J Simmons

Definitely do a f1099-R for the tailings. Also, it is good for paper trail purposes if it actually is deposited into the plan. Also will make it easier to remember to include it as a contributed amount and a distributed amount when doing the f5500 for the year. As to new 402f and other notices, those are required during the 180 days before the annuity starting date, i.e. the first distribution. They would not be required again. As for giving a new election opportunity just for the tailings, I do not think you need to do so--unless you have for HCEs in that past (or might in the future).

Thanks, David. The regulation actually reads better, at least for my situation where it will be the same percentage. It doesn't require a 'better percent', just that the vested percentage of such individuals in order to avoid the election requirement. Treas Reg § 1.411(a)-8(b)(1)

Is your company using the Internal Revenue Code definition (Section 414(q)) for this purpose?

That run out likely began 1/1/2009 even though his employment ended 5/20/08, at least most of the documents I've seen don't specify the run out to begin on a mid-year termination at that time. March 31 was the 90th day, if that is what the plan specifies. The plan documents do need to be checked to make sure Bill's concerns are vetted. I agree that the run out likely started 1/1/09, even though I didn't say it. So let's assume it was timely submitted. I still don't think anyone has actually addressed the question. QDRO and Burns continue to act like children, so I'm just going to ignore them. Please assume the deductions happened like they were supposed to and the participant actually had $418 withheld before he quit. If he submits the claim AFTER he terminates, is the plan still obligated to pay him the full $988? It depends on what the plan specifies. The claim submitted AFTER he terminates might be for medical services provided before he terminated (or during some grace period specified by the plan). If so, and the claim is submitted before the applicable run out period expires, the plan is obligated to reimbursement him for such medical expenses up to the amount elected by the employee for that annual health flex account, less prior reimbursements by reason of that annual health flex account. This is so regardless of the fact that $988 exceeds the $418 actually held out of his paychecks.

I'm betting unless the 'other orifices' are nostrils, sniffles would like to keep them out of this thread. Maybe this thread can be considered closed unless sniffles wants to re-start it with a follow-up question.

Individual A is a statutory employee of Financial Institution. A accrued benefits under the nonqualified deferred compensation (NQDC) plan. A has reported and continues to report his commission income as a Sched C to his f1040. A also has his own QRP. The Financial Institution is now paying out the NQDC. Will the NQDC payments in 2009 count as earned income for purposes of QRP compensation purposes?

Is there a problem with setting up a SEP for 2008 (by 4/15/2009 when sole proprietor's f1040 will be filed), and then promptly set up a 401k QRP for 2009 and never fund further into the SEP? We'd like to capture an ER contribution deduction for 2008, and then have a solo K for 2009 and later. There are no other EEs.

A plan has had a vesting schedule dating back to the 80s that is the usual 2-6 year graded, 20% increment schedule with one twist. Those with less than 2 vesting years are 1% vested. (I presume this was to have an actual cash out and thus forfeiture following termination of employment by those with less than 2 vesting years before the deemed cash out rule was adopted.) However, the ER would now like to amend out the 1% vesting. Otherwise, the 2-6 year graded, 20% increment schedule will remain unchanged. Understandably, those currently just 1% vested cannot lose that 1% vesting. So the change will only impact those who enter the plan as participants after the date of the amendment. My question is whether we need to go through the rigmarole of giving those with at least 3 vesting years the option to remain with the old vesting schedule rather than being subject to the new vesting rules. Either way, it makes no difference. Someone with 3 vesting years will be 40% vested both under the old and the new schedules; someone with 4 vesting years will be 60% vested under both; those with 5 vesting years will be 80% vested under both; and those with 6 or more vesting years will be 100% vested under either the new or the old vesting schedules. We'd like to avoid the 'election' because of (a) the administrative burden, and (b) the confusion by employees being asked to elect the old or be in the new schedule--and the suspicions some will no doubt have if we explain there's no impact, but the federal pension laws require us to 'jump through this hoop'. Is the election required in this situation where none of those that would have the right to make the election would be effected one way or the other?

