J Simmons

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.

I agree with Sieve. I do think that since the K PSP existed for part of 2007, had the contribution been designated as to be made and allocated pursuant to its formula for that part of 2007 that it existed separate and apart from the ESOP, that the contribution would then go as designated. However, in the absence of any designation like that, the contribution was made at a time when the ER had only one plan, the post-merger ESOP. As Sieve pointed out, it would be the ESOP's requirements and allocation formula that would apply to an undesignated contribution.

I'm starting to feel dazed and confused with all those 70's pop icon references. I hope we won't start feeling rapid inflation and other factors of the 'misery index'.

I don't think so. IRC sec 72(t)(2)(A)(iv) excepts from the 10% early penalty tax "part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary". If that would be a $10,000 payment per year over life expectancy, a $20,000 would undercut that. At $20,000 per year, that would run out in 1/2 of the person's life expectancy.

Check Prop Treas Reg § 1.125-5(d)--although this is in a proposed regulation, it is a reiteration of a longstanding rule.

Thanks, QDROphile. I don't suppose there's any authority to cite to that, just that $xx,xxx as of the 'date of separation' does lend itself to the level of certainty needed from the plan and PA's perspective to effectuate the award sought by the QDRO. If however you know of a cite, that would be great. There's no effort going on in the actual situation by the PA to manipulate the timing (or the market values), just an upset employee that has pointed out the impact to the balance of his remaining benefits because the award was in fact implemented (i.e., date of segregation) on March 9 and the employee has seen the bounce in the market values since that date. The employee has alluded that the PA was somehow timing the implementation for the best interests of the alternate payee. PA was hoping it could, in the future, insist in the name of needed clarity for an actual month, day and year for the valuation of the awarded portion.

Here's the situation. QDRO says that awarded to ex-spouse is $xx,xxx as of "date of segregation". Does that meet the "clear award" standard of IRC § 414(p)(2)(B)? My concern stems from shifts in the value of the employee's DC plan account one day to the next. The current market volatility makes this concern more vivid. It takes a plan administrator time to review and determine that a received order is a QDRO. Then there is a time lag for the implementation--the segregation--from the time the plan administrator sends its instruction to the recordkeeper/custodian. The speed in turning this around is relatively quite quick (a matter of 2 to 3 weeks). Given that the regulations specify a reasonable amount of time, no more than 18 months, a 2 to 3 week turnaround time seems reasonable. After all, the outside parameter mentioned by those regulations is 18 months. However, there’s a big difference in the proportion of the employee’s account that gets carved out if that was effected by recordkeeper/custodian on March 9 when the Dow Jones was around 6,400 as opposed to last Friday when it was around 7,700 hundred. That’s just a couple of weeks. My concern is the possibility of an employee pointing a finger at the plan administrator if the 'segregation' took place on March 9 when it would also have been within the reasonable turnaround time to have done effected the 'segregation' on March 27. What I do not like is the perception that could spawn out of the potential for market timing manipulation by the plan administrator, at least it might look that way from the employee’s perspective. Any thoughts on whether the Plan Administrator could 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)?

yes.

It's probably been 12 or 13 years since I last researched it, but it seems that the research suggested that although there is a limited exemption for IRAs to be invested in certain U.S. coins, a QRP could not if the coins had any numismatic value beyond the value of the metal used in the coin.

Probably not unless a IRC section 410(d) election has been made or the church plan does not meet the definition of 'church plan' set forth in ERISA section 3(33). See ERISA section 4(b)(2) for the application of Title I of ERISA to church plans, which Title is what the Supreme Court was interpreting and applying in Kennedy.

For discretionary match, most plan documents anticipate the employer determining a total dollar amount and then the plan document supplies a formula for allocating that amount. Check your plan document before declaring the match, so you'll know what parameters might need to be specified in the declaration. Putting a cap might, as you suggest, prevent the re-allocation of all the match forfeitures.

