of employees.

Good question. As long as the exclusion is written as part of the plan, then that would become a non-issue. The issue with Cash or Deferred Arrangments when one owner opts out is a major concern for businesses that are not incorporated. In such instance, any employer contribution made has the effect of reducing 'earned income' for that particular owner. In such instance, you would want the 'facts and circumstances' of each case to show the employer contribution was allocated pursuant to a business decision rather than a personal one. Hence, placing each partner in their owner allocation class (when using a cross-tested plan) may not be a good idea. But, for SHM, you can write the document to exclude any HCE from this contribution as you please. Then, it is not subject to the discretion of any individual. Hope this helps.

Sieve, I agree with your logic. It certainly avoids the issue and continues to remain within the employer's budget.

Your fact pattern seems to be missing some details. It sounds as if you are stating that the Trust is attempting to change the ownership of the IRA from the trust to an actual individual. Assuming that tax payer died and the trust was named beneficiary of the IRA. Assume the trust was 1) Irrevocable at death, 2) valid under state law, 3) had spouse indentified as beneficiary under this trust instrument and 4) Trust documents were provided to the IRA custodian: This allows for the trust (while not a natural person) to be treated as a 'designated beneficiary' of the tax payer. Now, this trust wants to assign the IRA to the spouse. This would appear to constitute a full taxable distribution to the trust. An IRA is then created for the spouse and funded with a (presumably) large deposit causing IRA funding limits to be exceeded. In other words, I do not believe this to be a rollover, but a change of ownership (which effectively constitutes a series of transactions).