Thank you, mjb. I read your post to say, essentially, that (a) PA can insist on a going forward date for segregating a dollar amount awarded rather than allowing QDROs to specify a date that has already passed and would require retroactive calculation, and (b) the PA is not responsible for market fluctuations in an EE's account between the time payout is requested and actually made. Do you agree with QDROphile that a PA may not insist on an exact date (e.g., April 5, 2009) rather than "date of segregation" in the name of needing that clarity per IRC § 414(p)(2)(B)?

See Derrin Watson's answer to a similar question here

That run out likely began 1/1/2009 even though his employment ended 5/20/08, at least most of the documents I've seen don't specify the run out to begin on a mid-year termination at that time. March 31 was the 90th day, if that is what the plan specifies. The plan documents do need to be checked to make sure Bill's concerns are vetted.

It's how the funds were so characterized when the plan came into possession. If the plan TEE was holding the funds in question in constructive trust and then paid them out to the EE in 2003, the plan TEE violated its constructive trust duties and could yet be held liable to make the bankruptcy estate whole. Also, the clawback could follow the funds into the hands of the employee. The termination of the plan in 2003 does not resolve the bankruptcy TEE's claims.

I agree with IRS Q&A with the ABA in 2003 as you explain it. If 1/2/09, the due date of the last repayment, was no more than 5 years from when the loan was made, you should be fine even if the plan loan program and loan documents do not call for default to occur until a payment is late within the regulatory allowance (last day of calendar quarter first following the one in which the payment was due), i.e. 6/30/09 on your facts. But check the applicable documents to make sure they do not call for default to occur earlier than that.

I would have the written election mention that the spouse acknowledges that she has the right to withdraw benefits upon request and that the plan allows her to postpone payout until the deceased employee would have reached age 70 1/2, then have it specify that she elects to postpone payout until the earlier of the time she requests payout or the deceased employee would have reached age 70 1/2. The only reason I see for leaving the plan account bearing the deceased employee's name in the title would be for identifying that it is when the deceased employee would have reached age 70 1/2 (rather than when the spouse will) that is the latest date for payout, per the plan terms you mention.

I think you have to further net for SEP purposes. Otherwise, a SP could artificially segregate its gross revenues into one schedule C and its expenses all into another Schedule C in order to artificially inflate SE income for SEP purposes.

If the only theory being advanced by the bankruptcy TEE is 'unjust enrichment', I think that the plan should prevail and not have to disgorge anything. Unjust enrichment acknowledges that the plan has legal title to the funds in question, just that the equities in favor of the bankruptcy estate outweigh those that run in favor of the plan. That is, the plan owns the funds and the bankruptcy TEE is asserting a claim. On the other hand, if constructive trust is the theory or something else that posits that the plan never acquired an ownership right, then the clawback sought by the bankruptcy TEE might prevail. Under such theories, the plan TEE is merely holding such funds for the bankruptcy estate even though the plan TEE was under the mistaken belief it was holding those funds for the benefit of the participant/employee. Don't know of any legal authority to cite for this distinction.

Where are the 2009 deferrals? Were they put into the SIMPLE IRAs? Have the been deposited into investment accounts that reference a 401k plan? Does the ER yet hold the amounts deferred?

Treas Reg § 1.457-8(a)(2)(ii) provides

From the perspective of the Plan and the Plan fiduciaries, I like the in-kind distribution of LLC ownership interests. You do have to value it, but at least there is nothing that is being walked away from by Plan trustees or taken by a potential party in interest in dealing with the plan as part of the LLC's dissolution.

Unfortunately, I think you are correct.

The medical practice (albeit inactive as a going concern) could continue to be the sponsoring employer of the 401k plan until the loans are repaid per their original repayment schedules, and amend the loan policy to provide that a transfer of employment incident to the sale of the business's assets will not trigger the loans being due and payable. Once all the loans have been repaid, then terminate the plan.

Apart from the issue of tax deductibility, when is the last date that 401k safe harbor contributions for a plan year may be made without being delinquent?

Would the NHCEs be given the same choice? I.e., to leave their money at Schwab too?

Why not continue the 412(i) as a wasting trust, and set up a separate 401k plan for future accruals? That way you do not have any 412(i) taint (if there possibly is any) on the new accruals.

Haven't heard of any model language for this purpose from the IRS.