BTG

Assume a plan calculates the employer match on a plan year basis, but the employer funds per-pay period with a year-end true-up. Could the plan be amended to provide that, if an employee hits the 401(a)(17) limit before the end of the year, the true-up amount for the employee will be funded at that time, rather than waiting until year-end? I'm wondering if the timing of the true-up is potentially a BRF issue, given that it would be virtually all HCEs who would get the contribution early (and get the opportunity for additional earnings). Of course, there's always the potential for additional losses as well. As always, I appreciate the collective wisdom of the group.

Thanks again, Peter. I like that conclusion. I was hung up on the language at the outset of 408(h) which provides that it applies "for purposes of this section." However, there is also the last sentence that says the custodian will be treated as the trustee (which implies, at least to me, that the custodial account will be treated as a trust) "for purposes of this title," which would include 1563. I'm inclined to go with this analysis unless anyone else has other thoughts on this that they would be kind enough to share. Thank you again, Peter, for all of your help!

Thank you for the response, Peter. I had that same thought. If 1563(e)(3)(A)-(B) apply, then presumably, the ownership would be attributed to the IRA holder, at least provided that the IRA is structured as a trust account. However, what if the IRA is structured as a custodial account pursuant to 408(h)? Would that lead to a different result under 1563(e)(3)(A)-(B)? It certainly doesn't seem that it should from a policy standpoint. Again - I'm just surprised that I haven't found a more robust discussion of this topic anywhere, and I'm probably missing something.

I'm trying to determine whether stock held by an IRA is attributable to the owner for purposes of the controlled group rules. So, for example, if I own 100% of Company A, and my IRA owns 100% of Company B, am I deemed to own 100% of Company B, such that A and B are in a brother/sister controlled group? I know the answer is "yes" in the context of a qualified plan (based upon the language in 414(b) stating that 1563(e)(3)(C) doesn't apply). However, I have not been able to find a discussion of the application of these rules to IRAs anywhere. From a policy standpoint, the case for attribution would seem to be even more compelling in the IRA context, given that there's always going to be a single individual who owns the entire account. I find it hard to believe that this issue hasn't been addressed, and I assume I'm missing something obvious.

This is definitely an area where we could use some additional guidance. It comes up reasonably often, and the existing guidance is frustrating. On the one hand, the regulation C.B. Zeller cites above very clearly addresses the handling for 415 purposes and provides that the back pay is generally taken into account with respect to the year to which it relates. However, make sure to also look at the plan document's definition of plan compensation for allocation purposes. For example, many plans use W-2 comp. These back-pay amounts won't be picked up on the employees' W-2 until the year of payment. Depending upon the exact facts presented, this mismatch can lead to bizarre outcomes and can sometimes mean that the individual is not permitted any deferrals or employer contributions on the back-pay. (It gets extra fun when the back-pay award explicitly states that the employee is entitled to them.)

Paul and Lou are spot on. Just because someone opts out, doesn’t mean you get a free pass on them for testing purposes. These elections are almost always more trouble than they’re worth.

Our client maintains a DB plan. A participant was receiving a J&S payment and then died. The plan sponsor tried reaching out to the (non-spouse) beneficiary for years and never received a response. Now the beneficiary has died. Presumably the missed payments are still owed to the beneficiary's estate. However, is the sponsor required to include an interest adjustment where they made every effort to pay during the beneficiary's lifetime?

Curious how folks are handling the situation of a participant who receives back pay for prior years. Are you making corrective contributions for missed deferral opportunities and any employer contributions with respect to the back pay? Treas. Reg. § 1.415(c)-2(g)(8) provides that it is generally taken into account for the limitation year to which it relates. So for 415 (and 414(s) testing comp) purposes, it would be included for the prior year(s) to which it relates. However, back pay is reported on Form W-2 for the year of receipt. So, if a plan uses a W-2 definition of comp, it seems that the back pay would be picked up in the year of payment, even if the individual doesn’t have 415/414(s) comp to support it. It seems odd to me that the timing would differ, but I suppose not everything in the wonderful world of ERISA makes sense.

The EOB has easily been the most valuable resource over the course of my career thus far. I use it on a daily basis. I have found the electronic version of the EOB a little clunky and difficult to navigate, but once you get where you're going, the content is excellent. As an aside, am I the only one wondering what a "401(k) Split Plan" is?

Thank you both. C.B., your point is well-taken regarding the "safest approach" issue. In this particular instance, I'm trying to justify a historical situation where RMDs did not commence, so I'm just trying to establish that it was a defensible position. Given the lack of clarity/authority at this point (pending potential clarification in the final regs), I'm getting pretty comfortable that it was a reasonable, good faith interpretation of 401(a)(9)(C).

If a non-owner participant terminates employment after age 72 (or 70-1/2, as the case may be), but is later rehired within the same calendar year, are RMDs triggered? There doesn’t appear to be any guidance on this. Where the rehire occurs in a later calendar year, and RMDs have already started, there is at least informal guidance stating that they must continue. (See ERISA Outline Book and 2010 ASPPA IRS Q&As.) However, I've found nothing addressing termination and rehire in the same calendar year prior to starting RMDs.

Thank you both. The terms of the judgment award the entire benefit to the participant, and accordingly there is no QDRO. CuseFan, as you suspect, this is a situation where the participant was forced into pay status with a QJSA automatically at RBD. Based upon the believe that she was married at the time. It seem to me that the participant should be retroactively switched to a single life annuity, with the resulting underpayments corrected. To the extent that the plan offers other forms of benefit, she should be given an opportunity to make an elect such a form instead of the SLA. Again, thanks to both of you for your insight. Brian

Our client has an interesting situation: A participant whose divorce became final ON her annuity starting date. The plan administrator was aware of the pending divorce, but could not suspend payments (as it normally would under QDRO procedures) because the participant had also reached her required beginning date under the RMD rules. The administrator did not receive the final decree until a few months after the ASD/RBD, and brought the participant into pay status with a QJSA because they believed her to still be married on her ASD. Under state law, the participant was not married on her annuity starting date. My thought is that the participant should be permitted to retroactively elect a life annuity. However, I'm curious if anyone has ever seen a similar situation and how you handled it?

Lump sum windows in connection with a plan termination close as well. If the participants don't elect a lump sum during the window, they won't have the option later. They'll get an annuity contract from an insurance company.

Curious what the objection is to the use of this terminology? I see it used routinely.