Does the plan permit discretionary match despite the fixed match being reduced to zero? If not, the reduction to zero fixed match has created an impossibility for re-allocation, but for application of the match forfeitures against the plan costs. Since no one has accrued a right to re-allocation of the match forfeiture in question, perhaps you could amend the coding of the plan document to permit the match forfeiture to be applied as additional profit sharing contribution.

The reason for the indicia-of-ownership requirement is so that U.S. federal courts have jurisdictional authority over those in whose custody plan assets are entrusted as part of the plan's investments--so that the federal court can order appropriate relief if any impropriety should develop. It's a matter of U.S. federal courts having the ability to protect retirement savings of Americans. Who within the reach of the jurisdiction of a U.S. federal court is on the other end of the subscription agreement? Physically having in the U.S. a subscription agreement that would perhaps require the plan trustee going into a foreign court to enforce it against and retrieve assets from the other contracting party to that subscription agreement would not, in my opinion, do.

The only thing wrong with Sieve's memory is how long ago that PTE was--16 years. Prohibited Transaction Class Exemption 93-1, January 11, 1993 (58 FR 3567).

Given that when the question would ever be litigated the operational facts will then have occurred, I would prefer to defend a document (in light of whatever operational facts may or may not be) that is vague (merely states the intent is 404c compliance) than a document that detailed out how that compliance was intended. If the operational facts are at odds with a detailed 404c document, that could give the court an extra reason to find that the plan fiduciaries are not entitled to 404c relief. And there's also the problem that a discrepancy between operational facts and a detailed document could lead to an ERISA violation by the fiduciaries failing to operate the plan as written.

Would the PEO's use of the prototype mean that the PEO has an individually designed plan document (rather than a prototype), but at least has a plan document? That would affect the restatement cycle, but if the language of the prototype specifies the prototype-level sponsor the ability to amend and that amendments apply to the PEO's adoption, you'd have the updates as well if made by the prototype-sponsor.

The plan docs will say for the FSAs what the run-out period is. See Prop Treas Reg § 1.125-1(f) HSAs? the employer shouldn't be involved in HSA expense reimbursement. The employee takes a withdrawal from the HSA, and then includes as taxable income only what he or she cannot justify as taken for qualifying medical expenses. If by HSA you meant HRA, then check the plan document.

The trustee may have a legal claim based on contract and other business theories against the investment adviser (and annuity provider), but based on my experience, the investment adviser and annuity provider likely have disclaimers--perhaps even signed by the trustee. As for an ERISA claim, the trustee's theory would hinge on being able to snag the investment adviser into the loop of ERISA fiduciaries to the plan, and that the investment adviser breached that duty. Hopefully, no more than 3 years have passed for that one since the trustee knew or had reason to know of the improper investment product. See Browning v Tiger's Eye Benefits Consulting, 4th Cir #06-1404, Feb 26, 2009 (unpublished opinion). Is the trustee liable? It doesn't sound like he acted very prudently signing up to invest the plan assets into an investment product (i.e., annuity) that he did not understand.

The forfeitures would be restored to those employees, current and mostly former, that were paid out only part of their accrued benefits. Then the plan would need to process and pay out those as 'tailings' distributions.

#1: Yes, I think the $300,000 would need to be restored. #2: The plan exam guidelines suggest that the absence of profits in the years for which no contributions were made might not count towards the facts-and-circumstances test of whether there has been a de facto plan termination due to discontinuance of contributions. I would suggest to the ER that it needs to flag the position as part of its submission of Form 5310 that there has been no de facto termination until a termination amendment is now prepared and signed--but brace the ER for the IRS taking the contrary position despite its audit guidelines, and requiring another $300,000 be contributed to restore those forfeitures from 2006-08. #3: Same answer as #2 above.

Do you remember the "Adopt Me Now or Tokyo is Toast" Chicken named EGTRRA by Dave Berry? See attached.